Welch Allyn job cuts are related to new tax mandated by health care law
Published: Monday, September 10, 2012, 4:47 PM Updated: Tuesday, September 11, 2012, 6:30 AM
By Charley Hannagan, The Post-Standard
http://www.syracuse.com/news/index.ssf/2012/09/welch_allyn_cutting_275_worldw.html View full sizeStephen D. Cannerelli / The Post-StandardWelch Allyn's Skaneateles Falls headquarters is seen Monday, the day the company announced a major restructuring of the global provider of medical diagnostic products. The company expects to reduce an estimated 10 percent of its current workforce over the next three years, including 45 jobs in Skaneateles.
Skaneatles Falls, NY -- Welch Allyn told employees at companywide meetings this morning that it plans to cut 275 jobs, or about 10 percent of its worldwide workforce.
About 45 workers were told today that they will lose their jobs at the company's headquarters in Skaneateles Falls.
The cuts are part of the medical device maker's plans to reshape its business in the wake of turmoil in the U.S. market and expand into emerging global markets, Chief Executive Steve Meyer said this afternoon.
The changes are needed "to really get Welch Allyn able to compete on a global scale," he said. Welch Allyn is a privately held company that does not release its sales and earnings to the public.
In a press release, Meyer said "we firmly believe this restructuring program is the right thing to do for the long-term success of the business, however, we also fully recognize the hardship it will cause some of our colleagues in the short term."
Welch Allyn employs 2,750 world wide including 1,300 at its Skaneateles headquarters.
The job cuts will take place over three years as the company realigns its manufacturing facilities, he said. Jobs will be eliminated across the organization, but none will come from the factory floor in Skaneateles, he said.
Those who choose to leave will receive a "generous" severance package, health care and outplacement assistance, Meyer said. Those workers who are laid off will also receive a severance package, outplacement assistance, and up to $4,000 for retraining at an accredited institution, he said.
Meyer said he did not know if the number of job cuts in Skaneateles would grow above 45.
View full sizeStephen D. Cannerelli / The Post-StandardWelch Allyn President and CEO Steve Meyer speaks about a major restructuring of the global provider of medical diagnostic products at the company's headquarters in Skaneateles Falls on Monday. Meyer said the actions were taken to proactively prepare the company to address the Affordable Care Act's mandated U.S. Medical Device Tax, which is scheduled to begin in 2013.
The majority of the job losses will come from Beaverton, Oregon, where Welch Allyn plans to close a factory. About 160 workers will lose their jobs when the factory that makes wireless portable patient monitors closes, Meyer said.
Production of those products will move to Skaneateles, he said. At the same time, the company will move its remaining thermometer probe cover, lamp and some of its blood pressure cuff production to its factory in Tijuana, Mexico, Meyer said. That factory opened about seven years ago, he said.
Skaneateles factory workers will be retrained to make the new products, he said.
The Oregon employees will be given an opportunity to transfer to Skaneatles, Meyer said. The company plans to keep the Beaverton offices open as one of three new product development and technology centers. The others will be in Skaneatles and Singapore. The company will also create a global finance shared service center in Tijuana, Mexico.
The company's headquarters will continue its evolution into a high technology center, captitalizing on demand for its digitally-enabled patient vital signs monitoring systems and diagnostic cardiology products, in addition to its traditional core products, Meyer said in the news release.
The changes will help Welch Allyn better position itself to extend further into the emerging markets of Brazil, China, India and Russia, he said.
The company said it take 90 days to review its European operations to determine the best way to operate in that market and will reorganize its Latin American operations to be more competitive in the region.
Welch Allyn President and CEO Steve Meyer discusses the impact of the medical device tax that is part of President Obama's health care law.
The uncertainty surrounding the future of the Obama health care package is creating turmoil in the domestic market, Meyer said. Hospitals and doctor offices aren't investing in new equipment until they see how the health care issues will play out, Meyer said.
Welch Allyn and other medical device makers face a new federal tax hike come January when a new 2.3 percent tax on sales of medical devices called for under the Affordable Care Act takes effect, he said.
For example, a company that has $100 million in sales would pay $2.3 million in tax, Meyer explained. If that same company earns $10 million in profit that tax now represents a 23 percent dip in the bottom line, he said.
"Our plan is well thought out and tied to the rapidly changing healthcare market, and in keeping with our history of making sure we treat our employees fairly and with the highest levels of respect," Meyer said. "We are confident we will emerge from this restructuring stronger than ever."
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