The rumors started shortly after Thanksgiving in 2008. A big layoff would be hitting IBM in a matter of months. Optimist’s predicted a few hundred would lose their jobs. Others said it could be as high as 2,000. Leading up to the dreaded January day most guessed it would be in the 600 – 800 range, and when the sun had set on “Pink Slip Tuesday” many breathed a sigh of relief that it was only around 300.

While the loss of 300 jobs is certainly a big dent in the local economy, sources say IBM actually scaled back planned layoffs after a decent earnings report. While profits at IBM Essex Junction were down, the company as a whole did well. IBM hopes the positive publicity of the report will allow them to ride out tough times.

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In Essex, the optimists also say potential contracts could be looming which would mean the development of new technology. A thinner work force would mean the ability to compete throughout the economic downturn and avoid layoffs in the future.

The doubters do not have such a rosy outlook.

They point out that IBM Microelectronics (of which Essex is a member) loses money each year despite accounting for $3 billion in revenue. In Essex it is primarily maintained to service the internal demand of other IBM product divisions using proprietary IBM semiconductor technologies. This internal consumption of semiconductors by IBM is only $600 million of the $3 billion and shrinking year after year. This represents a hugely disproportionate percentage of the corporation’s total capital expense budget to service a relatively tiny internal market.

In addition, a recent consortium with China, Singapore, Korea, and other semiconductor manufacturers, whereby they have licensed many of those same proprietary technologies to guarantee long-term, external sources of chips based upon their semiconductor research, could have a devastating long-range impact on IBM Essex. This begs the question, what would life in Vermont be like without IBM? To answer that, one must first understand the extent of IBM’s imprint across the state.

Impact On Vermont

It is well known IBM employs over 5,000 employees (approximately 5,300 at year-end 2008), and at one time employed approximately 8,500. According to IBM spokesman Jeff Couture, this makes it the largest for-profit employer in the state and its Vermont payroll, not including benefits, is over $300 million. These employees combine to export over $2 billion in finished goods from Vermont annually.

On top of this, Couture points out, IBM purchased products and services from more than 160 software vendors, business partners and companies in Vermont last year. In addition, more than 3,000 IBM retirees live in the Green Mountains, and “contribute to its way of life,” said Couture.

While these are impressive figures monetarily they are only a tiny tip of the equation and space limits discussions of housing markets, taxes, and other economic stimulus. The financial numbers though don’t even touch on the social impact Big Blue makes in the state including the charitable contributions of the company and its employees.

According to Couture, the total impact of IBM charitable giving in Vermont exceeded $2 million in 2007. Employee charitable donations in Vermont exceeded $1.45 million. The IBM On Demand Community Volunteer Initiative engaged 34 percent of employees and 8 percent of IBM retirees, contributing over 183,000 volunteer hours to Vermont communities. Employee and company matched giving exceeded $320,000 in cash and technology to Vermont schools, higher education, hospitals, hospices, public TV and radio.

Hundreds of employee volunteers visit Vermont classrooms to share their love of science, technology, engineering and math through hands-on science activities. IBMers also mentor students through the company’s online MentorPlace program. In addition, IBM has supported workforce development through grants of IBM’s Reading Companion to Vermont Adult Learning and literacy partners. Reading Companion uses IBM’s voice recognition technology to help adults, including new immigrants and refugees, improve their literacy and learn English as a second language.

There is also the E.X.I.T.E. (Exploring Interests in Technology and Engineering) technology camp for middle school girls which IBM hosts each summer. This program provides daylong hands-on workshops for at-risk students at partner organizations.

Even the Leahy Center benefits from IBM’s generosity. Since 2000, IBM has partnered with ECHO at the Leahy Center for Lake Champlain to promote math and science with an environmental focus. This has included workshops and the donation of more than $150,000 in technology and cash.

IBM also sets the standard for other Vermont companies and led an effort involving other area businesses and the United Way for employee volunteer projects in its annual Spring Days of Caring volunteer outreach. Big Blue also engaged other employers and the United Way to found the Vermont Employer Diversity Network to increase workforce diversity.

Another 50 Years?

Once a business is fixed to the level IBM is in a community, it becomes difficult to imagine life without it in an area. Often, many feel immune to the possibility it might leave. Sadly, in many cases it is a possibility. As an example, you have to look no further than the rich textile industry that was once flourishing in Vermont. Long-time residents will remember after its demise the way the textile plants sat empty for years from Winooski to Bellows Falls. In some towns, like Richford, they are still dormant.

Is it conceivable Vermont will face life without IBM? Couture is positive in his outlook but also recognizes the challenges of doing business in Vermont.

“The fact that the site has been in business in Vermont for more than 50 years is a reflection of our ability to change and adapt to market conditions. Leading consumer electronics and communications companies depend on the IBM Vermont plant. Many have established long-term contracts with the facility and have put the future of their businesses in our hands. We are continuing to attract new customers and work. The continued success and longevity of the plant depends on multiple factors. Some we can directly control, such as our technology, quality and services; some we can’t, such as taxes and energy costs,” he said.

When asked what a dream scenario for IBM would look like in the state Couture’s response seems carefully worded.

“I’m not sure its a question of creating a dream scenario, as much as ensuring a range of policies and programs that together can help and not impact IBM’s operations and cost of operations, compared to our competitors. For Vermont, these include energy costs and reliability, tax policies for business and individuals, infrastructure development and maintenance, such as roads and electrical generation capacity, predictable and reasonable regulations or permitting practices, and housing and other costs of living, including overall tax rate, that can impact the affordability of living in Vermont, which affects IBM’s ability to attract and maintain employees,” he said.

Kyle Scanlon is the editor of Livin’ Magazine.