Welch Allyn to Cut 275 Jobs as Part of Restructuring

Published: Sep 11, 2012

Portland Business Journal by Erik Siemers , Business Journal staff writer

Medical device manufacturer Welch Allyn on Monday said it is cutting 160 jobs from Beaverton over the next three years as it consolidates manufacturing operations as part of a global restructuring.

CEO Steve Meyer told the Business Journal that the manufacturing of patient monitoring systems and vital signs devices will shift from Beaverton to the privately held company's headquarters in Skaneateles Falls, N.Y.

The company's Beaverton workforce, now spread across two buildings at 8500 S.W. Creekside Place, will drop from 270 people to 110 as it becomes one of Welch Allyn's three dedicated research and development centers alongside Skaneateles Falls and Singapore. The company will at some point likely occupy just one building, Meyer said.

Some of the Beaverton manufacturing workers will be offered a chance to keep their jobs and move to New York, a spokesman said. The rest will be offered a severance package that includes outplacement assistance and an education benefit that includes reimbursement of up to $4,000 off education costs once coursework is completed.

“Beaverton is unique in that they have fantastic capabilities in R&D in software development and wireless technologies,” Meyer said. “That piece we intend to retain as well as a number of our marketing colleagues in product development in those areas.”

Welch Allyn is cutting 10 percent of its 2,750-person global workforce as part of a restructuring Meyer said is necessitated by the federal Affordable Care Act.

The legislation — signed into law in March and upheld by the U.S. Supreme Court in June — includes a 2.3 percent excise tax on total revenues of medical device companies that goes into effect next year.

“If you do the math on that, you have to realize it’s a regressive tax that starts on revenues, but when applied to the bottom line the impact is pretty substantial,” Meyer said.

Meyer, for example, said that for a business with $100 million in sales and $10 million in profit, a 2.3 percent tax on sales equals $2.3 million.

“That represents a 23 percent tax on your income,” Meyer said. “Those are the kinds of orders of magnitude we’re dealing with in terms of the numbers.”

Welch Allyn doesn't disclose its annual revenue, but it's certainly larger than $100 million. The company's Beaverton operations alone generate around $120 million in annual sales, according to a profile on the website of the Oregon Manufacturing Extension Partnership.

Meyer said, as a private company, Welch Allyn hoped it could benefit from being able to “ride out the storm” and manage the added costs internally.

“We simply couldn’t wait anymore,” he said. “We’re actually behind most of our peers in making a number of these moves.”

This won't be the first time Welch Allyn's Beaverton facility dealt with the specter of a global restructuring.

In 2006 it came out the winner when the company decided to consolidate its manufacturing operations. Welch Allyn facilities in San Diego and Chicago were phased out while Beaverton was slated to grow its employment by 10 percent.

The Oregon Manufacturing Extension Partnership, a Portland-based nonprofit manufacturing consulting program, lists Welch Allyn among its case studies, detailing how it helped incorporate lean manufacturing techniques and other cost-saving mechanisms into the facility.

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