BioKyowa will lay off 25 percent of work force

Thursday, March 2, 2006

BioKyowa Inc. will reduce its Cape Girardeau plant's work force by 25 percent next year as part of what it calls a "major reorganization" to help it lower prices and keep pace with global competitors.

That means in January that roughly 37 of the 145 workers at the Nash Road amino acid facility will be laid off, BioKyowa president Terumi Okada said Wednesday. He said up to 30 employees will have the opportunity to participate in a voluntary separation program that will offer larger severance packages.

"We are truly saddened that it is necessary to streamline our work force to keep our competitive position, which we must do if we are to continue to successfully operate our Cape Girardeau facility," Okada said. "This has been a very difficult and painful decision for us."

BioKyowa's major competitors -- mainly Ajinomoto in Japan as well as smaller Chinese companies -- have already publicly announced plans to significantly lower their production costs in their plants. Those competitors, Okada said, are also prepared to make similar changes in their overseas facilities. Those facilities make many of the same amino acids as BioKyowa and will then be able to offer the amino acids at a lower cost to customers.

Kyowa Hakko of Tokyo is the parent company of the Cape Girardeau BioKyowa plant, which opened its doors here in 1984. Kyowa Hakko is a leading global supplier to the food, pharmaceutical and chemical industries, with net sales of $3.3 billion annually.

BioKyowa Inc. in Cape Girardeau is the company's only U.S. facility, which is a major producer of a dozen amino acids used in industrial and food products, primarily arginine and glutamine. Arginine is an amino acid used in supplements to increase blood flow and glutamine is used in nutrition therapy.

Bill Hinckley, BioKyowa plant manager, said that the local plant will not decrease production after the layoffs next year. Customer demand for the amino acids is still high, he said. Production levels will be maintained thanks to new technologies, more automation and improved work methods. Hinckley said those technologies and methods are still in the works.

The employees will be laid off during a "pretty close time period" in January.

Employees were told Wednesday.

"They took it pretty well," Hinckley said. "I'm sure they were shocked. I'm sure they were worried. Their emotions probably ran the whole gamut. But overall I think they took it pretty well and calmly."

But that's one of the reasons BioKyowa made the news public a year in advance, Hinckley said. The company wanted to give workers reasonable notice. It also allows the company to develop some of the technologies that will help them maintain productivity after the layoffs, he said.

The company declined to discuss production and pricing numbers, citing proprietary concerns.

Okada says the company is committed to keeping BioKyowa successful in the amino acid business. Sometimes, the decisions are difficult ones, he said, pointing to the company's 2001 decision to cease production of the farm-grade amino acid lysine.

"One of the factors to our ceasing lysine production was that we did not make the difficult decisions necessary to staying in business," he said. " ... We believe that this action greatly improves and strengthens the long-term future of BioKyowa."

335-6611, extension 137

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