TEMECULA - Abbott Laboratories is cutting 700 jobs from its factory on Ynez Road, the largest-scale layoff in several years for an area whose economy is fighting to overcome a weakened construction industry and record numbers of foreclosures.

Abbott's cuts Tuesday follow weakened demand for stents, tiny wire-mesh tubes implanted in blood vessels to keep them from collapsing. Competition from three other stent producers is intensifying, even as the company's Temecula facility prepares a new generation stent for launch in the United States early next year, analysts said.

The cuts also are a response to improved manufacturing efficiency, Abbott spokeswoman Karin Bauer said. The company's vascular division is closing a sister facility in Galway, Ireland, where 500 people now work. Bauer said most of the cuts in California were among manufacturing workers at the Temecula plant, but include several dozen administrative employees in Redwood City and Santa Clara.

In Temecula, employees' reactions ranged from grief to shock to grudging acceptance. Employees who were given notice in a day-long series of meetings said those laid off include assembly-line workers earning $10 per hour through line supervisors making more than $50,000 per year. They included employees in fields as diverse as quality control and chemical storage, several said.

"I am aware of people across the board who have been let go today," one said. "It's a mess."

Like others, the Murrieta man, who earns $14 per hour, spoke on the condition that his name not be used: Information on severance pay included stipulations that employees not do anything to reflect poorly on the company.

Still, another employee who reviewed packets the company distributed said the severance packages appeared relatively generous for manufacturers that downsize. Abbott is holding informational meetings on severance pay and continuing benefits at the University of Redlands campus on Madison Avenue today. Employees will continue receiving paychecks into February, apparently with lump severance payments to follow, several said.

"That's nothing compared to losing your job and benefits," the Murrieta man said.

The bite was especially hard coming just three weeks before Christmas, several said.

The unexpected

Rumors of pending layoffs had been swirling within the company for months, even as the company expands its Temecula facility to the east side of Ynez Road. Those rumors intensified in September, when Abbott sent home 100 to 200 employees who assembled catheters, two employees said. The employees continued to receive regular paychecks and were called in to work once or twice each week to do janitorial work and other assorted tasks until they returned to their regular assembly lines last month, one of those employees said.

The cut represents 15 percent of the facility's workforce but a tiny fraction of Abbott Laboratories' 65,000 employees worldwide. The company's headquarters are 35 miles north of Chicago, near Lake Michigan.

Even after the cuts Tuesday, the Temecula facility remains the city's largest private-sector employer, with about 4,000 employees, approximately the same number as two years ago. Those numbers include a much smaller facility off Briggs Road in French Valley, which Abbott Vascular acquired in April 2006 along with Guidant Corp.'s vascular division on Ynez Road.

Guidant began in mid-2005 to beef up its work force for mass production of Xience, a chemical-coated stent designed to prevent blood clots. Abbott Vascular has been selling Xience in Europe since late last year. The company expects the U.S. Food & Drug Administration to grant final approval by June, following the recommendation of an FDA advisory panel last week.

Meanwhile, dozens of employees have worked in trailers at the Temecula site, while office workers have squeezed in two and three to a cubicle. That overcrowding and the anticipated demand for the new stent were behind the company's expansion to the east side of Ynez with two new buildings and a four-story parking garage. The garage is complete, meanwhile, and Bauer said the two buildings, totaling 300,000 square feet, are still on track for completion by the end of next year.

All of that made the sudden cuts all the more surprising for Lee, a Temecula woman who received notice Tuesday. The woman said she took the job with Guidant in 2003 after being laid off from a manufacturing job in the Southeast.

"I thought maybe because this is such a huge company that I would never have to worry about layoffs again," said Lee, who asked that she be identified by her middle name. "But here I am, four years later."

'A major blow'

Lee said a co-worker had it worse. The other woman and her husband bought a house in Menifee earlier this year and are already stretched making mortgage payments and feeding four children.

The layoffs, which several observers believed to be the Temecula area's largest in five years, come at a particularly delicate time for Southwest County. Though a state agency estimates the area's unemployment has edged up to just 5.1 percent, homeowners are wincing at real estate values that have fallen by 10 to 20 percent in the last year. A weak market also has made it difficult for homeowners to sell or refinance their way out of steeply rising mortgage obligations.

As a result, lending institutions have already seized 1,500 houses in Southwest County. Across Riverside County in the July-September period, the number entering the foreclosure process across exceeded the number of escrows closed for the first time in a decade.

"There's no good spin you can put on this," said John Husing, an economist who does consulting work for several city governments and economic-development organizations in Riverside County. "To lose 700 jobs is a major blow."

The layoffs also raise the hurdle for those cities' and organizations' efforts to right a massive imbalance between jobs and housing, Husing said. Tens of thousands of local residents cram the southbound lanes of Interstate 15 and the westbound lanes of Highways 74 and 91 on weekday mornings to reach jobs in places such as San Diego and Irvine. Husing said a sustainable local economy needs about 6 jobs for every 5 dwellings; Southwest County's falls far short with a ratio of 4 to 5, he said.

"The Temecula-Murrieta area is getting awfully dependent, economically, on a single company," Husing said he remembers thinking in 2005 when Guidant began preparing to manufacture Xience. "Any time that happens, it's a vulnerability that's a bit scary."

Rough competition

Xience is one of two drug-coated stents expected to be cleared for sale in the U.S. next year. Along with a similar stent being developed by Minnesota-based Medtronic Inc., Xience could overcome occasional side effects associated with existing drug-coated stents made by Johnson & Johnson and Boston Scientific, the two other large manufacturers in the industry, said Steve Halasey, editor of MX Magazine, a publication for executives in the medical-device industry.

But the side effects spooked many doctors and led industry analysts to wonder whether even a second-generation stent would succeed, Halasey said.

Still, several scientific studies released in the last three months have spurred hope for Medtronic's and Abbott's products and boosted their stock prices, Halasey said.

"Anybody that's in the market is going to get a bounce," Halasey said. "That makes it a little curious that they're laying off now."

Both Halasey and Erik Swain, who is editor-in-chief for Medical Device & Diagnostic Industry magazine, said they foresee no serious problems ahead for Abbott, whose shares have rebounded from a modest downturn since September. The company's stock rose 49 cents to close at $57.50 Tuesday.

Still, Swain said, for Abbott to cite better manufacturing efficiency as a primary reason to lay off so many workers is unusual. Like Halasey, Swain said the downsizing almost certainly was a delayed result of the acquisition from Guidant last year.

"Manufacturing technology certainly does get better and better every year," Swain said. "However, it's not common to attribute a layoff of this size to something like that. Companies are thinking about manufacturing issues right from the start of product design. I would have to think that this is related to the Guidant thing."

- Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.