ARGYLE -- Covidien's recent decision to close a local plant highlights challenges manufacturers face today, officials said.
The medical device maker on Friday announced plans to shutter its Route 40 facility in a year to 18 months and move production work to a plant in Mexico and another that is under construction in Costa Rica.
With 200 local workers, Covidien is the largest employer in Argyle and one of the 10 largest in Washington County.
Company spokeswoman Rachel Bloom-Baglin said the closure is part of a bigger, global restructuring that began in 2008 and targets other plants in the U.S. and abroad.
The goal is to increase operating efficiencies and position the firm for growth, she said.
"We did a lengthy financial and business review and, of course, everything comes into play as we make those decisions," she said. "It's not any one thing."
According to Argyle Supervisor Robert Henke, the loss will reverberate across the community.
"Our (high) school has about 200 kids," Henke said for perspective. "Any jobs being lost is a horrible thing, but 200 jobs is a pretty good whack."
Not only will the closing affect workers, but gas stations and other shops could notice a decrease in people travelling to the plant, he said. The tax base could also be impacted if the plant sits empty and Covidien challenges its assessment.
Henke noted other examples of outsourcing in Argyle, including the former Tyco International Kendall Sherwood plant that shut down in 2004 after sending jobs to Mexico.
"I think we've got to really wonder whether we have anything that's stable," he said of manufacturing jobs.
The news comes despite a positive outlook for Covidien. The company is profitable, continues to beat expectations and is launching a number of new products, Bloom-Baglin said. Net income increased from $907 million in fiscal year 2009 to $1.6 billion in 2010.
"Overall, we are performing well, but like other health care companies, there are lots of things going on," she said, citing health care reform, austerity measures in Europe and a difficult economic environment.
In recent years, many medical device makers have faced a challenging price environment, soft demand for procedures, an increasingly complex U.S. approval process for new devices and the implications of health care reform.
Earlier this year, medical device maker C.R. Bard cut 200 of its 900 Queensbury jobs to relocate production work to other plants. And last month, the CEO of AngioDynamics Inc., which has a Queensbury plant, resigned after an "underperforming" fiscal year.
Tori Riley, president and executive director of the Washington County Local Development Corp., said manufacturers continue to struggle with high energy costs and taxes.
"I don't think any industry is safe anymore," she said.
According to Riley, losing a local facility is always a concern when the decision-making happens somewhere else.
"A lot of these companies, if they don't have their corporate headquarters here, we have to be very cognizant where their other firms are operating, and where are their other competitive markets," she said.
Vicky Pratt Gerbino, the new president of EDC Warren County, agreed. She said there is a lot of pressure on firms to increase profitability, especially with the long lead time to bring products like medical devices to market.
"It's a step that they are taking in order to position themselves for higher profitability going forward," she said.
"Our job as economic developers is to try to get those people back to work."
Covidien has not commented on its plans for the property once the facility closes. Both Pratt Gerbino and Riley said that will be a topic of discussion when they jointly meet with company officials later this week. The economic development groups will offer their assistance and seek to minimize the impact of the closure.
Employees will be eligible for severance and outplacement services; the company will also provide employment opportunities at other Covidien plants.