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IBM and Vermont's Business Climate

06/06/02 12:00AM By Timothy McQuiston
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(Host) The unfortunate thing about rumors is that they are frequently based in fact. And Commentator Timothy McQuiston says such is the case with IBM.

(McQuiston) More than a month ago, even before IBM's CEO spoke to financial analysts, the rumors began to fly in the Burlington area: the Essex Junction plant would lose 1,500 employees; the cuts would be across the board. The plant would be sold; the plant would be abandoned. On Tuesday, the rumors were confirmed. Almost 1,000 workers lost their jobs.

Even though the Vermont plant is still IBM's state-of-the-art chip manufacturing facility, it's been showing its age for a long time. When the new East Fishkill, New York, plant goes online in August, it could make the Vermont production plant redundant.

However, IBM wants to expand its chip making capabilities in three ways: it wants to greatly expand its so-called foundry service, which makes chips that other companies design. Two, it wants to become a giant out-sourcing service, where it will both manufacture and design computer products and systems on contract for other companies. And third, it plans to expand its chip designing services, where it would design chips manufactured by someone else.

All this, IBM believes, is part of what it sees as the new outsourcing model in chip manufacturing. A model it wants to design, build and dominate. And you can see this process evolve right here in Vermont. The Essex Junction plant has shifted from an R&D and manufacturing plant, to one with more manufacturing and less R&D.

To prove that point, IBM announced that along with the layoffs, 200 additional positions are needed on the production line. But that is little solace at this point. There is a lot of anger out there. Not only from those who were laid off, but from those who stayed and had to witness people being fired. Many in the business community blame the state's "anti-business" reputation.

But history isn't kind to business. In Vermont, the massive woolen industry, marble production, and precision tools were all dominant industries, much bigger than IBM is today and they, for the most part, have gone away. That's not to minimize what IBM has done for the state. IBM changed Vermont from a poor state into a middle income state envied across the country. You could live on a dirt road, drive by a dairy farm, stop at the general store, and then still make real money. IBM has been more important to the state's economic and political development over the last 50 years than the interstate highway or reapportionment.

Vermont hasn't lost IBM. It still employees 7,000 people. For now, the rumors have been quelled. But the economy will suffer at least a little and at least for a while. And I get the impression that even IBM isn't exactly sure what lies ahead.

This is Timothy McQuiston

Timothy McQuiston is editor of Vermont Business Magazine.
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