A global restructuring at IBM this week has claimed 1,600 jobs so far, including an unknown number in Rochester, according to the employee group Alliance@IBM.
IBM isn’t saying how many of the latest job cuts will come from its Rochester development and manufacturing plant, which dates back to 1956. The work force there has steadily declined for the last 20 years.
Altogether, the restructuring will cost $1 billion worldwide, including severance expenses. IBM has declined to release any details about the layoffs.
The company is probably cutting 6,000 to 8,000 jobs globally, based on the $1 billion cost figure, said Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Washington. That would represent less than 2 percent of IBM’s total workforce of 434,246 as of Dec. 31.
“Some level of workforce remix is a constant requirement for our business,” the company said in a statement. “Given the competitive nature of our industry, we do not publicly discuss the details of staffing plans.”
Rochester employment, which peaked at 8,100 employees in 1991, has plummeted to an estimated 2,500 today. The exact count isn’t revealed by IBM, which quit giving out Rochester employment numbers five years ago.
IBM announced in March that the company planned to move most of the Rochester plant’s production work to Mexico and New York next year. The action reportedly cost about 200 jobs locally
Manufacturing of its Power Systems, PureSystems and PureFlex Systems servers would be moved to Guadalajara, Mexico, while refurbishing of used IBM machines would be moved to Poughkeepsie, N.Y. The company declined to say how many jobs in Rochester would be lost as a result.
In Rochester, a town of 106,000, a layoff of several hundred workers is still a blow, said Gary Smith, president of the Rochester Area Economic Development, Inc., and everyone seems to know someone whose family will be affected.
“It’s not news we like to hear,” said Smith, whose group works to attract and retain business expansion in the area.
But with the Mayo Clinic getting $400 million from the state to back its ambitious development plan, Smith believes the long-term impact on the overall economy may be minimal.
“It’s bad news for people in community,” he said, “but there may be other opportunities for those workers to transition into something new, with [Mayo’s] Destination Medical Center and other industry sectors growing.”
IBM, the world’s largest computer-services provider, began cutting U.S. jobs Wednesday as part of a global restructuring plan announced in April.
The reduction targets employees with a range of seniority from rank-and-file staff to executives, a source told Bloomberg News, who asked not to be named because the information is private. Some U.S. workers began to receive notifications of the cuts Tuesday night, according to Lee Conrad, a coordinator for Alliance@IBM.
“Change is constant in the technology industry and transformation is an essential feature of our business model,” IBM said in a statement.
IBM announced the job-cutting effort after releasing disappointing first-quarter results in April. The Armonk, N.Y.-based company posted profit of $3 a share in the period, missing the $3.05 predicted by analysts — the first earnings shortfall since 2005, according to data compiled by Bloomberg. IBM said at the time that the job reduction would be concentrated overseas and mostly complete by the end of June.
The $1 billion plan represents an increase over IBM’s job-cut efforts in recent years. The company spent $803 million on workforce restructuring in 2012, up from $440 million in 2011.
IBM also has been cutting hours of its contract employees. CDI Corp., a Philadelphia-based provider of staffing and outsourcing services, told its staff working for IBM to limit their hours in May, according to a memo obtained by Bloomberg. IBM at the time said that the company relies on contractors to manage labor costs on information-technology projects for clients.
Star Tribune staff writers Steve Alexander and Jackie Crosby and Bloomberg News contributed to this report.