Layoff Rumors Panic IBM Workers; Nothing Confirmed

January 12, 2009 Dan Burger

For many IBM employees, last week was torture. Rumors have been swirling that jobs are on the chopping block and that close to 16,000 workers will become victims of a one-two combination punch from the economic downturn and IBM’s continual moves to lower its costs and extend its string of profitable quarterly reports.

As is its standard practice, IBM has nothing to say on the topic of layoffs. That includes any denial that this move is about to be made.

Information on the rumored job losses comes primarily from the Website of the IBM Employees Union, Alliance@IBM. (Yes, IBM does in fact have a union in the United States, which is a local of the Communications Workers of America.) Postings on the current job elimination status can be found on this Web page.

Here’s one comment from just before Christmas: “The layoff date is January 23rd. Approx. 16,000 employees worldwide will be affected. The majority from the U.S. I heard this from a 2nd line mgr. Confidentiality agreements were signed in the upper ranks to keep this hush, hush, but nothing this big stays out of the light for long. Good luck everyone. – the fix is in -“

As of Friday afternoon, there was speculation that the majority of people being severed would come from the hardware group and that jobs would be lost globally. The United States, Europe, and China are likely to be hit the hardest, if this is true.

Earlier last week, an article in the Rochester, Minnesota, Post-Bulletin quoted Lee Conrad, the long-time union organizer at IBM group as saying the rumors and media reports “puts everybody in panic mode. People are worried if they get cut from IBM, where are they going to get another job?” Rochester is the traditional home of the IBM AS/400, which was later renamed the iSeries, the System i, and Power Systems i.

The IBM Rochester facility had jobs for 4,400 workers as of January 2008. If IBM were to chop its employee count by 16,000, it would represent about 4 percent of its worldwide total, which is estimated at 400,000. IBM employs more than 120,000 in the United States and is very likely looking to offshore more work to cheaper labor markets, as it has done over the past decade.

The number of potential layoffs affecting Rochester workers brings to light a Minnesota law known as the state Worker Adjustment and Retraining Notification Act. It goes into effect February 1 and requires that employees receive at least 90 days’ notice before a plant closing or more than 250 employees are eliminated. Among the rumors that are bubbling is word that the firings would surface on January 23, thereby not being subject to the state law that becomes effective nine days later.

Mass firings are not the kind of thing companies want to highlight in press releases, although the news is often welcomed by stockholders who view it as a positive move that makes a company leaner and meaner. Still, the press releases mask the ugliness of it all by referring to it as a cost improvement or re-engineering plan. Maybe the worst term I’ve heard is “synergy-related headcount reduction.”

IBM is due to announce its fourth quarter financial results on January 20. The company’s third quarter revenues rose 5 percent to $25.3 billion, which lifted its yearly profits 22 percent higher than for the same period one year earlier. At that time IBM’s chief financial officer, Mark Loughridge, noted that “while the current environment is challenging, we have the right operational plan to drive double-digit revenue growth in emerging markets, substantial productivity in major markets, and continue to extract cost and expense from our spending base and drive ongoing improvements to meet our full year objectives.”

Coincidentally, it is also being rumored that Microsoft is planning to fire 15,000 employees this month; about 17 percent of its workforce. That’s a much bigger hit. Server maker and services provider Unisys just announced 1,300 layoffs, about 5 percent of its workforce. Hewlett-Packard announced last fall that as part of its acquisition of services giant Electronic Data Systems, the company would be cutting 25,000 jobs over two years, or about 7 percent of its global workforce; you can bet a lot of those job cuts have nothing to do with EDS, but this way HP only has to put out one press release. Sun Microsystems, which has been struggling in the server space, announced in November it would cut 5,000 to 6,000 employees, or between 15 and 18 percent of its workforce.

It sure ain’t pretty out there. But it is worse in financial services and construction, if that is any consolation.

Correction: The Worker Adjustment and Retraining Notification Act (WARN) mentioned in this article is a federal law put in place to aid displaced workers in retraining and obtaining new jobs. It requires companies with more than 100 employees to give a 60-day advance notice when laying-off a significant number of workers or closing a facility. Apparently there is a gap between the intent of the law and its real world applicability. Several companies have successfully skirted it, and a few states have put tougher versions of WARN on their books to put some teeth into the law. Minnesota is not one of those states. We also want to clarify that IBM does not recognize or have a contract with Alliance@IBM, which is affiliated with the Communications Workers of America and the AFL-CIO. There are, however, members of Alliance@IBM employed at IBM facilities. [Correction made 01/12/09.]

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