Abbott is making more medical devices than it can sell and is cutting back on production, writes Barry O'Halloran
Abbott was keen to stress yesterday that its decision to close its manufacturing plant in Galway with the loss of about 500 jobs is not a reflection on Irish workers, or the cost of hiring them.
Its local vice-president, Damian Halloran, who runs the facility, stressed that the jobs that are due to go over the first nine months of next year are not destined to be moved to a country where it is cheaper to hire staff.
Instead, the company says that it has to cut the jobs as it has "excess" manufacturing capacity in its Abbott Vascular operations in the Republic and the US, where an estimated 700 jobs are to go.
The plants, in Galway and Temecula, California, produce stents and catheters that are used to widen clogged arteries, or heal damaged blood vessels, in heart disease patients.
The company is making more of these devices than it can sell and has to cut back on their production.
The group's statement said yesterday that this is down to the fact that its operations have become more efficient. But this is happening against a background where the demand for stents has been falling.
A recent article in Business Week, to which Mr Halloran referred yesterday, points out that changes in the market mean demand for these devices has fallen by between 20 per cent and 30 per cent.
The article quotes research by US investment bank, JP Morgan Chase, which found that doctors in the US are referring fewer patients to hospitals to have stents fitted.
Alongside this, where they are sending patients for this treatment, the rate at which they seek stents that also contain drugs, used to heal damaged arteries and blood vessels, has fallen from nine out of every 10 to between 67 and 68 per cent.
Two of its global rivals, Boston Scientific and Johnson & Johnson, have also taken hits as a result of this. Boston is cutting 2,700 people from its global workforce, including 150 from its Galway plant, and Johnson & Johnson has plans to axe 3,400 jobs. Last year it emerged that doctors in the US were concerned that some stents could themselves cause problems.
The US Food and Drug Administration (FDA), which is recognised for setting high standards when it comes to approving new drugs and medical treatments, began a review of the devices.
However, Abbott has avoided the fall-out from this, as the FDA last week signalled that a new, drug-coated stent on which the group is working had passed one of the last stages of approval, and is just one step from getting the green light.
The Galway plant supplies facilities in Clonmel, Co Tipperary and California which produce the finished stents. The Clonmel plant will survive, and between 50 and 100 people from Galway could get the option of being redeployed there.
Alongside IT, pharmaceuticals and biotechnology, medical devices is one of the areas targeted by job-creation agencies such as IDA Ireland.
The reasoning is simple: businesses in this field provide well-paid, high-quality jobs, they invest heavily in research and development, and demand for their products does not depend on economic conditions, as recessions do not stop people from getting sick. Even though these businesses are a good deal more recession-proof than many others, yesterday's announcement shows that no industry is free from risk.
For the moment, Abbot as a group remains a big player in the Republic, with over 3,000 people on its books here. It has been here since the 1940s.
However, as Galway Siptu official Michael Kilcoyne remarked, none of this is much comfort to families facing the prospect of losing, one, and in some cases, two, pay packets in 2008.