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Zimmer suing key supplier

Says production move may cost it millions in lost sales

A supplier’s plan to move production out of Switzerland could cost Zimmer Inc. millions in lost sales, the company argues in a lawsuit.

Zimmer is suing Greatbatch Medical for unspecified damages in a lawsuit filed Nov. 8 in the South Bend division of the U.S. Bankruptcy Court for the Northern District of Indiana.

Zimmer, which is requesting a jury trial, also wants the court to stop Greatbatch from making the move, giving Zimmer time to prepare for what it considers a major disruption in its supply chain.

Both companies are significant employers in northeast Indiana.

Warsaw-based Zimmer employs about 2,300 full time in Warsaw. Buffalo, N.Y.-based Greatbatch, which dedicated a new $17.5 million manufacturing plant in Fort Wayne in June, employed about 120 locally then and had plans to create about 75 new jobs with the operation’s move from leased space in Columbia City.

Greatbatch makes specialized surgical instruments for Zimmer. The instruments are needed to implant Zimmer orthopedic devices, including artificial hips and knees. Those devices – and the instruments required to implant them – are sold in countries around the world.

For safety reasons, governments in those countries require companies making surgical items to have their manufacturing operations inspected and approved. The process can take months, Zimmer states.

For that reason, Zimmer’s standard contract with suppliers includes provisions that keep a supplier from moving production without Zimmer’s approval.

But that’s what Greatbatch plans to do, Zimmer argues.

On July 2, Greatbatch filed a document with the Securities and Exchange Commission outlining plans to move production by the end of 2013 from its plant in Switzerland to existing factories in Fort Wayne and Tijuana, Mexico.

But this timeline is too short to allow Zimmer to get all the required approval it needs from various countries around the world before selling its products there, including items made by suppliers. In addition, Greatbatch has fallen behind on filling orders, Zimmer claims.

Greatbatch plans to sell its Swiss facility to an unnamed buyer. That would prevent the possibility of the company moving some work while continuing in Switzerland to build a stockpile of products for Zimmer, the lawsuit argues.

Zimmer says it could lose millions if it’s unable to sell orthopedic devices and instruments in the meantime.

Greatbatch spokesman Christopher Knospe late Wednesday said the company doesn’t comment on pending litigation.

It’s too soon to know how many Fort Wayne jobs would be created if some of the work moved here, he said. The strategy would help the company fully use its 80,000-square-foot local facility.

At a glance

Zimmer Inc. also is asking the court to:
•Force Greatbatch to make enough surgical instruments to meet Zimmer’s needs for the short term;
•Stop Greatbatch from selling its Swiss factory to another company, therefore ending Greatbatch’s ability to keep filling Zimmer’s orders; and
•Stop Greatbatch from moving production to factories in Fort Wayne and Mexico until Zimmer has had the chance to inspect the plants, apply for and receive approval from various governments around the world, where the items are sold.

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