Expect IBM to leave Vermont within three years. No matter what we do.

While looking up something on the Internet today, I came across the writings of technology journalist Robert X. Cringely. He’s been one of America’s leading tech writers since the 1980s. He’s a very credible, very connected reporter on the world of technology business.  

For the past several years, Cringely has written some remarkably prescient stuff about IBM — and most of it has been bad, particularly for the company’s domestic workforce. Back in 2007, he predicted an acceleration in domestic reductions.

In 2007, IBM had an American workforce of 121,000. In 2010 it stopped reporting the number of domestic employees. But according to an IBM union that tracks layoffs, by 2011 its American workforce was down to 98,000. Headcount has continued to decrease since then, with major layoffs in early and mid-2012. And there are signs of another round of cuts before the end of this year.

So Cringely was dead-on. And earlier this year*, he got a look at IBM’s internal plans for the next three years, and they include a virtual depopulation of its American division: a reduction in US headcount of 78%.

*He wrote these pieces in April 2012, around the time of IBM’s last big round of layoffs. But, as will be noted below, they failed to attract any attention in the mainstream media.

That’s four American employees out of every five. What are Essex Junction’s chances of surviving the next three years? Even if we gave IBM huge tax breaks, ultra-cheap electricity, and built the Circ Highway overnight?

No, this has nothing to do with Vermont’s business climate or costs or Act 250 or traffic jams or the Democratic majority or the evil that environmentalists do. It has to do with IBM’s all-out push to cut costs and increase earnings. Remember this when IBM closes down and the Republicans scream bloody murder.

Details after the jump.  

Cringely reports that IBM plans to grow earnings-per-share (EPS) to $20 by 2015. (Right now, it’s around $13.) And…

The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.

Reducing employees by more than three quarters in three years is a bold and difficult task. What will it leave behind?  Who, under this plan, will still be a US IBM employee in 2015? Top management will remain, the sales organization will endure, as will employees working on US government contracts that require workers to be US citizens. Everyone else will be gone. Everyone.

Want some more good news? IBM has done everything it can to conceal the scope of its domestic cutbacks. As I said above, it no longer reports the size of its US workforce. But also…

IBM manages to skirt the Worker Adjustment and Retraining Notification (WARN) Act requiring advance notification of layoffs or plant closings by structuring these resource actions to stay just below the numbers required to provide notifications at given locations.

So when it comes, we can expect it to come as stealthily as possible.

Cringely wrote these pieces in April 2012. They attracted a lot of attention in technology circles, but failed to penetrate into the mainstream media:

My recent IBM columns have stirred up a lot of interest everywhere except in the press. One reporter called from Dubuque, Iowa, but that’s all. This is distressing because the story I’m telling has not been contradicted by anyone. Nobody, inside or outside IBM, has told me I have it wrong. In fact they tend to tell me things are even worse than I have portrayed.

As a reporter I know there are always more stories than I have time or space to write, but this silence from the U.S. business press is deafening. Here is a huge news story that is being completely ignored.

It has certainly been ignored in the Vermont media. And it shouldn’t be. I hope someone takes this up and pursues it (see below). Because if Cringely is right — and he’s batting close to 1.000 when it comes to IBM cutbacks — then Vermont will lose IBM within the next three years.

And when it happens, nobody should be surprised. Absolutely nobody.

p.s. A little free advice for other media outlets. If you contact IBM, of course they will issue a carefully-worded denial along the lines of “We have no plans at this time to leave Vermont, which has been a very good location for us.” If you stop there, you won’t have a story.

I’d suggest contacting Cringely and getting his take, along with anything he can share about IBM’s planning documents. Then talk to other knowledgeable people who can establish Cringely’s bona fides. And check in with some observers of the tech marketplace and see if their assessment of IBM (aggressively cost-cutting, single-mindedly focused on EPS) agrees with his. Then you should have enough for a story.

3 thoughts on “Expect IBM to leave Vermont within three years. No matter what we do.

  1. Two articles back to back on GMD point overseas.

    IBM will fire everyone they can in America, retaining only those required by federal law (working on military projects) and the executive class (people that can’t be replaced by wage slaves).

    Vermont’s minimum wage just took a jump up – which is a good thing.

    But the point is this: Republicans want America to be a third-world nation where workers get paid almost nothing and the handful of the Executive Class are the only ones that can afford to live.

    Republicans are the ones that scream from their penthouse suites that American workers have to compete on the world marketplace, while the GOP puts in tax breaks for companies to fire all American employees and ship their jobs to China.

    Just what is the wage Americans are forced by Republicans to compete with?

    $1/hour, 12 hour days, 7 days a week, $84 a month.  

    That is what Republicans want Americans to ‘get used to’.  Getting used is more accurate.

    And that’s why I say Republicans want America to be a third world nation.

    Republicans want 99.95% of the American population to live on $84 a month, with no food stamps, no health care, no retirement, nothing.

    As we’ve seen in Michigan, the Republicans there have eliminated local control by elected officials, installing un-elected dictators to run cities and regions, firing the locally elected councils.  We can conclude that Republicans want only governors to be elected by the People, and then they prevent Dems from voting.  So the all-powerful governors will only be elected by those that are registered as Republican.

    The Republican Utopia is this: Only Republicans get to vote for Governor, who then behaves as a dictator, appointing his connected friends to make life as miserable as possible for the cities where Dems are the majority.  People that actually work for a living make a maximum of $84 a month, and have $3000 a month in bills to pay.  There is no social safety net at all.  

    If you are poor it’s your own fault because after working 84 hours a week, you obviously aren’t working hard enough and feel entitled to a handout!

  2. There are a couple of extra points worth noting about the IBM situation. First, much of the work done in Vermont is related to government contracts that require a secure facility. Second, much of IBM’s movement to produce products outside the United States is driven by growth in those markets as much as it is by cost management.

    I think we’ll see continued but reduced employment in Vermont. Vermont should be able to hold onto the IBM operation in some form as long as the government contracts require the secure protection of the product. But the article is right, it probably doesn’t matter how many tax breaks Vermont offers, or what kind of infrastructure or power contracts we provide…IBM is bigger than Vermont and bases its decisions on contract demands and its global business interests, not the perks offered by a small state government.

  3. It seems, looking through old news stories, that IBM has been slowly, but steadily reducing the number of employees in VT. In 2002, they were listed as having over 7,000 employees in the state. In 2011, they were down to 5,300 – a decline of 1,700 employees in 9 years, or about 188 per year. Not enough to require any kind of notice, and if done at a rate of just over 10 per month, spread out around the company, while taking advantage of attrition by retirement and other reasons for leaving, it would be a very quiet process.

    To drop 75% in 3 years, they’d have to pick up the pace by about 10-fold, so I expect, to remain under the radar and continue raking in the state’s largesse, they’ll wait until near the end before they make any big cuts – taking the unemployment cost/re-training hit at the same time they glom onto the tax deductions for shipping the employees overseas.  

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