Organic Consumers Association

Monsanto Lays Off 2,400 Workers at its St. Louis Headquarters

By Rachel Melcer
St. Louis Post-Dispatch Oct 16, 2003

Monsanto Co. executives on Wednesday took action, after months of saying
they need to cut costs because competition is hurting sales of their
flagship product, Roundup herbicide.

The agrochemical, biotech seeds and traits company, based in Creve Coeur,
said it is laying off between 7 percent and 9 percent of its 13,200
employees, or between 924 and 1,188 people.

Approximately 200 of those cuts are at its Creve Coeur and Chesterfield
facilities, leaving behind about 2,400 local employees.

The layoffs are evidence of a trend Chief Executive Hugh Grant has been
touting for some time: Monsanto is now making more money by selling biotech
seeds than old-line chemical herbicide.

"A piece of this is really about looking forward at what this business is
becoming, rather than looking back at what we used to be," said Grant, who
also is company president and Tuesday was named chairman.

Monsanto made $4.9 billion in sales in the fiscal year ended Aug. 31. Of
that, $1.9 billion came from biotech seeds, such as corn and soybeans
genetically modified to resist certain insects and withstand applications of
Roundup or generic glyphosate weed- killer.

Sales of Roundup were $1.8 billion. And the company made $1.2 billion in
revenue from other agricultural productivity products, primarily its Posilac
growth hormone for dairy cows.

Grant said that's a good thing.

Roundup lost its patent protection a couple of years ago, and competition
has been fierce ever since. Monsanto knew that it would steadily lose
revenue from the product that had been its mainstay for decades.

So the company began heavily investing in biotech crops.

It spends 10 percent of revenue each year on research and development. That

translates to nearly $500 million a year - or $1.4 million a day. "We will
continue to do that," Grant said.

The result is a pipeline of products that, if successful, can sustain
Monsanto for decades to come. Today, its biggest-selling products help
farmers cut costs and more efficiently use herbicides. Tomorrow, they could
be soybeans and corn enriched with vitamins, or reduced in fat, that help
improve the health of consumers.

While there also is competition in biotech seeds, Monsanto has patented
several of the world's most popular products. And it is significantly ahead
in developing new ones, Grant said.

"Unlike many past Monsanto restructurings and, frankly, unlike many made by
other companies in our industry, our decisions were made from a position of
strength and growth," Grant said.

"We've talked for a long time about the potential of seeds and traits - that
potential is no longer theory, it's reality. And it is this management
team's responsibility to bring that reality to bear," he said.

It is not always pleasant, however. Laying off employees and deciding to cut
lines of business are tough, Grant said.

And the company's news Wednesday was not all good.

Monsanto suffered a fourth-quarter net loss of $188 million, despite $1.3
billion in net sales. For the full fiscal year, the company made a profit of
$68 million.

It took a lot of one-time lumps.

Monsanto paid $396 million to help settle a liability lawsuit over
decades-old contamination of Anniston, Ala., with polychlorinated biphenyls,
or PCBs. It lost money in Argentina and Brazil, due to political and
economic instability that ruined the market for Monsanto's Roundup and
seeds. It paid for laying off workers. And it took charges to meet changes
in accounting laws.

The company is under pressure from investors and Wall Street analysts to
make smart choices and bring in higher profits next quarter and next year.

Monsanto said it is making the right decisions.

The company is selling or shutting down its wheat and barley business in the
United Kingdom, which has 125 employees. Monsanto acquired it in 1998 with
plans of developing improved strains of wheat through conventional breeding.

But "that technology didn't pan out," Grant said. The division never got
around to considering developing genetically modified wheat for Europe, such
as the Roundup Ready wheat it is making for North America.

Not only was it unable to produce better wheat, but the entire regional
market began to bottom out. A ton of wheat this harvest sold for $55 to $65,
Grant said, down from about $140 in 1981 when he joined the company.

"There's not too many industries that have faced that kind of squeeze," he

Monsanto also is shuttering a high-tech business for which it once had high
hopes: Monsanto Protein Technologies, which was genetically modifying crops
to grow proteins for use in pharmaceutical drugs.

That division had 75 employees locally and in Middleton, Wis., most of whom
are losing their jobs, said spokeswoman Lori Fisher.

Monsanto would have grown pharmaceutical proteins in corn, which then would
have had to be extracted and purified for use in drugs.

But the processing requires very expensive facilities that meet Food and
Drug Administration muster - and Monsanto didn't want to bear that cost
alone, Fisher said. Yet its potential pharmaceutical company customers were
unwilling to share, she said.

Grant said he believes plant-based pharmaceuticals will be a good business
for some other company, but it is outside of Monsanto's focus. And it is

"I've spent a lot of personal time reviewing our technology portfolio," he
said. "This isn't about tearing costs out of technology. ... It's about
placing bets more carefully.

"The main (decision) for us was, for a dollar spent, what does the risk look
like? And how long is the payback?"

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