Jul. 27–DRAPER — For the second time in four months, a major player in Utah’s biomedical industry intends to shut down its manufacturing plant and move hundreds of above-average jobs out of state.
Ballard Medical Products on Tuesday told its 450 employees that the gastroenterology, cardiology and respiratory care devices made in Draper for 27 years would now be produced in Mexico, where labor is cheaper and where parent company Kimberly-Clark already makes 40 percent of such devices.
“Market and competitive pressures have forced all manufacturers to manage costs more efficiently, and Kimberly-Clark Health Care is no exception,” said Joanne Bauer, company president. “We understand that these changes will have a significant impact on our employees at the affected facilities, and we will provide them with maximum support during this time of transition.”
Ballard employees have plenty of company, namely the 750 Hospira workers who learned in March that their employer will strip its Salt Lake City plant and send their jobs to California, Connecticut and Mexico.
Both moves surprised Brian Moss, president of Utah Life Sciences Association. But he does not see either as a sign of big trouble for the state’s biomedical sector. Moss confidently points to other Utah companies — Merit Medical, Becton Dickinson (formerly Deseret Medical) and Cephalon — which plan to create a combined 1,200 jobs in the next few years.
“There’s a big difference between making a highly technical medical device and Kleenex,” Moss said. “I cannot conceive of our very skilled technical jobs being transferred to Mexico . . . and I just don’t see that plant closing down and going away; it will be operated by someone.”
Chris Roybal, Gov. Jon Huntsman Jr.’s senior economic adviser, sees the recent job losses as temporary setbacks.
“It is important to note that Kimberly-Clark [did this] not as a reflection on Utah’s economy, but just that we were caught in the company’s global business plan,” he said.
It was Friday that Dallas-based Kimberly-Clark announced plans to close or sell 20 plants nationwide and slash its work force by 6,000 jobs, or about 10 percent. Ballard, founded in 1978 by late Utah biotechnology entrepreneur Dale H. Ballard, was acquired by Kimberly-Clark in 1999 as part of a $774 million stock deal. On Tuesday, Kimberly-Clark identified the Draper plant, along with a 250-employee facility in Pocatello, Idaho, as among the doomed. The Ogden plant, which makes Huggies and employs 500 workers, will not be affected, company officials said.
John Dodd, head of global manufacturing for Kimberly-Clark, said the company would offer Draper employees job referrals and counseling, along with yet-to-be-detailed severance and benefit packages. The first of the firings won’t take place for at least a month, with the rest staggered out over the next two to three years, he said.
“We’ll begin talking with employees in the next several weeks to let them know what their status will be,” Dodd added, stressing that his company has yet to define a specific work force reduction schedule, though he did confirm Kimberly-Clark would likely discuss the possibility of putting its Draper site up for sale before year’s end.
Roybal cautioned against overreacting to the occasional flow of jobs to Mexico, with which the governor is seeking a trade and commerce pact. “We may, on occasion, lose some jobs but we will gain on a trade basis over time,” he said.
However, nothing is likely to stop the migration of jobs to countries such as Mexico, where manufacturing wages can be a quarter of the cost in the United States.
“This is the ongoing dynamic, especially with the pressure on health care costs,” Richard Davies, managing partner of the Vector Resources biotech consulting firm. “[Hospitals] need to control or reduce their costs, and that puts incredible pressure on the supply side.”
Still, Davies sees medical products development as a strong sector.
“It will continue to be a center of innovation, creation of new and novel devices. We have great minds here,” he said, though adding that outsourcing basic manufacturing abroad for cheaper labor will continue to be a component of the industry.
Brad Bertoch, president of the Wayne Brown Institute and a member of the Utah Technology Industry Council, mused that the lost jobs may find their way back to the Beehive State.
“As companies outsource, they find certain things work well and others don’t. The more technically complicated the job, the less success” of Third World workers meeting stiff regulatory requirements for sales in the United States, he suggested.
“Kimberly-Clark is just bowing to the allure of outsourcing offshore in an effort to improve their bottom line. There could prove to be a lot of problems with that,” Bertoch said.
Meanwhile, Ballard employees, asking to remain unidentified for fear of retribution, took little comfort from the company’s plans to stretch out terminations.
“We knew something was up when corporate and employee assistance people showed up this morning,” one woman said. “We’ve been afraid this would happen.”
Added a male colleague: “A lot of people have been working here a lot of years and really didn’t get much notice this would happen. Now, they are concerned if [Kimberly-Clark] will be true to their word [in phasing jobs out over time].”
Even competitors lamented Ballard Medical’s passing. Fred Lampropoulos, president and CEO of Merit Medical, saw the development as bitter irony, given that “the biomedical industry has been the backbone for this state in the recent recession.”
“It’s a mixed situation for Merit,” he said. “We’re saddened that another company is essentially being shut down. But the positive in this is that many of those employees may become Merit employees as we continue to expand our own operations.”
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