Business

Leiner to lay off 500 workers

Leiner Health Products is located in the Lakemont Industrial Park near Carowinds.
Leiner Health Products is located in the Lakemont Industrial Park near Carowinds.

Leiner Health Products will lay off more than 500 workers from its troubled Fort Mill manufacturing and distribution plant, the company said Thursday.

Leiner will stop manufacturing and packaging over-the-counter drugs, vitamins and supplements at the Fort Mill plant. Those operations will be consolidated into the company's Wilson, N.C., plant, the company said in a news release.

About 30 employees will stay on in Fort Mill, and Leiner will keep using the facility for distribution, said Chief Financial Officer Kevin McDonnell. About 540 employee positions will be eliminated, according to a document filed Thursday with the U.S. Securities and Exchange Commission.

The layoffs will happen over the next three to six months, he said.

Leiner's business has been crippled since an unplanned government inspection found problems with its manufacturing practices earlier this year. A Fort Mill employee contacted the Food and Drug Administration about the plant, located off Carowinds Boulevard. The company then shut down drug production at its plants nationwide.

The exact nature of the problems has not been stated publicly.

The company hasn't resumed production, McDonnell said Thursday. But Leiner's goal is to stay in the OTC business, he said.

Leiner is still working with the FDA, and McDonnell said he did not know when the issues might be resolved.

Leiner makes drugs sold as store brands for retailers such as Wal-Mart and Costco. Generic drugs make up about 25 percent of its total business.

"This is a new beginning as we strive to emerge as the nation's 'best-in-class' OTC store brand supplier," CEO Robert Kaminski said in a statement.

Outside the plant

Thursday afternoon, a security guard waved a metal detector over people entering the Fort Mill plant. He asked reporters to leave the property, and most workers did not want to discuss the layoffs.

Those who did had mixed reactions.

Tim Martin, who had worked in the packaging department for a year, said he was happy to hear the company would be bringing in an outside firm to help workers find new jobs.

"We got a fair deal," said Martin, who lives in Rock Hill.

Another employee, a Rock Hill resident who asked not to be named, said the company's offer was no help.

"Eight years shot to hell," he said.

The plant runs three shifts, and many workers were told of the layoffs during Wednesday's third shift and Thursday's first shift. Some workers lost their jobs immediately, others will stay on a few more months.

Allan Moffitt, a second-shift logistics department employee, found out he had been laid off shortly after arriving at work Thursday afternoon.

Employees were gathered in a meeting room, informed of the layoffs and given the rest of the day off, the Tega Cay resident said. Most had heard about the layoffs in advance from co-workers on the first shift, Moffitt said.

"It's very frustrating," he said. "It's disheartening to lose a job. I've got bills to pay, and it adds anxiety and stress."

Moffitt, who worked at Leiner for about a year, said employees weren't told when their last day would be. Most would end employment between July and August, he said. The company offered severance packages based on years of service, Moffitt said. He said Leiner officials pledged to host an outside firm to help people find new jobs.

"They're doing the right thing, helping us find another job," said Moffitt, who has been laid off twice before from other companies. "The other (companies) were, 'This is your last day. Good luck.' They've gotta do what's right for the business. I don't hold any grudges."

The S.C. Department of Commerce and the Rock Hill office of the Employment Security Commission had not heard from Leiner late Thursday afternoon. Both offer help to laid-off workers.

The commerce department has a so-called rapid-response team that comes into businesses and helps file their insurance, find new jobs or retrain for new careers, said spokeswoman Kara Borie. But the team can't deploy unless a company says it's OK.

The department called Leiner on Thursday to offer help to its employees, but did not hear back, she said.

Company in trouble?

Some analysts say Leiner could suffer from its recent setbacks.

"In general, in the store-brand business, you can't have any quality control problems," said Derek Leckow with Barrington Research. "They'll probably lose some market share."

Since Leiner stopped making its drugs, other companies have stepped in to fill the supply gap, he said.

"There's the question of how expensive and how costly will it be to get that share back," Leckow said. "In the meantime, someone has to fill the orders."

That's one of the reasons Moody's Investors Service cited when it downgraded Leiner's debt ratings last month.

Moody's was concerned about Leiner's lost sales and the high costs it will take to fix manufacturing practices and start production again, according to market reports.

In early May, an important supplier yanked a long-term agreement with the company, instead announcing it would compete directly with Leiner instead. In April, Leiner recalled some of its products because of problems with their shelf-life and uniformity.

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