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The 3 Things J&J Didn't Say in Its Tylenol Recall Statement

By Jim Edwards

Updated on: July 16, 2010 / 1:23 PM EDT / MoneyWatch

Like everything emerging from Johnson & Johnson (JNJ) these days, its statement on the closing of its Fort Washington, Pa., Tylenol plant featured more conspicuous absences than substance. Among them:

Tylenol boss Peter Luther's name was not on the statement nor was he quoted in it.
It didn't say how long the factory was expected to stay shuttered.
And it didn't explain how re-opening the factory with fewer workers but more outside consultants was expected to improve the quality of the product.

J&J used the statement to announce that it had submitted its plan of action to end the Tylenol recall to the FDA, and that because the factory would be "out of service for a protracted period of time" 300 of its 400 workers would be laid off. But there's no certainty over these three issues:

Luther: Speculation is swirling around Luther, the president of J&J's McNeil Consumer Healthcare unit, who has stayed in the background during the months-long recall of Tylenol, Motrin and other brands due to contamination. You can't draw any conclusions about the fact that his name wasn't on the statement, except to say that companies usually quote their corporate leaders in such cases. That certainly keeps J&J's options open if it wants to suggest he spend some time alone in his office with a pearl-handled revolver.

Timeline: From a macro perspective, there's still no clue as to when the Tylenol drought will end. The AP reported:

Asked about the timeframe, company spokeswoman Bonnie Jacobs said, "Our best estimate is at least the middle of next year."

If true, that essentially doubles the previously known size of J&J's over-the-counter medicine problems. Earlier this year, analysts had estimated that J&J might take a $300 million revenue hit. Now some are saying $650 million in revenue will be on the line. In Q1 2010, before the recall got into full swing, U.S. sales of J&J's consumer meds tumbled 10 percent, or $166 million. That decline will be bigger in Q2.

The FDA plan: The statement is vague as to what J&J's plan for bringing the factory back online is. It includes:

Assessment and improvement of management controls;
Interim controls and the use of outside experts to provide additional product quality assurance while the plan is being finalized and implemented;
[And when the plant reopens] ... staffing levels at the reconfigured plant are expected to be substantially lower than they are today.

So more management, more outside consultants, but fewer people actually making drugs? That could mean any of three further possibilities. Perhaps new, modern equipment requires fewer error-prone humans to operate it. Or perhaps J&J believes these brands will never sell as well as they did previously, and thus it won't need as many staff to churn them out.

I hope it's not the third possibility: That McNeil is trying to cure its problems by installing more chiefs and fewer Indians.

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Image by Flickr user woodleywonderworks, CC.