A Medical Device Daily

Hospital products manufacturer Hospira (Lake Forest, Illinois) yesterday disclosed plans to close two manufacturing plants and phase out production at a third, resulting in layoffs of about 1,500 workers while creating about 400 new jobs at relocated operations.

Altogether, this will amount to about a 10% reduction in the company's current work force of about 13,000.

It said that over the next 18 months it will close a plant in Ashland, Ohio, and over the next 28 months close a plant in Montreal.

It also said that it would phase out manufacturing operations at a facility in North Chicago, Illinois, in advance of a 2014 leasing expiration date there, primarily over the next four years. Hospira has leased that facility from Abbott Laboratories (Abbott Park, Illinois), its former parent, after its spin-off from Abbott in 2004 (Medical Device Daily, May 4, 2004).

The company said it would transfer operations to some of its other U.S. facilities, creating about 400 new full-time positions at these other locations so that “the net position reduction is projected to be approximately 1,100 jobs.”

Hospira said the closures and layoffs are forced by “the relatively higher costs of manufacturing in the impacted facilities, coupled with excess manufacturing capacity available for certain product lines . . .”

It said it would make available career counseling, job-search training and other assistance to help prepare employees for the transitions.

CEO Christopher Begley said the closures are necessary “to keep costs down while maintaining our high standards of quality and performance.” He added that since the spin-off from Abbott, “our manufacturing optimization efforts have included not only the consolidation of our operations infrastructure, where appropriate, but also key capital investments in several of our sites to support the company's strategies for growth.”

The company estimated pre-tax expenses of $95 million to $110 million over the 2005-2009 period for the impairment and accelerated depreciation of assets, employee-related costs and other expenses.

The total net cash outflow is expected to be $58 million to $73 million, Hospira said, while estimating that it will see cost savings of about $15 million from the closures in 2008, with annual cost savings reaching $30 million in 2010.

Based on expected production at the facilities, the company predicts a pre-tax impairment charge of about $13 million in 4Q05.

Hospira's product lines include generic acute-care injectables, integrated solutions for medication management and infusion therapy, and what it terms “the leading U.S. injectable contract manufacturing business.”

The company currently operates 14 manufacturing facilities worldwide.

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