Ailing Storage Technology Lays Off 1,000 More

Another 1,000 workers were laid off at Storage Technology Corp. plants here and in nearby Broomfield on Monday, bringing to 4,000 the number of Storage Technology workers in Colorado who have lost their jobs in the last 90 days.

Storage Technology, once a leading maker of data-storage devices for large-scale computers, filed for protection under Chapter 11 of the U.S. Bankruptcy Code on Oct. 31 following major losses, including a $64.7-million loss in the third quarter of 1984.

Under Chapter 11, a company continues operating but is protected from creditors’ lawsuits while it devises a plan to pay its bills.

The Louisville-based concern “is terminating approximately 950 to 1,000 employees in Colorado,” said Gordon Swarzfager, Storage Technology’s vice president-communications. The cuts will leave Storage Technology with about 5,000 workers in Colorado and 11,000 worldwide, he said.

He said the latest layoffs hit hardest in the direct labor or manufacturing area, with “probably up to 100 indirect or overhead white-collar people” also terminated.

Completed Plan

“We have completed our stabilization plan and we have been studying the various parts of our business to determine the optimum level to operate at during the next several months,” Swarzfager said.

“We have completed that plan, and that was the deciding factor” in the latest round of layoffs, he said, adding: “We are hopeful this is the last major termination in Colorado.

“Down the line we may let a couple (of) people go . . . but this is the last major layoff or termination in Colorado,” Swarzfager said. “There might be others outside the headquarters area,” he added.

“Figuring conservatively, (the latest layoffs) should result in $15 million to $20 million in savings annually,” Swarzfager said.

He said that most of those terminated would leave the company Monday, although all would be paid through next Monday. If those terminated sought other severance benefits, “they would become a creditor to the corporation under the bankruptcy laws,” he said.

Meanwhile, Swarzfager said that since a bankruptcy judge last month allowed Storage Technology to use certain assets from a subsidiary, amounting to about $140 million, “orders improved quite a bit. . . . We believe part of that is, with the judge releasing those funds, our customers are feeling more comfortable with the long-term viability of STC and those perhaps postponing orders are now taking delivery.”

Storage Technology was founded in 1969 and grew to become a $1-billion company on the success of its data-storage devices, particularly those that served large-scale computers made by International Business Machines Corp.

Problems Mounted

But, in recent years, Storage Technology’s problems mounted, reflecting in large part increasing competition from IBM’s own storage products. Storage Technology’s inability to turn costly investments in various new technologies into competitive products also hurt the company.

In 1983, Storage Technology lost $40.9 million on sales of $886.6 million.