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'Stunned silence' as IBM breaks news to Rochester employees

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IBM Rochester
The entrance to IBM's Rochester campus.
Photo courtesy Jerry Olson/Rochester Post-Bulletin

IBM's decision this week to move some of its Minnesota operations to New York and Mexico has some wondering how much longer the company will stay in Rochester.

For more than five decades, Rochester's IBM facility has manufactured products from personal computers to network equipment. But in recent years, the company has downsized its workforce.

On Tuesday, IBM officials gathered employees in small groups and told them the company will start assembling servers at a facility in Guadalajara, Mexico, according to one worker who expects to be laid off. The worker did not wish to be identified by Minnesota Public Radio News but said cuts will begin in September and affect both full-time and contract employees.

The worker is concerned that he will be cut from the company sooner if he is caught speaking out. The 10-minute meeting was followed by "stunned silence," he said.

Others around Rochester echoed the dismay.

"It'll be a sea-change in terms of Rochester, relative to what we're known about and that's been IBM and Mayo," said state Sen. Dave Senjem, R Rochester. IBM has been one of the city's leading corporate partners, he said.

"To see it waning away so to speak is relatively and frankly an emotional experience. We never thought we'd see this day come and apparently it has, and that's again terribly unfortunate."

"We never thought we'd see this day come and apparently it has, and that's again terribly unfortunate."

IBM officials declined to say exactly how many jobs will be cut or how many people it currently employs in Rochester. A labor union called Alliance at IBM estimates 2,800 people work for the company in Rochester.

Mayor Ardell Brede said IBM's presence in the city has changed drastically over the years. As IBM's workforce shrinks, the company has more empty space on its 82-acre campus.

"There are third parties that are already using part of the building that used to be all IBMers," Brede said. "And now it's other organizations that are in there."

For example, Hitachi contracts space at IBM's campus, located just off Highway 52 in northwest Rochester.

Brede said over the years, he had heard IBM sometimes had trouble getting employees to move to southern Minnesota.

"As they used to say, it was one of the hardest places for IBM to get people to move to was Rochester. Then it was the hardest place to get them to move away from if they wanted to move some," Brede said. "So we'll hope for the best for all of the people that are involved."

Business analysts say companies like IBM are constantly evaluating productivity and cost-saving measures.

Skyline of downtown Rochester, Minn.
The skyline of downtown Rochester, Minn., is seen Thursday, Feb. 14, 2013. Mayor Ardell Brede said IBM's presence in the city has changed drastically over the years. As IBM's workforce shrinks, the company has more empty space on its 82-acre campus.
Alex Kolyer for MPR News

While it's hard to know whether IBM will ever completely close up shop in Rochester, David Grossman, a managing director at the Stifel Nicolaus investment banking firm, expects more changes in the coming years as the company continues to evaluate lower-cost global resources.

"It's a much more dynamic marketplace now that there are centers of population growth with educated employees all over the world now," Grossman said. "I think global companies are going to continue to access that labor pool."

As IBM scales back, Rochester's other flagship employer, the Mayo Clinic, promises to grow in the coming decades.

Mayo leaders are pushing a proposal to become a medical destination. If the state of Minnesota invests half a billion dollars to redevelop Rochester, the Clinic promises to invest $3 billion of its own money to become an even bigger global medical hub.

Mayo's proposal may help alleviate some of the cuts at IBM, said Rochester Chamber of Commerce President John Wade.

"This community is not immune from the pressures of a global economy. We understand that and we are attempting to diversify this economy," Wade said. "At the same time, we have to take full advantage of an opportunity that is in front of us related to creating some 25- to 40-thousand jobs over the next 20 years.

While it's unclear if the skills of IBM's laid-off employees transfer to work at the Mayo Clinic, officials say improving Rochester to keep Mayo is the kind of initiative the city needs. Last year alone, the clinic reported adding 2,100 jobs in Minnesota.