Chicago Tribune - July 14, 2005
Bruce Japsen, bjapsen@tribune.com

The move is a rare retrenchment by one of the Chicago area's biggest employers and one of the largest Abbott layoffs involving local workers in recent memory. In 2002, the company cut about 2,000 jobs, including 200 in Lake County.

The North Chicago-based medical-products giant said it would trim diagnostics and pharmaceutical manufacturing jobs at its sprawling north suburban Abbott Park campus, just off the Tri-State Tollway, and at a large plant in North Chicago. The cuts are intended to save more than $200 million annually.

The announcement was made as part of an otherwise robust second-quarter earnings report that showed profit up 38 percent.

The company also plans additional "selective" job cuts in other parts of the world during the next two years to increase margins that have narrowed from a year ago despite a push into more lucrative products.

Abbott said it is increasingly moving into expensive technologies in developing drugs and medical products that require higher spending on research and development. The company also is ramping up production overseas, where labor costs are cheaper and plants are closer to its global customers.

Already, Abbott has been eliminating an undisclosed number of jobs through attrition, but company executives chose to make more drastic reductions after determining its manufacturing, research and development needs for coming years.

Abbott spent nearly $1.7 billion on research and development last year and plans to increase that by a percentage in the "high single digits" this year, the company said.

Under Chief Executive Miles White, Abbott shed low-margin businesses like hospital products in favor of boosting spending on more profitable drugs and devices such as its injected rheumatoid arthritis drug Humira.

The company also has ramped up drug research funding as it develops cancer medications and a new formulation of its blockbuster AIDS drug Kaletra.

Some of the job cuts were rumored for months, creating tension and unease among the more than 14,000 employees Abbott has in Lake County. Abbott has more than 60,000 workers worldwide.

Employees who contacted the Tribune in recent months said they worried they would lose their jobs, given the openings this year of three new diagnostic test-making plants in England and Ireland.

Abbott, though, said any shifting of jobs away from Lake County to Ireland and England has been done largely through attrition. The new cuts are additional initiatives, the company said.

Abbott's manufacturing realignment resulted in a one-time after-tax charge of $27 million in the second quarter, and another after-tax charge of $215 million is expected in the second half of the year as the company further realigns global manufacturing operations.

Abbott's second-quarter net earnings were otherwise solid, rising to $877.1 million, or 56 cents a share, compared with $634.3 million, or 40 cents a share, in the year-earlier quarter.

Revenue jumped 17 percent, to $5.52 billion from $4.7 billion, led by a 58 percent increase in worldwide sales of Humira to $321 million in the quarter.

Abbott also reported a 200 percent increase in sales of its arthritis pill Mobic, which has benefited after so-called Cox-2 painkillers like Vioxx and Bextra were removed from the market over the last year due to increased risks of heart attacks.

However, analysts said that Mobic, part of the older, non-steroidal anti-inflammatory class of drugs, doesn't help Abbott's margins because it co-promotes Mobic with another company.

Mobic sales improved to $322 million, but Abbott gains only an undisclosed fraction of its profit as part of a distribution agreement with Germany's Boehringer Ingelheim.

Shares in Abbott dropped $2.06, or 4.1 percent, to close at $47.65 Wednesday on the New York Stock Exchange. On Tuesday, Abbott closed at a three-year high of $49.99.

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