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  • > Even to dismiss the action has a project name! Project Everest !

Even to dismiss the action has a project name! Project Everest !

Object: Project Everest

We are writing to ask that Covidien abides by the ruling of the court order of 24th June 2009 signed by the President of the Tribunal de Grande Instance, Pau, which states that the redundancy plan for employees at the Airox factory be negotiated in a « transparent, fair and comprehensive way, updating the redundancy plan as necessary, and in view of social, economic data including the financial means of Covidien Group ».

To summarize: Airox is a company employing 61 people in R&D (20) and manufacturing (equipment ventilation – Respiratory GBU), acquired in September 2006 by Tyco Healthcare to complement its range of ventilation equipment.

At that time, Airox, whose prosperity, the image and dynamism was expected to create substantial profits for the group, was currently developing a new range of ventilators that were to be manufactured on the same site.

In September 2008, the closure of the manufacturing site was announced. Project Everest is activated.

1/ Profits generated by Airox
- Approximately $1.4M of sales are made each month by the commercial arm of Covidien on the basis of ventilators and « Gen1″ spare parts produced by Airox. (net of all direct and indirect costs of production, and the Airox profit margin)
- The manufacturing arm of Airox, in addition to being self-financing, also finances R & D, investment in equipment (approximately $ 1.7M in FY09), and new products which will generate future profits for Covidien until well after Airox closes its doors.

2/ Job cuts at Airox are unjustified from an economic point of view

Contrary to the initial claims by Covidien management and Human Resources, it is now widely accepted that Covidien has decided to close the Airox manufacturing plant to optimize the use of existing resources and to improve profitability of the Group:
- One of the only profitable manufacturing sites in the Respiratory GBU will be closed.
- The Galway factory manufactures a range of aging ‘end of life’ products and therefore needs new products to revitalize manufacturing, which the range of devices designed at Airox will provide.
- The closure of Pau allows substantial restructuring economies (approx 800K €)
- The Galway plant is located in Ireland, where tax breaks are more advantageous than in France.
- Covidien has already implicitly admitted that additional financial compensation would be offered to Airox employees as it was relocating manufacturing for reasons of profit and not economic necessity.
- Ms. Appell says that the profitability of the group is sufficient to justify the closure of a factory, even a profitable one, rejecting any moral assessment of that decision.

3/ Loyalty and professionalism despite the closure announcement in September 2008.

- Devices leaving Airox are of an excellent quality: the % of FOOBS is better than targets (0.2%, target 0.5%)
- Back-orders have been minimised despite poor estimated marketing forecasts
- The KPIs are good with a 0% rate of absenteeism
- The G-Med audit for the EC mark found only minor non-conformities. The auditor highlighted that the role of Airox employees was critical in this success
- The corporate audit action plan has been successfully completed

4/ Significant material and moral damage to employees

- Under French law, businesses must make every effort to re-employ within the Group, employees that are being made redundant. Covidien has not proposed any serious re-employment of employees either abroad or in France. Only one person has been reemployment by the R&D department.
- The current slump in the employment area of Pau suggests employees will have great difficulty in finding an equivalent job within a reasonable amount of time. Several multinationals have already made substantial numbers of employees redundant in the Pau region (Celanese, Halliburton, …) as well as many small businesses.

5/ Redundancy plan copied from Elancourt

- It is not appropriate for the redundancy plan at Airox to be a copy and paste of the Elancourt redundancy plan.
- Airox is a manufacturing site in a rural area, whereas Elancourt is an administrative centre located in Paris.
- The labor markets are completely different, so a redundancy plan copied from Elancourt is not relevant to the local employment needs.
- Ms. Appell has implied that the same measures would be applied to all Covidien sites (despite their obvious differences,) so that future sites will not expect greater redundancy payments in comparison to Elancourt.
- Covidien has expected Airox to meet the same standards of quality, targets and KPI as other sites within the Group, but without the financial means needed to achieve those targets.

6/ Taking into account the temporary employees

- One third of the people who will lose their jobs are employed on temporary contracts and have been working for Airox for over a year. When the closure was announced it was announced that people on temporary contracts would be offered permanent jobs so that they would benefit from the Redundancy plan. This has not been the case.
- These people are involved in the creation of wealth in the same way as permanent staff and continue to work hard, and to demonstrate loyalty and professionalism to Covidien and therefore should be treated equally within the redundancy plan.

7/ Redundancy conditions consistent with financial means of Covidien Group

- Redundancy conditions should be consistent with the financial means of the Covidien Group, as instructed by the judge, rather than based the financial means of Airox.
- When it is important to the Group, Covidien has shown its willingness to mobilize large financial sums to motivate certain Airox employees.
- More than $1,4M stock will be destroyed outright, due to poor overall management of the project (supplies bought on the basis of marketing forecasts in 2007 and approved by management), which shows that this amount of money is not significant for the Covidien Group.
- Bonuses that normally would have been distributed to employees for FY2009 have not been, as this money has been put aside by Airox to pay for the redundancy plan.

8/ A commitment to negotiate not met

- In its arguments on 10 June 2009 before the Court in Pau, legal counsel for the Covidien Group repeatedly emphasised a willingness to negotiate with employees. In reality, this has not been the case.
- In a discussion with employees on Friday 3rd July 2009, Ms. Appell retracted this argument saying that the only intention to negotiate was to redistribute the current proposed financial amount, rather than increasing the budget for the redundancy plan.
- Mrs. Appell did not make any increased financial proposals and referred any negociations or decisions until the meeting in Pau on 07/21/09.
- Mrs. Appell’s only comment was that the employees’ proposal was unreasonable and that she would not communicate the employees’ proposal or the supporting arguments to the management.

This being the case, the employees ask that the Covidien Group faces up to its social and moral responsibilities, and fairly compensates all employees involved in the creation of wealth for the Covidien Group.

Accordingly, we request that the social redundancy plan is negociated in a « transparent, fair and comprehensive way, updating the redundancy plan as necessary, and in view of social, economic data including the financial means of Covidien Group »in accordance with the order of 24 June 2009, signed by the President of the Tribunal de Grande Instance in Pau.

Finally, we appeal to your professionalism that the currently stalled negotiations will be resumed in a spirit of real dialogue at the meeting to be held July 21st 2009 at Airox, Pau.

We look forward to the presence of Mrs. Appell, Mr McIlwaine and Mr Balfe for a new financial proposal and a genuine willingness to negotiate in a transparent, fair and comprehensive way.

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