Smith & Nephew eliminated nearly 100 jobs in Memphis and Andover, Mass., on Thursday, Jan. 31, as the medical device company cuts expenses in an effort to offset tax hikes included in the Affordable Care Act.
The Affordable Care Act includes a 2.3 percent medical device tax, which took effect Jan. 1.
The London-based company, which employs about 1,800 people in Memphis, said the new tax will cost the industry about $30 billion over 10 years.
“(The tax) has impacted a number of companies across the U.S.,” said Joe Metzger, senior vice president of corporate communications. “Smith & Nephew is not immune from this added expense burden.”
Smith & Nephew announced in February 2012 that it would reduce its global workforce by 7 percent over the next three years. Several other companies announced similar plans, including Stryker and Medtronic.
Metzger would not comment on the exact number of jobs lost in Memphis, but sources familiar with the job cuts say it included about 60 Memphis employees.
“Unfortunately, and in order to absorb this cost burden into our business, this has meant less than 100 positions have been made redundant across various departmental functions in our Tennessee and Massachusetts sites,” Metzger said. “The company is providing the affected employees with a comprehensive severance package and outplacement support.”
Most of the employees were with the Advanced Surgical Devices division at the company’s Goodlett Farms Parkway facility.
Shelby County Mayor Mark Luttrell said he was “disappointed” by word of the second layoffs in the division in two years.
“It hurts anytime you see a company of that size cutting back,” Luttrell said. “I think the economic reality of things is that those things happen. Hopefully the balance sheet will show that we’ve gained more than we’ve lost.”
Smith & Nephew Inc. bought the Goodlett Farms Parkway property in January 2010 as part of a $42 million expansion of the global headquarters for the then-orthopedics division. That division was later consolidated with operations in Andover and became known as Advanced Surgical Devices Division. The division was split between Memphis and Andover.
Both locations saw job cuts in December 2011 in a move to eliminate duplicate positions and the continued restructuring of Smith & Nephew. The Memphis location cut about 80 positions.
The president of the Memphis division, Joseph DeVivo, left the company that August as Mike Frazzette in Andover became president of the new division.
For the third quarter 2012 the company reported revenues of $952 million compared to revenues of $1.03 billion in the third quarter of 2011.
The layoffs in 2011 came late in a year that had already included jobs cuts by its competitors – Medtronic Inc. and Wright Medical – which both also have facilities in Shelby County.
Wright is based in Arlington and Medtronic’s spinal and biologics business is based in Memphis.
Last summer Medtronic cut 500 positions, and another 500 are expected by the end of 2013. In March 2010, Medtronic had warned that taxes relating to the new health care reform and other business pressures could result in a reduction of about 1,000 jobs.
In December 2009, the Memphis Shelby County Industrial Development Board approved a $6.2 million payment-in-lieu-of-taxes agreement with Smith & Nephew for the Goodlett Farms expansion, which the company said would create 160 jobs and generate $13 million in annual payroll at an average annual wage of $93,427 excluding benefits.