IBM to Leave Norwalk in Cost-Cutting Move : Business: The pullout, which will take about a year, will result in a substantial loss of sales tax revenue for the city. The company plans no layoffs.
International Business Machines Corp., the giant computer company that has been one of Norwalk’s top sources of sales tax for 15 years, plans to close its operations in the city.
The company hopes to cut costs by moving its Norwalk sales, service and administrative offices to IBM facilities in Gardena and Costa Mesa. The move will begin within 60 days and be completed by September, 1993, when the lease on its building on Imperial Highway east of the Civic Center expires, city and company officials said.
City Manager Richard R. Powers said the loss to the city will be substantial.
Disclosing the amount of sales tax IBM generates is prohibited by law, Powers said, but it is equal to “a major high volume retail shopping center or several auto dealerships.”
The move compounds the city’s already tight finances. Norwalk officials have laid off 11 employees, frozen pay raises and trimmed some services to balance this year’s budget.
IBM’s Norwalk office, which opened in 1977, serves northern Orange County, western Riverside County and southern Los Angeles County. It sells and services IBM products, including computers, workstations and printers. It also designs special computer systems and software.
IBM’s best sales year in the city was 1990-91, when the city’s overall sales tax totaled $7.2 million, city officials said.
Powers said IBM “at times has been the city’s largest sales tax producer,” although the company’s share of the tax has declined.
Last year, IBM--the world’s largest computer manufacturer--experienced a sharp drop in profit and sales, marking the first time since the end of World War II that its revenues failed to increase.
Analysts attributed the drop to IBM’s concentration on large, expensive mainframe computers as the world market shifted to less-expensive desktop machines.
Powers said IBM’s departure from Norwalk was rumored two years ago, prompting city officials to offer IBM a share of the sales tax it produced if it would stay.
“We tried really hard, really gave the full nine-yard treatment to try to retain them,” Powers said, but the offers were rejected.
An IBM spokesman said the company has been trying to lower costs to strengthen its position in the face of a weak global economy and sharp competition.
At the end of July, IBM completed an incentive plan allowing employees to retire or leave the company with severance pay while retaining retirement options and benefits. The worldwide work force of 344,400 was reduced by 32,000, the spokesman said.
IBM would not disclose the number of employees in Norwalk but said no one will be laid off because of the move.
Earlier, the company consolidated two Orange County offices in Costa Mesa and merged a Burbank facility with one in downtown Los Angeles.
Powers said the company’s pullout is particularly difficult for Norwalk because the city depends heavily on the sales tax, which provides 33% of the city’s general fund for basic city services.
“We are people rich and industry poor,” he said. “We have had an overreliance on the sales tax. When the consumer-related economy drops, city revenue drops.”
The city is working with the building owner, Park Tower Realty Co. of New York, to find a new tenant for the six-story, 127,000-square-foot building, he said. IBM built the structure in 1976-77 and sold it to Park Tower in 1988.
Despite the bad news from IBM, Powers said, there are positive developments in the Civic Center area.
Los Angeles County has bought a building across Imperial from the IBM site and at the end of the year will use it to house records and offices of the registrar-recorder and county clerk. Powers said 600 people will work in the building. The city also hopes county operations will attract other office development.
Hutton Development Co. of Santa Ana, which owns another building across from IBM, plans to add nearly 1 million square feet of office space in the next few years based on market demand.
The city Redevelopment Agency also is preparing a development proposal for 10 acres of land it owns near the Sheraton Hotel.
Closing of Norwalk IBM Facility
International Business Machines Corp. plans to consolidate its Norwalk sales, service and administrative offices with other IBM facilities. Here is an overview of the decision and its impact:
* Norwalk location: IBM’s Norwalk operations are on Imperial Highway east of the Civic Center. The six-story, 127,000-square-foot building was built by IBM in 1976-77 and sold to Park Tower Realty Co. of New York City in 1988. A new tenant will be sought.
* Timetable: The move will begin within 60 days and is scheduled to be completed by September, 1993.
* Financial impact: Exact figures were not disclosed, but city officials say the sales tax revenue for Norwalk is equal to a high-volume retail shopping center or several auto dealers. At times, IBM has been the city’s top sales tax producer.
* Effect on employees: No layoffs are anticipated. Offices will be transferred to Gardena or Costa Mesa facilities.
