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Special Report: Corporate & Executive Relocation

The news this spring that Pfizer Inc. planned to shift 1,000 jobs to Manhattan from New Jersey, Missouri, Michigan and California took many by surprise. Since Sept. 11, almost all the major relocation traffic has been headed in the opposite direction.

But the pharmaceutical giant, which acquired Warner-Lambert in 2000 and recently completed its purchase of Peapack, N.J.-based Pharmacia, is convinced that it can save $2.5 billion over three years by consolidating many of its operations in the city. The company is also sure that it can persuade key employees to make the move.

"We never really talked about leaving Manhattan," says Greg Vahle, Pfizer vice president of human resources and services. "We talked about continued growth and how to package that growth in New York City."

Pfizer's decision comes at a crucial time for the city. Many longtime corporate residents are responding to pressure from consultants and regulators to geographically diversify their workforces outside Manhattan.

Pfizer, however, believes workforce consolidation is the key to successfully running a business today-and it does need to consolidate. Its two acquisitions tripled the company's revenues and workforce and made it the largest drug company in the world, with $48 billion in sales and 140,000 employees in 100 countries. Under pressure to meet cost and earnings expectations promised by the mergers, Pfizer is closing some operations and shifting major functions

to a few localities, such as Connecticut for research and development and New Jersey for its consumer business.

Jobs in legal affairs, finance, human resources and marketing that support the core pharmaceutical business and now sprawl over four states will migrate to the city, where the drugmaker's longtime presence helped sway the relocation decision.

Seeing the advantage

"We realize it's not the cheapest place to do business, but we're already here," says Pfizer's Mr. Vahle. "We attract a high-quality workforce in New York City, and we think it's advantageous to be in the country's business and financial capital."

To accommodate thousands of additional employees who will relocate to or be hired in Manhattan, Pfizer will invest $400 million to buy and renovate a 31-story building at 685 Third Ave. It will also refurbish five other buildings it owns or occupies in the city. Altogether, it plans to spend $1 billion in the city over the next 15 years.

The initial wave of transferees is already starting to stream into Manhattan, with most expected to be in place by this time next year. Many will get Pfizer's standard package, sweetened with lots of personal help, such as counseling and a buddy program that pairs them with local Pfizer employees for support. The package itself includes help with house-hunting, moving and selling a home as well as cost-of-living salary hikes for those transferring from lower-cost locales.

Others, such as New Jersey workers who elect to commute into the city, will get an additional $400 per month in take-home pay for the first year and $200 per month for the second year to defray their higher commuting costs. Employees whose jobs are eliminated or who choose to stay put even though their jobs have shifted to Manhattan may interview for other positions within the company or receive placement help and a severance package that starts at 23 weeks' pay for administrative workers and 39 weeks for managers.

Company officials won't reveal how many employees have accepted jobs in Manhattan, but say their efforts so far have been largely successful. Based on its experience in 2000, when it bought Warner-Lambert and shifted hundreds of jobs to Manhattan, Pfizer is betting that half or more of the employees whose jobs are moving to New York will choose to relocate.

Relocation experts say Pfizer's expectations are realistic, especially given the current job market. For example, one 10-person Pharmacia marketing team in the United Kingdom is easily replacing two members who have chosen not to move here.

Time is right

Consultants say, too, that relocations following a merger or acquisition usually work to a company's benefit.

"Companies move an individual to get particular knowledge or skills to another location in an organization," says John Wada, a consultant at relocation specialist Runzheimer Inc. "And that has a lot to do with human productivity and integrating two organizations that may have different cultures."

As for the city, the payoff could be considerable-an estimated $300 million, including the multiplier effect of the 3,300 additional jobs Pfizer has promised the city over the next 15 years in return for $46.3 million in state and city incentives.

According to Mintax Inc., a New Jersey economic development adviser that helped Pfizer negotiate the incentive package, every net new Pfizer job will support 4.8 jobs in other industries. "They pushed us hard to be as aggressive as possible," says Andrew Alper, president of the city's Economic Development Corp.

Pfizer officials, however, say the size of the incentive package did not drive the decision to shift jobs to New York-after all, Michigan offered the company a $600 million deal.

Pfizer's expansion has excited economic development types, who are hoping that the company's expanded presence can help strengthen the foundation for a biotechnology industry in the city.

"It's a fine piece of marketing for us," says Kathryn Wylde, president of the Partnership for New York City. "We're trying to market to other companies, and their first question is `What's the climate like among industry leaders already there?"'

Nevertheless, despite euphoria on both sides, alarm bells are already sounding. Some question whether Pfizer will be able to create the promised new jobs. Competition from generic drugs and increasing government pressure to lower prices could cramp Pfizer's ambitious growth plans.

"If the business isn't growing, we won't expand," warns Mr. Vahle.

Copyright 2003, Crain Communications, Inc

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