Merck To Cut Back On Pigment Production

German pharmaceutical and chemical company to curb pigment production in Germany, the U.S., Japan and China, and cut hours for about 500 domestic workers.

FRANKFURT (AP) -- German pharmaceutical and chemical company Merck KGaA said Friday it would curb pigment production in Germany, the U.S., Japan and China, while it expects 2009 to be a difficult year overall.

The company said it would put about 500 German pigment workers on shorter hours but didn't expect job cuts domestically. The 500 affected German workers are at the Gernsheim facility near Frankfurt.

Other pigment production sites in Savannah, Georgia, Onahama, Japan and Songjiang, China would also be affected by production cutbacks, but spokeswoman Phyllis Carter wouldn't say if that meant facility shutdowns, shorter hours programs or job cuts.

Speaking at the Darmstadt-based company's annual general meeting Friday, chief executive Karl-Ludwig Kley said demand for paint pigments had fallen sharply because of weak sales in the auto industry. "The trend continued unbroken in the first quarter of 2009," Kley said.

"For the pigments business, we must assume that the previously agreed measures such as reducing overtime and vacation days within the scope of several idling phases will not be sufficient to adapt production volumes to the sharp decline in demand," Kley said, offering no further details about the international sites.

German companies often institute shorter hours programs to answer weaker demand.

Merck didn't provide a detailed forecast for a "difficult" 2009, but said it would "rank among the winners."

After the acquisition of Swiss biotechnology company Serono two years ago, Merck said it had reached the size needed to be a market presence. "Beyond this critical mass, however, bigger does not always equal better," Kley said, adding that the overall business model was sound.

Merck KGaA in Germany is not part of Merck & Co. of the U.S.

Shares of Merck KGaA were 1.2 percent lower at euro67.78 in Frankfurt afternoon trading.

More in Operations