Stryker starts layoffs ahead of device tax
Looking to minimize the sting of the pending 2.3% tax on medical device sales, Stryker ($SYK) is starting rolling layoffs at two New York facilities, planning to shutter them by year's end and cut 107 jobs in total.
As The Buffalo News reports, Stryker filed a notice with the State of New York, saying it plans a first round of layoffs that will terminate 11 employees starting Sept. 21. More job cuts are to come, and the company is looking to trim costs by shutting down the two plants it landed in a 2010 acquisition of Gaymar Industries for $150 million.
The cuts are part of Stryker's plan to absorb the 2.3% hit by slashing its workforce by 5% and reducing its operating costs by $100 million, according to The Buffalo News. The company has put one of the New York facilities up for sale at $3.9 million, the newspaper reported.
The Michigan-based firm isn't the only devicemaker preparing for a strain on revenues once the tax takes effect in January. Boston Scientific ($BSX) said it predicts paying a $100 million charge next year in extra taxes, and Medtronic ($MDT) says it will lose $175 million against its 2013 earnings. And while those companies haven't outlined cost-cutting measures, Indiana's Zimmer has said it will cut 450 jobs.
The Congressional Budget Office estimates the tax will cost the industry about $30 billion over a decade, and the device lobby contends the charge will hamper R&D, slow down the process of getting devices from labs to patients and, as Stryker would agree, force devicemakers to slash payrolls. After passing the House, a bill to repeal the 2.3% levy appears to have stalled in the Democrat-controlled Senate, but industry group AdvaMed hasn't given up hope, looking forward to a possible end-of-year vote in that chamber.
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