Oh boy. That deal Governor Shumlin made with IBM for cheap electricity? Yeah, that’ll do the trick.
Bloomberg News reports that IBM “is nearing a deal with Globalfoundries Inc. for its chip-manufacturing business… after searching for a buyer for the money-losing unit since last year.”
The deal would be very bad news for Essex Junction and the northwest Vermont economy, because GF isn’t interested in the Essex plant.
Globalfoundries is primarily interested in acquiring IBM’s engineers and intellectual property rather than manufacturing facilities, which have little value as they are more than a decade old, said people with knowledge of the matter…
“Little value,” ouch!
If the deal goes down and GF consolidates production at its existing plant in New York, I’m sure the Republicans will be screaming that it’s all Shumlin’s fault. But it’s not, not at all.
Two facts:
— The Essex plant is, according to Bloomberg, “of little value” because it’s too old. Not because of expensive electricity or any other factor related to Vermont or Essex.
— IBM’s been ruthlessly divesting itself of businesses and product lines, not to mention tens of thousands of domestic employees, in an all-out effort to meet very ambitious earnings goals. Farmers call that “selling the seed corn,” but it makes Wall Street happy. This process has been going on for years at a global level, and has nothing whatsoever to do with Vermont state policies, regulations, taxes, or electricity prices. As El Jefe General would say, it’s the free market at work, bucko.
Ironically, according to Bloomberg, the IBM chip-making business “has been a successful developer of fundamental process technology, yet failed to deliver the level of sales and profit that [other firms] have achieved.”
Makes me pine for the good old days, when IBM became a global titan based on its heavy investments in R&D.
I’ve been writing about IBM’s future in Vermont — or lack thereof — for two years now, starting with a diary entitled “Expect IBM to leave Vermont within three years. No matter what we do.”
Nothing’s changed; the corporation is shedding jobs and productive units, and our state’s economy is just collateral damage. And no amount of tax breaks, utility deals, regulatory relaxations, or Republican officeholders would make the slightest bit of difference.
IBM has been saying the long-goodbye since way back in the Douglas admin.
I think the key to IBM’s overarching problems is right there:
They no longer identify with innovation. Quarterly sales and profits are all that matters now. You can’t be innovative if you can’t look much further ahead.
When the stockholders rattle their chains, IBM is going to dump Vermont, no matter how cheap the power.
This is shame for anyone that will have their job disappear. It probably would take a super human effort to tally all the state government tax incentives, assorted tax breaks and goodies IBM lobbied for over the years. Too bad none of it can ever be clawed back from IBM as they cut and run.
In 2012 the NYTimes.com did a state by state examination of corporate tax giveaways by states. The figure for Vermont is unfortunately exaggerated due to including sales tax breaks for food and clothing. But the Times estimated that :
http://www.greenmountaindaily….
who thinks that GF’s assertion that IBM’s “manufacturing facilities … have little value as they are more than a decade old” could be the beginning of THEIR negotiations with Vermont to keep getting the same sweet deals as IBM did. Different players, same old game.