IBM Plans to Eliminate Up to 4,000 Jobs, Close 2 Plants
International Business Machines Corp. on Tuesday announced a $600-million consolidation plan that it said will probably lead to the resignation or retirement of 3,000 to 4,000 employees.
The world’s biggest computer company said it would preserve its no-layoff tradition in the streamlining effort, which is intended to “further reduce costs, provide for future growth and speed new products to customers.”
“This is a major, major restructuring,” Terry Lautenbach, IBM senior vice president and general manager of IBM United States, said in an interview.
The move had been expected. IBM said it would cut 1,600 jobs in Boca Raton, Fla., the birthplace of the original personal computer, by eliminating manufacturing there, and 2,800 jobs in Tucson, where it will phase out manufacturing of data storage products.
IBM will also close two plants of Rolm Systems that manufacture telecommunications equipment, moving work from the Santa Clara, Calif., operation to a nearby San Jose plant and from the Austin, Tex., site to IBM’s main Austin site.
The cuts in Florida and Arizona will be partially offset by additions of jobs in other places such as IBM’s Research Triangle Park near Raleigh, N.C., which will take over the manufacturing of Personal System-2 computers now done in Boca Raton.
IBM will offer jobs to all employees displaced by plant closings. But in an apparent effort to cut employment, it will offer two years’ salary and a $25,000 bonus to any employees in the Boca Raton and Tucson sites who choose to resign or retire.
Lautenbach said the payments should be considered a form of assistance to people choosing to leave rather than an incentive to get them to leave.
IBM also intends to try to cut its headquarters staff in Westchester County, N.Y., and elsewhere by offering eligible employees four weeks’ salary for every year of service as separation bonuses.
The cuts will result in a charge of $600 million against pretax earnings in the second quarter, IBM said. However, the harm to first-half earnings will be largely offset by an accounting change related to treatment of deferred income taxes, which IBM plans to record retroactively as a gain in its first-quarter earnings.
IBM said the key elements of the moves, expected to be completed by the end of 1989, were as follows:
- Personal System-2 manufacturing in Boca Raton will be moved to IBM’s Research Triangle Park plant near Raleigh, where much Personal System-2 manufacturing already takes place. All other operations related to the Personal System-2 that are in Boca Raton will remain there.
- Manufacturing operations at the Tucson storage products plant will be phased out and the work moved to IBM plants in San Jose, Charlotte, N.C., and Poughkeepsie, N.Y. The Tucson development laboratory will continue its operations there.
- Rolm Systems telecommunications manufacturing in Santa Clara will be moved to IBM’s nearby San Jose facility. Rolm Systems manufacturing and development in Austin will be consolidated with IBM’s main Austin site.
- The IBM plants in Charlotte and Austin will take over some of the assembly work now done in Toronto. At the same time, an IBM laboratory in Toronto will get more programming development responsibility.
Manufacturing of memory cards and power systems will continue in Toronto.
- A plant in the New York City borough of Brooklyn will diagnose and process electronic components, work that used to be done in numerous locations across the country. Assembly operations now in Brooklyn will be consolidated in Poughkeepsie.