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Covidien closure highlights industry’s challenges

2011-07-11T18:30:00Z 2012-06-27T13:36:53Z Covidien closure highlights industry’s challengesBLAKE JONES--bjones@poststar.com Glens Falls Post-Star
July 11, 2011 6:30 pm  • 

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.

Copyright 2015 Glens Falls Post-Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(8) Comments

  1. Matt Funiciello
    Report Abuse
    Matt Funiciello - July 13, 2011 11:28 am
    boston said: "Matt, your intellectual honesty is to be admired. We would be considered by the folks who get their info from the controlled left-right media, that you and I are on opposite ends of the political spectrum. It's a crime that the controlled media will "report" NAFTA, IMF, North American Union, bailouts, criminal wars, etc. in a left-right thought control way.""

    boston, it is amazing to me that much of the conversation surrounding closures asks "WHY would profitable corporations leave?" (as if the answer isn't obvious). They leave because global economic slavery makes it MORE profitable to do so and the corporate mandate is to make as MUCH profit as you can. That's why we need REAL free market conditions in which competition breeds success or REAL regulation in which our standard of living is maintained by limiting trade with countries profit by oppressing their working class. The current system is devised to allow only the most unprincipled to prosper.
  2. boston
    Report Abuse
    boston - July 12, 2011 2:18 pm
    Matt, your intellectually honesty is to be admired. We would be considered by the folks who get their info from the controlled left-right media, that you and I are on opposite ends of the political spectrum. It's a crime that the controlled media will "report" NAFTA, IMF, North American Union, bailouts, criminal wars, etc. in a left-right thought control way. Your decernment of the truth is uncommon, but your numbers are growng. You, me and thousands of others have turned off FOX, MSNBC, and any "news" source that "reports" in a left-right, Repub.-Dem. mind box. Truth shall set us free from the international bankers, the corporate media, the private Federal Reserve Bank that is stealing us blind and the politicians who are in their hip pocket.
    How about a green tea party? After all, dispite what the media has told peolpe what to think, I find more tea party folks voted for obama than Bush. That will confuse the media educated masses.
  3. Matt Funiciello
    Report Abuse
    Matt Funiciello - July 12, 2011 11:18 am
    PfortE, you make great points about corporate greed but it IS NAFTA and GATT that have allowed the unprincipled ownership class to go where the slaves are and to profit from their misery at our expense. Clinton and the Dems ARE responsible for global economic slavery (but so is every president since Carter, at least). The corporations have been slowly jockeying for political control and the economic control that goes with it for over a century. Our own lack of vigilance that allowed a Slick Willy to sell the working class to India and China for a buck is disgusting and is our OWN fault. We reap what we sow, as they say. The middle class' co-option of radical workers' political rhetoric post-60's may have seemed very nice but the middle class is not the working class. They are a class that lives off our backs and they can never be allowed to feel that they represent workers. They can't. Covidien's closing is what happens when workers let the middle class speak for them.
  4. PfortE
    Report Abuse
    PfortE - July 12, 2011 9:50 am
    No no no...NAFTA nothing. Don't lose sight of who made the decision here. The thief isn't absolved just because you left your keys in the car.
  5. mytwocents
    Report Abuse
    mytwocents - July 12, 2011 7:36 am
    Wow!! Just another example of corporate greed. Here's some numbers for you:

    Covidian
    Net Income 2010-$1,632,000,000
    Operating Income (medical devices)-$2,097,000
    Executive Compensation to top 5 $26,900,000
    There's more numbers I could share but this just goes to show how a company will milk every penny they can out of a company to make a buck. I understand that sometimes businesses have to make unpopular decisions to benefit the company. But please do tell who is benefiting by this "restructuring?" My guess would be the top 5 as their compensation is based on the performance of the company and the higher the Net Income, the higher theirs is too.

    Good thing they are closing down this plant, they certainly would be shutting the doors if they didn't.

    Source: Covidian.com Investor Relations Online: http://investor.covidien.com/phoenix.zhtml?c=207592&p=irol-IRHome

  6. EnoughIsEnough
    Report Abuse
    EnoughIsEnough - July 12, 2011 6:04 am
    You can thank Bill Clinton and NAFTA for this.
  7. couldbeanybody
    Report Abuse
    couldbeanybody - July 11, 2011 9:23 pm
    ANOTHER manufacturing facility shipping there jobs out of country...How much profit is enough? What about all the people who will lose their homes, their cars, their livelihoods due to corporate greed? I used to be a sub-contractor there, and made many friends. My heart breaks for the families who will be effected by this decision. Many of the woman there are single mothers to start with! I think if it's possible, alot of you should re-locate to Costa Rica. Seriously, they will have to pay you ALOT more than the locals, and you could live one heck of a good life down there!! Look into it! And they would have to pay for your re-location too!! Stick it right back to them.....:)
  8. PfortE
    Report Abuse
    PfortE - July 11, 2011 7:48 pm
    "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."

    Translation: Everyone on the board and all the officers score a bonus if profit margins are widened. Relocating our manufacturing to places where we are not required by law to pay a living wage is a great step forward to that effect.

    Shame on you, folks.

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