IBM continues global job trimming; impact on Rochester unclear

The effects of the latest cuts on the Rochester campus aren’t known, but employment at the site has been shrinking for years.

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IBM has been the second-largest private employer in Rochester.

Photo: Jerry Olson • Rochester Post-Bulletin,

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A global layoff that will claim thousands of IBM jobs continues the contraction of the technology heavyweight’s campus in Rochester.

While IBM isn’t saying how many of the latest cuts will come from the development and manufacturing plant, which dates back to 1956, the workforce there has steadily declined for the last 20 years.

“It’s hard to tell for certain what is going on,” said Thomas Misa, director of the University of Minnesota’s computer industry history project, the Charles Babbage Institute. “Since 1993, IBM has shifted its corporate strategy and its corporate accounting to emphasize global services. It’s tough to show profits for units like Rochester that have great track records in building hardware and software.”

Now IBM Rochester, with its blue-colored buildings that emphasized the parent firm’s nickname, Big Blue, is caught up in a worldwide layoff that could claim 6,000 to 8,000 jobs.

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.

So far, 1,600 jobs have been cut, including some in Rochester, according to a union group called Alliance@IBM, which is run by Communications Workers of America Local 1701 in Binghamton, N.Y.

“Some level of workforce remix is a constant requirement for our business,” IBM said in a statement. “Given the competitive nature of our industry, we do not publicly discuss the details of staffing plans.”

A blow to community

In Rochester, a city of 109,000, the latest layoff is still a blow, said Gary Smith, president of 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.

But with the Mayo Clinic getting $400 million from the state to back its ambitious medical development plan, Smith believes the long-term effect on the economy may be minimal.

“It’s bad news for people in the 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.”

Rochester and the southeastern Minnesota region have a diverse mix of industries, with lower unemployment than the rest of the state, said Brent Pearson, a state regional labor market analyst based in Mankato.

Unemployment in 2012 was 4.8 percent, close to prerecession levels, compared with the statewide average of 5.3 percent. With the Mayo Clinic headquartered in Rochester and other health care-related industries playing a supporting role, one in three jobs in the area are in the education and health care services fields, Pearson said.

“We’re starting to look at recovery … but we’re not back there yet,” Pearson said.

For the past 15 years, IBM Rochester has been transforming from a manufacturing facility to one more focused on engineering, particularly in the health care and financial services areas.

The Rochester plant may be the only IBM facility with FDA certification, and the company has worked with the Mayo Clinic and some medical device firms.

IBM Rochester’s employment peaked at 8,100 in 1991, but has since plummeted to an estimated 2,500. The exact count isn’t known, as IBM quit giving out Rochester employment numbers five years ago.

Company officials didn’t respond to requests Thursday by the Star Tribune for comment.

Tradition of innovation

The Rochester plant has a long history of innovation, such as the immensely successful AS/400 midrange computer that garnered the coveted Malcolm Baldrige National Quality Award, presented by President George H.W. Bush.

Besides the award, the AS/400 had enormous consequences for IBM’s computer business. It was the result of a secret IBM Rochester effort, code-named the Silverlake Project, that turned IBM’s computer business strategy on its head.

In the 1992 book “The Silverlake Project: Transformation at IBM,” three project participants and their co-author describe how before AS/400, Rochester’s market share of midrange computers plummeted. But rather than lay down and die, Rochester initiated the most radical cultural change in IBM’s history, switching from a ­product-driven to a market-driven approach to doing business.

There have been more recent Rochester advances, such as helping build the Blue Gene supercomputer. In 2011, the latest version of Blue Gene, the “Watson” supercomputer, bested two human champions to win the “Jeopardy!” TV show — a challenge that required encyclopedic knowledge and split-second answers.

But that was only part of the story. Watson was designed to be the world’s most efficient doctor’s assistant — it listened to patients, asked a few questions and read 100 million pages of related medical material per second.

In March, however, IBM said it would move the bulk of its computer manufacturing from IBM Rochester to other IBM locations in Guadalajara, Mexico, and Poughkeepsie, N.Y., beginning this year.

IBM Rochester would retain only minor manufacturing responsibility, such as prototyping new products and final assembly of Blue Gene supercomputers.

 

Bloomberg News contributed to this report. steve.alexander@startribune.com • 612-673-4553 jcrosby@startribune.com • 612-673-7335

 

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