U.S. decides offshoring played role in Novartis cuts in Lincoln

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Was there a bit of offshoring involved when Novartis ($NVS) decided to whack 300 jobs at its U.S. consumer healthcare plant in Lincoln, NE? The U.S. Labor Department thinks so.

According to the Lincoln Journal Star, the federal department has ruled that the job losses planned over the next two years are tied in part to foreign competition. As a result, the workers being axed will be eligible for special assistance that might include tax benefits and, in some cases, moving expenses.

The situation tracks back to April, when Novartis said in an earnings release that it would cut 40% of the workforce at Lincoln over two years. The plant was closed in 2011 when inspectors excoriated it for the mess there. Despite investments in upgrades, the FDA issued another Form 483 listing more problems during a reinspection at Lincoln earlier in the year. The company decided it would limit the plant to producing essentially three products, Excedrin, Theraflu and veterinary drug Sentinel. The narrower focus would require fewer workers. The cuts started in May, with Novartis cutting 72 workers and eliminating another 41 jobs that were open, the Journal Star reports.

But the hard luck for Lincoln seemed to be offset by an expansion Novartis announced the same week for a plant in Prangins, Switzerland. The year before, the Swiss drugmaker had planned to close the Prangins consumer plant and eliminate its 320 jobs. Instead, the drugmaker said it would invest €60 million ($78.6 million) and increase its size by 30%. Plans also call for another €90 million ($118 million) in investments by 2020 to boost its capacity by 70% in 10 years.

The Nebraska Department of Labor said that when state labor officials visited the Lincoln plant following the announcement, they were told by employees that their jobs "were being moved to a plant in Switzerland." That led it to seek the special status for workers there, the Journal Star reported, although Novartis insisted the two decisions were not linked. 

Since then, another reminder of the plant's troubles has emerged. Novartis recalled 4.4 million bottles of Maalox in August because of packaging issues. A spokesperson said the Maalox was manufactured at Lincoln in December 2011.

- read the Lincoln Journal Star story

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