(Host) Commentator Timothy McQuiston says that it’s hard to imagine what could be much worse for the Vermont economy right now than massively bad news from IBM.
(McQuiston) IBM CEO Sam Palmisano stood in front of security analysts Wednesday afternoon and told them that the company was in good shape. But he said that “adjustments” were needed in the microelectronics division. That left no one satisfied. Of course, the news could have been a lot worse. Earlier in the week, the IBM rumors included not only layoffs of up to 1,500 in Vermont, but also that IBM would sell the facility.
Palmisano did indicate that employment levels company-wide are too high. He hinted that attrition could solve the problem. But though he didn’t say the "L" word, and despite calls from Governor Dean not to panic, local sources from within IBM indicate that workers here are expecting and even planning for layoffs, perhaps in the second week of June.
There are several reasons why IBM needs to make changes: the worldwide semi-conductor market is down, and cost savings must be made. IBM’s stock value has fallen over 30% in six months, from over $125 per share, to $85. And Palmisano, who just got the job in March, immediately had to deal with questions over how IBM accounted for its annual profit numbers.
IBM is not only the state’s largest employer with 8,000 workers, it also pays wages well above the state average. It does about $185 million in business with about 300 Vermont companies. Those companies and those workers play a dramatic role in the state’s economy, not only in Northwestern Vermont, but across the state. The Vermont site pays over $4 million in local property taxes and accounts for 19% of Green Mountain Power’s revenues. The place is big.
Along with the fact that the Essex Junction plant is still IBM’s most advanced chip-making facility, Vermont does have another card to play. Governor Dean is running for president, at least unofficially. IBM will consider that. And Dean, who has made a point of keeping in close contact with IBM over the years, will use all the influence he can muster to minimize the local impact.
Dean has more to lose than a race to be president. Like the rest of who live near Burlington, he must have friends who will be personally affected. He has his legacy to consider and he has an obligation to those Vermonters who elected him five times. As the state’s chief executive, he still serves us all.
And we shouldn’t forget that IBM has always been a class act. I don’t believe that Palmisano and the IBM board would simply abandon Vermont for the sake of short-term stock valuation. While
their first concern has to be the long-term good of the company, I expect they’ll consider the impact on Vermont of any decision they make.
This is Timothy McQuiston.
Timothy McQuiston is editor of Vermont Business Magazine.