Medtronic cuts jobs in cardio and vascular devices group

Medtronic PLC is cutting jobs in its cardiac and vascular devices group, including jobs in Minnesota, as the medical device maker works to implement a corporate-efficiency program in the wake of a transformational merger four years ago.

Medtronic spokesman Fernando Vivanco declined to say Friday how many total jobs will be affected by the changes in the company's cardiovascular devices group, but he confirmed that the cuts are spread across various locations and job responsibilities.

In Santa Rosa, Calif., the number of cuts being contemplated — 85 to 100 jobs — was high enough to trigger requirements that the company notify government officials. A story in the Santa Rosa Press Democrat said Medtronic, one of the largest employers in Sonoma County, has about 1,100 employees on two campuses making medical balloons, stents and heart valves.

In Minnesota, the number of job cuts doesn't appear to be high enough to trigger the requirement to notify state officials.

Vivanco said Friday afternoon that the number of job cuts is in flux, as some employees will be redeployed to other parts of the company, some contractors will be cut and some open positions will not be filled. But some jobs are being eliminated.

"We continually evaluate our operations to look for ways we can streamline the organization and be more efficient, as we need to deliver growth to the corporation. The business is prioritizing programs that best position us to have the greatest impact on patients in the future," Vivanco wrote in an e-mail Friday. "We needed to make longer-term structural changes to ensure the sustainability of our organization and determined that we needed to reduce a number of positions."

Medtronic, the world's largest medical device maker with more than $30 billion in annual device revenue, has been implementing a five-year cost-cutting program that it announced just over a year ago.

Called the "Enterprise Excellence Program," the initiative promised gross savings of more than $3 billion a year. The program will create at least $1.6 billion in cost, much of which is related to "employee transition and training investments" along with severance and other termination-related benefits at sites around the world.

"While the company anticipates there will be some employees impacted as a result of the restructuring and realignment plans, the company expects that its overall employee base will remain relatively unchanged, as new jobs are created in new capability areas and resources are deployed to support the company's growing market needs," Medtronic said in the Jan. 8, 2018, filing with the SEC.

The company employed 49,000 people worldwide in 2014, but that figure jumped to 92,000 after it acquired medical supplier Covidien in a $50 billion deal.

Medtronic officials have been working to streamline their workforce ever since, with the total number of full-time and full-time equivalent positions at the company at 86,000 in April 2018, the most current number available.

Medtronic has confirmed job cuts in Peoria, Ill., Portsmouth, N.H., and Columbia Heights, among other places. Overall, as of January the company had completed eight of its 10 "site consolidation" plans in its global manufacturing network.

In Minnesota, where Medtronic was founded, the company pledged to create at least 500 new jobs in the state at the same time as it moved its legal corporate headquarters to Ireland as part of the Covidien deal. In late 2016, Vivanco said the company had already added more than that number, bringing the company's Minnesota workforce to nearly 10,000.

The cardiac and vascular group (CVG), where the job cuts and transitions were confirmed on Friday, is a diverse business group that accounted for more than $11.4 billion of revenue last year. Products in the group include Medtronic's original medical device, the pacemaker, as well as implantable defibrillators, traditional and transcatheter heart valves, drug-eluting stents, and paclitaxel-coated balloons used in the legs.

In January, CEO Omar Ishrak made waves in the financial markets when he acknowledged "softness" in CVG sales would contribute to midrange growth for the company, causing at least one analyst to cut a price target on Medtronic stock. Ishrak fired back in an interview with CNBC's Jim Cramer, saying Medtronic has "the strongest pipeline that we've ever had in the company."

The following month, Ishrak said during a quarterly earnings call with investors that overperforming sales in Medtronic's minimally invasive therapies and restorative therapies groups had "offset the challenges in CVG that we talked about in January."

CVG grew organically by 1.6% during the prior three-month period, which Ishrak said was in line with the revised sales forecast announced in January. But the positive organic growth was based on accounting adjustments for factors like international currency fluctuations. On an unadjusted basis, CVG sales declined by 1% to $2.8 billion during the three months ended Jan. 25.

Although CVG is the largest of Medtronic's four product groups, it's also on track for the slowest growth of the four this year, with expectations for 3% to 3.5% revenue growth during the year, Chief Financial Officer Karen Parkhill told investors in February. The other company divisions are on track to grow between 5% and 15%.