Nellcor Plans Expansion in Chula Vista : Growth: A rise in demand for the company’s medical device prompts the lease of a larger plant in the EastLake Business Center.
There has been a significant drop in the number of anesthesia-related accidents and deaths since the early 1980s, and Nellcor, a company with an expanding presence in Chula Vista, claims a big share of the credit for the decrease.
Nellcor, which has its headquarters in Hayward, is the leading U.S. manufacturer of pulse oximeters, a medical instrument that monitors the oxygen level in a patient’s blood. Heavy demand for the product has fueled the company’s rapid growth and its decision to lease a 90,000-square-foot manufacturing and office building now under construction in the EastLake development in Chula Vista.
The success of Nellcor’s pulse oximeter can be attributed in large degree to the “non-intrusive” nature of the device. It is not inserted inside a patient’s body. Rather, the device’s sensors are placed on a finger, nose or foot to monitor the frequencies of light that are emitted through the skin. The frequencies are then analyzed by the machine to determine the blood’s oxygen level.
Knowledge of blood oxygen is a key determinant in how much anesthesia an anesthesiologist administers to a patient. Improper dosages of anesthesia can kill patients on the operating table.
Because Nellcor’s product and instruments like it have become such valuable tools of an anesthesiologist’s trade, their use has dramatically increased since Nellcor introduced the first successful non-intrusive oximeter in 1983.
The American Society of Anesthesiology adopted guidelines in 1986 and 1989 that have made pulse oximeters standard equipment in operating rooms, spokeswoman Susan Freschi said.
Nellcor has recently signed a 10-year, $8.8-million lease on a plant being built in Chula Vista to accommodate its growing need for space, site selection manager Carey Chenoweth said. Once completed, Nellcor will move to the new site from a smaller, 52,000-square-foot plant also in Chula Vista, where it employs 300 people.
Nellcor also operates a maquiladora plant in Tijuana where the oximeter sensors are made, then shipped to Chula Vista for final assembly. Maquiladora plants are operated by foreign companies in Mexico under special permits. Most of Nellcor’s manufacturing is done at the two plants.
Despite the plant expansion, Nellcor officials are not promising more jobs in Chula Vista. “We’re intentionally making sure that no one thinks we’re creating jobs,” Chenoweth said. “That’s not the intention of this move.”
The company has been shifting its operations from its main plant in Hayward to the Chula Vista plant in recent years because the San Diego area has a better labor pool. Plant Manager Todd Fletcher said increases in production in the Chula Vista plant would logically require increases in production at the maquiladora plant.
The company opened its Chula Vista plant in 1986 to take advantage of San Diego’s pool of workers, as well as to be near its maquiladora plant in Tijuana, Chenoweth said. The new plant in the EastLake Business Center gives Nellcor 50,000 more square feet for expansion, Chenoweth said.
The building, scheduled for completion in the spring of 1991, will house both production and office operations, as the existing plant on Bay Boulevard now does. The new plant will not be any more automated than the existing one, but will be more efficient because the operations that are now crowded into three small buildings will be done in one larger one, Fletcher said. Although about 25 companies now produce products similar to its oximeter, Nellcor has led the field in sales since 1983. Its $118.7 million in revenues last year represented slightly more than 50% of the oximeter market, Freschi said.
The devices were originally designed to help anesthesiologists maintain the proper dose of anesthesia to their patients, Fletcher said. Physicians are also starting to use the devices to monitor recovery of patients after they leave the operating room and to monitor patients in intensive care units, he said.
Freschi said the company, which posted a 24% gain in revenue last year, expects a strong market for its pulse oximeters in the near future.
Nellcor has enjoyed exponential yearly revenue growth since the early 1980s. Founded in 1981, Nellcor’s revenue has jumped from $3 million in 1983 to $118.7 million in 1989. Nellcor’s net income in 1989 was $8.1 million. With administrative offices in France, West Germany and Hong Kong, the company employs more than 900 people worldwide.
Fletcher said the new plant will be able to handle increased production if needed through the coming decade.
The Chula Vista plant, with the help of its 350-employee Tijuana maquiladora counterpart, is the only one in Southern California that manufactures the devices, he said. Competitors include Hewlett-Packard and Datascope.
The Nellcor plant also has recently started manufacturing capnographs, which monitor the exhaled gasses of patients, Fletcher said.
Local officials said Nellcor’s expansion is part of an overall trend in San Diego in which companies with maquiladora operations are bolstering their operations in the San Diego area so that managers and technical experts can be close.
“Nellcor has a very large commitment to their maquiladora plant,” said Dale Robinson, president of Made in Mexico, a Chula Vista-based consulting company that assists manufacturers in setting up maquiladoras.
Honeywell, a computer company based in Minneapolis, Minn., is an example of a major company that is moving into the area to be closer to its maquiladora plant, Robinson said.
The number of maquiladoras continues to grow, but the pace has slowed recently. A lack of housing has created a labor shortage because workers from other parts of Mexico cannot find a place to live in the Tijuana-Tecate area, Robinson said.
