Bayer's Berkeley Facility May Outsource Work
Tess Townsend, The Daily Californian, August 13, 2009
Berkeley's largest private employer may be outsourcing work in order to cut manufacturing costs, prompting city officials to expedite the passage of tax incentives for local businesses.
Officials at West Coast Bayer Healthcare Pharmaceuticals remained tight-lipped about union allegations that the company may move part of the process used to manufacture the only drug produced at its West Berkeley facility. The drug, known as Kogenate, is used to treat hemophilia and is only produced by the company at its Berkeley site.
Bayer officials said they could neither confirm nor deny union allegations that the process for purifying this drug would be outsourced. "Investment decisions are business proprietary information," said Sreejit Mohan, director of public policy and communications for West Coast Bayer. "We treat it with a level of sensitivity," Mohan said.
Bayer employs 1,350 people, 100 of whom are Berkeley residents, said Trina Ostrander, community relations manager for West Coast Bayer. If the company moves the purification process out of Berkeley, at least 70 employees will "almost certainly" be laid off over the next few years due to the loss of that department at the Berkeley branch, said Donal Mahon, a business agent at the International Longshore and Warehouse Union Local 6. If the purification process is lost in the short term, the entire manufacturing process may be outsourced later on, he said. "(Berkeley) is a single-product plant," Mahon said. "That's all we make-Kogenate."
However, Ostrander said the company would not be leaving Berkeley.
Bayer will announce an investment decision concerning the Berkeley branch when ready, Mohan said. "We're living in a very competitive world, and we're trying to make sure we're not giving away information to our competition," he said.
In order to keep the purification process in Berkeley, the city urged Oakland to expedite the expansion of its enterprise zone-which provides tax incentives to businesses-into West Berkeley. Donal Mahon said he thinks the expansion, which was approved in July, will make it more likely for Bayer to keep the entire Kogenate manufacturing process in Berkeley.
Benefits of being in an enterprise zone include tax credits for hiring local employees, as well as sales tax reductions for manufacturing equipment purchases, said Julie Sinai, chief of staff for Berkeley Mayor Tom Bates. The Berkeley City Council will have to ratify Oakland's decision when the council is back in session in September in order for the expansion to come into effect.
"What (the zone) will allow us to do is to offer incentives and opportunities for local businesses to stay and/or expand here in our own community and hire locally and be a stimulus for our local economy," Sinai said. While an expanded enterprise zone would benefit many businesses, Sinai said city officials would not have pushed for the expansion to be approved by Oakland so soon if they had not heard about the possibility of Bayer contracting out some of its work.
Bayer officials said an expanded enterprise zone will benefit all businesses in the area. "There's no reason that I can think of right now that (the council) wouldn't be really enthusiastic about approving the expansion," Ostrander said.
Bayer Considers Moving Out of Berkeley
Rio Bauce, Berkeley Daily Planet, August 07, 2009
Berkeley officials confirmed Friday that plans are in the works to try to provide tax incentives to Bayer, the city's largest private-sector employer, to keep the company from leaving the city.
According to East Bay officials, Bayer Healthcare could decide within two weeks whether to relocate or commence manufacturing the next generation of Kogenate, a drug for the treatment of hemophilia at their 43-acre campus next to the Berkeley Aquatic Park or relocate.
Senior company officials plan to make the case to the Bayer AG Governing Board that the company should stay in Berkeley. In an effort to retain the company, the mayors of Berkeley, Oakland and Emeryville are collaborating to expand Oakland's enterprise zone to include West Berkeley. An enterprise zone is a state-mandated area that gives companies tax credits to hire and train workers.
On July 28 the Oakland City Council unanimously approved a motion to ask the state to include West Berkeley businesses within Oakland's enterprise zone. If the cities succeed in getting Bayer included within the zone, the company could receive as much as $19 million in benefits over a 10-year period, including $13 million in tax incentives, $1.5 million in worker-training reimbursements, and $4.5 million in reduced electric rates from PG&E.
The East Bay Development Alliance, an organization that lobbies to increase jobs and improve economic activity in the East Bay, assembled the package of economic incentives for Bayer that includes the reduced PG&E rates.
Officials from the East Bay Development Alliance could not be reached for comment by press time.
Berkeley Mayor Tom Bates, Oakland Mayor Ron Dellums, and Emeryville Mayor Richard Kassis sent a joint letter to Bayer board member Hartmut Klusik last month urging the company to remain in Berkeley.
"We recognize that Bayer, as a publicly traded corporation, must make location decisions based in part on cost considerations," the letter said. "Therefore, the cities are working with the state to create a powerful set of economic incentives."
Although the cities may all agree to expand the enterprise zone, the final decision is up to state officials.
Bayer officials are reluctant to speak about the issue before the scheduled meetings among top company officials in Germany.
Company spokeswoman Trina Ostrander issued a statement late Friday. "Bayer is proud of its long-standing commitment to the Bay Area, and especially our 30-year Development Agreement with the City of Berkeley," said Bayer spokeswoman Trina Ostrander. "We value our local ties and have continuously worked to enrich the communities in which we operate and live."
Ostrander said that expenses would be a major factor in their considerations. "We cannot forget that by various indicators doing business in California is very expensive," said Ostrander. "To strengthen the economic diversity of the East Bay and encourage the growth of the biotech sector and green corridor requires forward-looking economic development strategies such as Enterprise Zones. We are currently exploring various options, however at this point it is premature to provide any speculation on future plans."
Berkeley city officials are anxiously waiting for Bayer's decision.
"We are fearful that any step to move production of Kogenate could mean a move out of Berkeley," said Michael Caplan, the city's economic development manager. "We are doing everything within our power to get them to stay here."
Caplan explained that expanding the enterprise zone is a regional issue, citing his office's statistics, which show that most Bayer workers live outside of Berkeley and 3,000 Oakland residents work in West Berkeley.
Founded in 1863, Bayer, based in Barmen, Germany, is the third-largest pharmaceutical company in the world.
Bayer's Berkeley campus is the company's global center for hemophilia and cardiology pharmaceuticals, including Kogenate. CNN reported that in January 2001, the FDA halted shipments of Kogenate FS after it was found that harmful bacteria were present in the drug's manufacturing process.