“Valeant’s model of cutting and slashing really doesn’t work for more than a very short period of time.”
The words are those of Allergan chief executive David Pyott but they will resonate today with the 1,100 workers at Bausch & Lomb in Waterford.
Since Valeant’s $8.7 billion (€6.4 billion) acquisition of Bausch & Lomb, there have been persistent rumours about the safety of jobs at the company’s Waterford plant – its only operation in Ireland.
There was an awareness locally that change was coming but, even in that context, the scale of the cuts announced yesterday was savage. Almost a fifth of the workforce will lose their jobs. For those who stay, wages will be cut by 20 per cent.
The company won't disclose how much it pays its Waterford staff, citing financial sensitivity in the competitive contact lens market, but it claims its wages are 30 per cent lower in its other major lens plant in Rochester, upstate New York.
It was at pains yesterday to paint its news as a job-saving proposal – the alternative being a total shutdown of the Waterford plant and the multinational group’s exit from Ireland. It’s unlikely to find a meeting of minds on that issue in Waterford.
While trade union representatives and the company are scheduled to meet on Tuesday, sources in Government and in the area say there is unlikely to be much room to manoeuvre. Bausch & Lomb is trailing a distant fourth in contact lens manufacture, Valeant says. The impression is that while the company does not actively want to antagonise the Government, and can see the value of a European base, it will have little compunction closing Waterford entirely if needs be.
Valeant is a company in a hurry. Led by former McKinsey director Michael Pearson, it has been expanding rapidly over the past five years, almost entirely through mergers and acquisitions and has stated its aim of becoming one of the big five players in pharmaceuticals.
Game-changing deal
It has been particularly active in the eyecare sector, as well as in dermatology and, having yet to fully digest Bausch & Lomb, it is now pursuing a game-changing deal with Allergan, having launched an unexpected hostile bid that has since been increased in value to $49.4 billion.
As part of its defence to the damning criticism of its business model by Allergan’s Pyott, Valeant said its purchase of Bausch & Lomb had been a rousing success – in part because it had managed to make extensive savings by slashing the target’s administrative budget.
Certainly Bausch & Lomb is feeling the squeeze and, for all the efforts of Minister for Jobs Richard Bruton last night to talk up the prospects for the plant, it is hard to see any positives in the current position.
The Waterford plant has struggled through Ireland’s period of austerity with a series of job cuts eating into numbers employed at the plant since its 2006 high of just over 1,700.
Until then, it had generally been the beneficiary of rationalisation in the group – often at the expense of the Rochester HQ and other US plants. There is a certain irony, therefore – and an indicator of the woes of the manufacturing sector in the US – that relocating work there is seen as the economic option for its new owners.
Quite what Allergan’s 850 workers in Westport make of Valeant’s approach is unclear but they could be excused for being nervous in the wake of the company’s latest announcement in the southeast.
