Stryker Corp. layoff plans strike chords of political and economic concern (Kalamazoo Gazette)
KALAMAZOO — Stryker Corp.‘s plans to layoff about 5 percent of its worldwide staff to cut costs — a move announced by the medical products company last Thursday — have some worried about the spin-off effect it may have in the community.
It seems to be an even bigger concern, however, to some from the political standpoint.
They are squarely blaming the new Medical Device Excise Tax and the Obama administration for the Kalamazoo-based company’s decision.
“We’ve already got the highest unemployment rate in the country,” said Charlie Owens, state director of the National Federation of Independent Business. “Clearly, the federal law is aggravating the problem and it’s undermining the state’s effort to improve the economic climate.”
Stryker Chairman, President and CEO Stephen P. MacMillan said the decision was a result of “a challenging economic environment and a market slowdown in elective medical procedures,” as well as the need to prepare for the new tax.
The company said that it will look to cut its 20,036-person worldwide staff before the end of 2012 and restructure some of its operations in order to wring out about $100 million in pre-tax operating costs savings. It said it expects the Medical Device Excise Tax, which requires the makers of various medical devices to pay 2.3 percent of their gross U.S. revenues on such products beginning in 2013, to cost it about $150 million.
If Stryker does an across-the-board cut of its 2,250-person Kalamazoo-area workforce, about 112 local workers would lose their jobs. About 1,002 of its worldwide workforce would be cut.
“It’s unintended, but not unpredictable,” Owens said. “The layoffs next year at Stryker because of the law will affect a lot of families in the Kalamazoo area, including the families who depend on the local small businesses.”
Owens said local restaurants, delicatessens, markets, gas stations, barber shops and other small retailers will be affected by the potential loss of Stryker employees. He called on Michigan’s congressional delegation to reconsider the law before it causes more damage.
The tax is part of the Patient Protection and Affordable Care Act signed into law in March of 2010 by President Barack Obama. It is intended to help generate $20 billion in 10 years to help pay for universal health care.
In its analyst blog, Zacks Equity Research wrote today: “The highly controversial tax, representing a part of the Patient Protection & Affordable Care Act (labeled as “ObamaCare”) enacted by the government-mandated healthcare reform in the U.S., will be a drag on devices companies.”
Although it also stated that the downsizing and restructuring will enable Stryker “to realign resources and continue investment in strategic areas for growth,” Zacks said of the tax payout: “The outlay is expected to throttle innovation as it will impact investment in research and development. Moreover, it will lead to job cuts and higher prices for customers.”