Wall Street Now Openly Asking J&J CEO Weldon When He Will Leave
Johnson & Johnson's Q4 2010 earnings gave a sobering picture of how much money the company has lost in sales from the ongoing Tylenol recalls, which have fallen almost exactly inside J&J's fiscal year: $1.3 billion. Sales of J&J's U.S. consumer products division were down 19.3 percent for the entire year, to $5.5 billion. The company said $900 million of that $1.3 billion decline was recall-related.
More wounding for CEO Bill Weldon, on his conference call with Wall Street analysts yesterday he was asked by Leerink Swann's Frederick Wise when the recalls would finally be over. After Weldon answered, Wise immediately asked when he was stepping down as CEO.
Ouch! Some kind of coded message perhaps? Or just confusion over the fact that Weldon canned his planned successor -- worldwide chairman Colleen Goggins -- when he blamed her for the Tylenol crisis at J&J's McNeil Consumer Healthcare unit?
Here's an edited digest of the conversation. Note that Weldon couldn't say there would be no more recalls, and that further recalls may come if J&J finds unsatisfactory conditions at its external supplier factories:
Frederick Wise - Leerink Swann: On Consumer, generally, you said you completed the internal review. What's left to do, and do you think we've seen the last of the recalls at this point?Given that the call's Q&A session began with an extended discussion between Weldon and Credit Suisse's Catherine Arnold on the topic of "the disparity between your guidance or what consensus estimates were," it's sounding a lot like The Street has run out of patience with Weldon.
William Weldon: We have looked at every product that's internally manufactured, which is around 80% of the total volume of McNeil. So we're now looking at external manufacturers, which does about 20%. So 80% plus is behind us. We still have to look at those and see if there's anything. As I said, if there's any issues there, we'll address those appropriately. So I would say most of it is behind us, Rick, but there could be a little bit ahead of us.
Wise: Does this make you rethink your strategy in some kind of way for managing the business? Maybe you want to bring everything in house? I mean, is this reflect too much cost cutting? How are you changing managing?
Weldon: I don't think if we always talk about lots of different issues out there, and we can't go into a lot of them. But no, I think we've identified and understand what the issues are. We're addressing the issues, and we're going to put them behind us. I think we've got them a, under control; b, understand them; and c, we're addressing them.
Wise: I hate to bring up the idea of thinking about your successor at this point. But clearly, there's a transition process underway. Maybe it would be interesting to hear, how you're thinking about the timing and maybe what you're looking for as you look out over the next couple of years in terms of the next kind of CEO for the company?
Weldon: Well, I think we go through, as I said before, very thoughtful assessment of the succession planning. I think we've created the Office of the Chairman, which is something that we've done in the past and allows people to work closely for a protracted period of time. So I think that's the best I can say right now.
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