Pfizer Cuts Back Michigan Operations

January 26, 2007
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KALAMAZOOPfizer announced Monday that it plans to close its human health research and development operations in Kalamazoo and Ann Arbor, and a small Esperion Group facility in Plymouth, and eliminate hundreds of jobs in the process. Overall plans call for reducing manufacturing plants worldwide from 93 to 66 and cutting costs by $4 billion a year.

Pfizer is expected to cut 250 positions in Kalamazoo and 2,100 in the Ann Arbor area and transfer that work to Pfizer sites in Conneticut, Missouri, California and the United Kingdom. However, the company will maintain its very large drug manufacturing facility in Portage, as well as its animal health operations in KalamazooCounty, which is why the number of job losses there will be fewer.

George Erickcek, senior regional analyst with the W.E. Upjohn Institute for Employment Research, said that since Pfizer is closing manufacturing facilities in Omaha, Neb., and Brooklyn, N.Y., it's possible that some manufacturing activity could be incorporated into the Portage plant.

Although Pfizer hasn't confirmed that additional manufacturing jobs might come Portage's way, Southwest Michigan First, the economic development organization for the Kalamazoo region, believes that any compression in Pfizer's manufacturing capacity "means good things for the

Portage Road
facility," said CEO Ronald Kitchens.

Kitchens sees a silver lining in the cloud. He said the Pfizer scientists losing jobs in Kalamazoo work in the pre-clinical phase of testing and efficacy, and there is great demand among existing life sciences companies in the region for people with those skill sets.

"Companies that are hiring people with these skill sets have to recruit nationally, so we believe there will be a job for everybody because these are the exact skill sets many companies want," Kitchens said. "We feel very comfortable that there's a good safety net under those folks."

He said Southwest Michigan First knew five years ago that the Pfizer cuts were coming because every study and every industry trend indicated that consolidation was the way big pharma was headed. Southwest Michigan First intends to work aggressively with Pfizer scientists that might be interested in starting new companies, Kitchens noted.

"We see a real opportunity to help those individuals who are being displaced to either start new companies or transition into the existing life sciences community in West Michigan, which now includes more than 200 life sciences companies."

The dissolution of the Pfizer research group presents Kalamazoo with an opportunity to redevelop the downtown Pfizer campus into a multi-tenant drug development campus.

"We think that's our future," Kitchens remarked.

Erickcek said that for the Kalamazoo area, the impact is going to be felt in two ways.

"First, many of these scientists are married, so we'll also be losing their spouses; that's something we were surprised about three years ago when Pfizer cut back on research and development," he recalled. "Not only did it threaten the loss of some of the more highly skilled individuals in the county, but also if they leave they may be taking school teachers, university professors, doctors and other professional workers, as well."

The second impact is the multiplier effect, Erickcek said. He estimates that for every 10 research jobs that are lost at Pfizer, the area will lose another six to eight jobs in consumer services and retail.

"The real challenge, we all know, is that the state has to diversify from automobile manufacturing," Erickcek observed. "When we see the trend in other Great Lakes states, none of them are doing well, but we're doing the worst. The reason for that is that we're simply not diversified."

Pfizer's decision creates yet another challenge for the state. Erickcek firmly believes that the decision was based on the corporate situation at Pfizer, and that it doesn't mean that the Ann Arbor operation or the Kalamazoo operation were not doing a good job or were somehow not competitive.

"It is basically a corporate move to consolidate activities. When things are bad, corporations tend to bring work back home and consolidate to the home base," Erickcek said. "I do not see this as reflecting the business conditions, or competitiveness, or anything regarding the state's economic situation."

The news is also a blow to Michigan because the state has been trying hard to promote itself as a significant player in the life sciences and to the Kalamazoo region because it has a rich history in pharmaceutical research.

Don Grimes, senior research specialist with the University of Michigan Institute of Labor and Industrial Relations, said the cuts will have a "very severe" impact on Ann Arbor and the state of Michigan. It's going to be a very big loss and there's no way to sugarcoat it, but the loss goes beyond jobs, Grimes said. In Ann Arbor, Pfizer has been a community leader in terms of its support for civic organizations. The company has been a big part of the city's tax base, too. Grimes also pointed out that Pfizer's presence in the city helped make Ann Arbor into a center for intellectual, private-sector research.

He estimates that with the elimination of the 2,100 Pfizer positions, the Ann Arbor area will lose an additional 4,000 to 6,000 consumer service jobs when the "multiplier" kicks in.

The research scientists about to be displaced are a highly educated and well-compensated group, Grimes pointed out, and as their positions disappear, a lot of intellectual capacity will be freed up. It would be in Ann Arbor's and the state's best interests to find ways to keep that intellectual capacity within Michigan's borders, he added.

MichBio, the state's trade association for the life sciences, announced Wednesday that it is working with Pfizer, the governor and other state and local officials and agencies, as well as its own members, to assist in retaining the Pfizer scientists in Michigan.

Executive Director Stephen Rapundalo said MichBio will serve as a clearinghouse for Pfizer employees looking for new employment opportunities or business venture opportunities. He urged life sciences companies to forward information about current or planned job openings and promised his organization would provide matchmaking support.

On Thursday, James Epolito, CEO of the Michigan Economic Development Corp., announced that his agency will work with Ann Arbor to develop a plan for reuse of the Pfizer facility and to find potential job placements for the soon-to-be displaced employees there.    

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