IBM moving Rochester production to NY, Mexico

IBM Rochester
IBM says it's moving three product manufacturing operations out of its Rochester, Minn. campus that employs more than 4,000 workers.
Photo courtesy Jerry Olson/Rochester Post-Bulletin

IBM will move three of its product manufacturing operations from Rochester, Minn., to Mexico and New York state, the company announced.

The company won't disclose how many jobs would be affected by the changes, which company officials said will start later this year and be complete by mid-2014.

"We don't talk about the jobs because of the strategic staffing and competitive issues in this business line," IBM spokesman Scott Cook said.

The manufacturing of Power Systems, PureSystems and PureFlex Systems servers will be moved to Guadalajara, Mexico, and the refurbishing of used IBM machines will be moved to Poughkeepsie, N.Y., he said.

MPR News is Member Supported

What does that mean? The news, analysis and community conversation found here is funded by donations from individuals. Make a gift of any amount today to support this resource for everyone.

A customer service center, the Blue Gene supercomputing research project and a solutions technology center will remain part of IBM's Rochester operation, Cook said.

According to IBM's website, the company employs about 4,400 people in Rochester. Its predominant mission there is the "development, manufacture and support of IBM eServer business computers." But union representatives say the company last reported its employee numbers in 2008, and that the current number was 2,800. Company officials did not offer numbers on IBM's current workforce in Rochester.

State Rep. Kim Norton, DFL-Rochester, said company officials have assured her they are not retreating from Rochester.

"While we might be losing some manufacturing, we are keeping the R&D, the research and development aspect and focus from IBM, as well as their global supply chain of leadership in our area, and the supercomputing," Norton said.

IBM has laid off other workers in Rochester in recent years, but Norton said IBM will still be a major Rochester employer.

"They're just focusing the types of businesses, the type of work that they do, to specific locations, and they are making changes about what they're doing in our community, but they are not leaving," Norton said.

Norton said the company told her the number of layoffs won't reach the threshold needed to trigger a notice to government officials. Department of Employment and Economic Development officials said that threshold is a third of the workforce. If IBM employs about 4,000 people in Rochester, the trigger for notifying the state would be 1,300 layoffs. But it's also possible the company could lay off people over several months, skirting the notification requirements.

Sen. Dave Senjem, R-Rochester, said the news about the loss of manufacturing jobs was disappointing. "It's sad news for our community. Certainly IBM has been a corporate partner along with Mayo in Rochester for many years," he said. A union representative said the total number of layoffs coming at IBM in Rochester was still unclear, but he said any layoffs are troubling.

"This seems to be a chronic thing with IBM. Over the last couple of years we've seen a lot of professional IT work being moved out of the country, and now we're seeing Rochester, Minn., getting hammered in its manufacturing area," said Lee Conrad, national coordinator for the Communications Workers of America alliance representing IBM workers.

IBM executives had signaled in January that layoffs could be coming, telling Wall Street analysts that slimmer workforce would be part of the company's "2013 transformation."

Alfred Marcus, a professor at the University of Minnesota's Carlson School of Management, said manufacturing hardware is a bigger part of IBM's portfolio than for many of its competitors, and he said it can be a burden for IBM.

"The cost pressures in this industry are extremely intense because there's so many options," Marcus said. "For IBM to survive as a hardware maker they have to be very, very conscious of costs."

Rochester Mayor Ardell Brede said he does not have the sense this means IBM will be pulling up stakes, as Ford did in St. Paul in 2011, or like Northwest Airlines when it moved its headquarters to Atlanta.

"I don't think that's going to be the case here. But if it's one person, or 200 whatever, that's of concern," Brede said "It's always disappointing with someone either downsizes or they're closing."

Brede noted that in the past IBM job losses have helped to create spinoff and start-up companies locally.

Many people in Rochester say the news about IBM is another reason the state should invest $500 million in the Mayo Clinic's proposed $3.5 billion, 20-year expansion to create a destination medical center.

Republican state Sen. Carla Nelson of Rochester said it is the kind of initiative that can bring back the stable jobs IBM is shedding.

"Destination medical center is the largest economic opportunity that I think this state has seen, or probably will see, in a generation," Nelson said.