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150 Largo jobs going to China

A medical device maker will outsource its manufacturing operation.

By KRIS HUNDLEY, Times Staff Writer
Published August 22, 2007

Manufacturing workers at Smith & Nephew PLC's plant in Largo got the bad news recently in a PowerPoint presentation: Their jobs are headed to China.

Within two years, the London medical device company expects to close its production facility in Pinellas County, putting 150 employees out of work.

One bit of good news: Smith & Nephew plans to keep the U.S. headquarters of its wound management division in the Tampa Bay area, along with its 350-person work force. A company spokeswoman said new office space will be found locally for those employees, who are involved in sales, marketing and back-office operations. The company plans to sell its 188,000-square-foot complex off Starkey Road.

"Manufacturing is going to cease, but we're keeping a footprint in the area," Smith & Nephew's Sidonie Myers said from the division's office in Hull, England. "And 350 people will definitely continue to be employed."

Smith & Nephew's decision to outsource work here and open its first plant in China is driven by economics and the demand for lower health care costs. Competitors like Johnson & Johnson already manufacture products offshore. Though Smith & Nephew declined to disclose its pay rates in Largo, current postings for medical manufacturing jobs in Pinellas County offer salaries ranging from $14 to $22 an hour. In China, wages can be as low as 60 cents an hour.

Despite an unemployment rate of just 3.9 percent in Florida, the state has steadily been hemorrhaging manufacturing jobs, losing 5,300 positions over the past 12 months.

"Part of our manufacturing strategy is to look at the production or outsourcing of product into low-cost environments, without a loss of quality," Myers said. She declined to identify the location of the new facility, saying land acquisition is not yet final. The company hopes to begin construction early next year, with completion within 18 to 24 months.

The Chinese plant will manufacture Allevyn adhesives, the company's high-tech bandages. To date, Allevyn products have been manufactured only in Largo and Hull. Three other wound-care products currently being made in Largo will be shifted elsewhere, Myers said.

Medical products are just the latest in a long line of goods that global companies have concluded can be made more cheaply overseas. Among local companies that have shifted production to lower-cost countries are Essilor, which moved its lensmaking line from St. Petersburg to Mexico, and Jabil, which has opened electronic component plants from Eastern Europe to Asia.

Among area service companies, Tampa's Sykes Enterprises has shifted some of its U.S. call centers overseas for cost-cutting reasons.

Though recent recalls of Chinese-made toys and tires have raised concerns about quality, those faulty products have generally been sourced from subcontractors. Smith & Nephew said it will own and operate its facility in China.

"We will make sure all the correct regulations are in place," Myers said.

Wound management is one of four divisions at Smith & Nephew, which also sells knee replacements, minimally invasive surgical devices and trauma-care products. The company said its wound-care products have a 17 percent share of a $4-billion global market. The U.S. wound-care division in Largo reported sales of $139-million last year, out of total division revenues of about $700-million. Smith & Nephew's global 2006 sales for all products were $2.8-billion.

Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

Fast Facts:

Also outsourcing

Bay area manufacturing companies that have moved production offshore:

Essilor of America: The company moved about 300 lensmaking jobs to Mexico in 2003.

Jabil Circuit Inc.: Based in St. Petersburg, Jabil has opened production plants worldwide, most recently opening an electronics factory in Vietnam.

[Last modified August 21, 2007, 23:38:05]