Medtronic eliminating some Twin Cities jobs in favor of contractor

Medtronic is eliminating lower-skilled jobs in Columbia Heights and shifting the work to an outside contractor whose team will be based in the Philippines.

Overall, Medtronic says it has created more than 500 new jobs in the state since the company moved its legal address to Dublin last year with its acquisition of Ireland-based Covidien and pledged to keep growing here. But executives continue to look for ways to stay competitive.

Gov. Mark Dayton said in a prepared statement Friday that while the job cuts were a concern, the company appears to be sticking to its plans to grow in Minnesota.

"This development is concerning, given the commitment given to me by Medtronic that the company will add 1,000 jobs in Minnesota following their acquisition of an overseas company in 2014," Dayton's statement said. "However, this afternoon the company assured me that they are on track to fulfill this ­commitment."

Medtronic declined to identify the outside contractor, but a worker familiar with the plan told the Star Tribune that Medtronic is hiring the well-known outsourcing and IT services firm Cognizant, whose team will provide phone-answering and customer service functions for Medtronic from offices in the Philippines.

The cuts, which were announced to staff internally late last week, will go into effect by April.

The Medtronic employee briefed on the outsourcing plan said about 70 people at Medtronic's Sullivan Lake plant in Columbia Heights were notified last week that their jobs would be affected. Spokesman Fernando Vivanco declined to confirm a number, saying it's not yet clear how many jobs are leaving.

"After careful consideration, the Americas Customer Care organization at Medtronic's Sullivan Lake facility in Columbia Heights announced to employees last week it is transitioning some National Answering Service and Patient Registration Services work to a third party organization, allowing us to be more responsive to fluctuations in demand and maintaining service levels to our customers," Vivanco wrote in an e-mail.

Earlier this year, Medtronic announced a round of job changes at the same plant, saying only that it was "transitioning" an undisclosed number of manufacturing jobs by the end of 2017 as part of the company's "ongoing consolidation of manufacturing to larger centers of excellence," according to Vivanco's e-mail.

The latest announcement involves jobs responsible for what Medtronic called "transactional" work that is "repetitive in nature and does not require deep Medtronic or customer domain knowledge." Examples include transferring incoming calls, responding to requests for published medical literature and handling undeliverable mail.

Work in the department that requires more time or expertise is not being moved, including development of procedures and work instructions and managing "escalations" from the transactional work, Vivanco said.

Some employees affected by the changes will remain on site to work as employees of the contractor, Vivanco said. A Cognizant spokesman did not return calls for comment Friday. Other affected workers may be able to apply for Medtronic jobs in other departments.

Vivanco noted Friday that Medtronic has nearly 10,000 employees in Minnesota today, and has already added more than 500 new jobs in the state since it acquired Ireland-based surgical-supply maker ­Covidien in January 2015.

Medtronic shifted its corporate headquarters to Dublin as part of the $50 billion Covidien deal, but it vowed to maintain "operational headquarters" in Minnesota, where the med-tech giant was founded 67 years ago.

The corporate tax rate in Ireland is roughly a third of the U.S. rate, but Medtronic officials have insisted the deal was motivated more by corporate synergies than tax advantages.

Medtronic officials have told investors the deal would allow the combined company to create $850 million in annual cost synergies. Vivanco said he couldn't comment on the expected savings from the changes in Columbia Heights, but he noted, "one of our stated objectives is to identify and implement opportunities to operate as effectively and efficiently as possible, given our size and scale."

When the plans to move Minnesota's biggest med-tech company to Ireland were announced in June 2014, company officials sold the deal at the time by saying it would allow Medtronic to actually create more jobs in the state.

Medtronic officials specifically pledged to create at least 1,000 new Minnesota jobs in five years in management, research and development, engineering, and manufacturing.

Vivanco said Friday that Medtronic remains on track to meet its commitment of adding 1,000 new jobs to Minnesota over a five-year period.

Columbia Heights officials said Friday that they had not heard of any planned job cuts at the Sullivan Lake plant.

"I'm sad to hear that. I don't like to hear that at all," Columbia Heights Mayor Gary Peterson said by phone Friday. "They've been a pretty good neighbor for a number of years."

Joe Carlson • 612-673-4779