Johnson & Johnson (NYSE: JNJ) has filed its redemption plan for the recall-plagued plant in Fort Washington, PA. J&J is set to keep the plant closed for months, until the middle of 2011, as it retrofits the facility, installs new equipment and retrains workers. But for some time, the company will have fewer workers to train: It's laying off 300 employees, some 75 percent of the workforce there.
The plant has been idle since April, when FDA inspectors released a scathing report on the facility's operations. J&J's consumer healthcare unit recalled some 140 million bottles of children's medicines made at the plant, because of possible contaminants and potentially "superpotent" products.
The products made at the Fort Washington plant will be transferred to other J&J facilities so that the company can get those drugs back onto the market as soon as possible. Analysts have said that the plant closure through year's end would cost the company about $650 million in sales. Six more months would be hundreds of millions on top of that.
"You don't close a plant for a long time and make redundant a lot of people unless you absolutely have to," Les Funtleyder, an analyst with Miller Tabak & Co., tells Bloomberg. "This isn't a minor problem." What's more, the spate of McNeil Consumer Healthcare recalls and the drastic action needed to fix quality problems indicate broader troubles, he suggests. "How on Earth did we get this bad, to the point where you have to shut down a plant?" Funtleyder says. "Who was minding this door looking at the yellow flags?"