Stryker Corp. (NYSE:SYK) officials said the company plans to cut 5 percent of its workforce over concerns about the impending 2.3 percent medical device tax prescribed by President Barack Obama’s health care overhaul.
The Kalamazoo, Mich.-based orthopedic device giant expects layoffs and restructuring efforts to reduce costs by more than $100 million before the tax takes effect in 2013.
Officials said the reductions should free up capital for strategic investments and growth "despite the ongoing challenging economic environment and market slowdown in elective procedures." according to a press release. Restructuring efforts will cost the company an estimated $150 million to $175 million, much of which will be recorded in Q4 2011 earnings.
Stryker CEO Stephen MacMillan has long been a vocal critic of the device tax, telling an industry lobby conference in September, "There is no doubt that we’re already starting to think about actions that offset that additional tax."
"Here we are, one of the greatest industries in the country, and we’re staring down on January 1st, 2013 and the addition of a 2.3 percent excise tax, while meanwhile on the other side all the discussion in Washington is about creating jobs," he said.
MacMillan, who’s on tap to take over as AdvaMed chairman next year, estimated the tab on the medical device tax at $150 million for Stryker.
"One-hundred-fifty million means nothing to people in Washington. That’s a rounding error," he said during the conference. "They look at a tax on our industry like, ‘What’s the big deal?’ We have to make those numbers real, because they’ve become numb to a government that is spending $3 billion in deficits every day."
Stryker revealed double-digit top-line growth and a 3 percent dip in earnings in its third quarter earning report yesterday.
Company officials were optimistic enough in their performance that Stryker boosted its full-year forecast to $3.70 to $3.74 per share, up from its prior view of $3.65 to $3.73.