Updates: IBM Offloads Chip Business, Essex Facility To Global Foundries

Oct 20, 2014

IBM’s chip division, including the plant in Essex Junction will be sold to GlobalFoundries, in a deal announced Monday morning.

A deal between the two companies has been rumored for months, but Monday's announcement was the first official confirmation from either company that a deal had been in the works. GlobalFoundries is a semiconductor manufacturer based in Santa Clara, California.

IBM is paying $1.5 billion to GlobalFoundries over three years to take the troubled division off its hands, according to filings with the Securities and Exchange Commission. GlobalFoundries will get IBM's global commercial semiconductor technology business, including intellectual property and technologies related to IBM Microelectronics. That division lost $100 million for IBM in both the third financial quarters of both 2013 and 2014, according to the filings.

GlobalFoundries also gets IBM's existing semiconductor manufacturing operations and plants in East Fishkill, New York and Essex Junction, as well as its commercial microelectronics business. Gov. Peter Shumlin said Monday morning that GlobalFoundries executives have assured him that it will keep the 4,000 jobs at the Essex Junction facility.

VPR will be posting updates throughout the day as they're available.

Update 6:20 p.m.

Scott Milne, Republican candidate for governor, issued a strong condemnation of Shumlin's economic policies, saying the governor is bad for business in the state.

I am happy that- for now- IBM took the steps necessary to protect the jobs that four thousand Vermonters have come to rely on. After years of failed leadership under Peter Shumlin, both as the President of the Senate and our Governor, our economy and the financial outlook for far too many Vermont families and seniors is moving in the wrong direction. Vermont needs to stop treating IBM, property tax payers, and small employers like ATMs used to subsidize failed policies, reckless government experiments and inept political leadership. Peter Shumlin has been a major part of the problem for over a decade. My administration will bring a fresh outlook, an employer friendly tone, and a plan to revitalize our economy.

Update 4:40 p.m.

Dean Corren, the Progressive/Democratic candidate for governor, issued a statement on the deal. He said the "negative 'sale' price" may have to do with environmental concerns at the IBM site.

From the public information available, IBM’s transfer of the Essex plant to Globalfoundries appears to be a good outcome for Vermont, keeping, and perhaps expanding, the roughly 4,000 jobs with a firm that is dedicated to chip production.

It is still a cautionary tale in terms of future economic development, in that large, out-of-state companies can have goals that do not have Vermont at their core, and make us susceptible to changes that cut significant numbers of jobs in a single stroke. This can happen even when the people and facilities are performing at a high level of productivity, quality, and profitability.

As a result, since such a large facility is strategic to the state’s economy, its fate must always be of great concern to the state, and while Vermont can do little to influence those external decisions, we must do our own contingency planning.

Specific questions remain regarding responsibility for the clean-up of contamination at the site, which may have a lot to do with the negative “sale” price.

Update 3:00 p.m.

IBM's stock opened down Monday on news of both the GlobalFoundries deal and a weak earnings report. IBM CEO Virginia Rometty said the company also won't make next year's earnings goals, according to The Wall Street Journal.

Update 1:10 p.m.

The Globe and Mail reports that IBM's facility in Bromont, Quebec was not part of the deal with GlobalFoundries.

Update 12:09 p.m.

In a statement, Sen. Bernie Sanders called the deal the beginning of a "new era" and said he hoped the sale would bring economic security to IBM workers.

“Amid all of the rumors and speculation of the last few months, this has been a very difficult period for the highly-skilled and dedicated employees at the Vermont IBM facility.  Now, with the purchase of the plant by Globalfoundries, a new era is beginning.  We all hope that this new relationship will bring economic security for the employees and for the entire community.  I look forward to working with the employees, Governor Shumlin and the new ownership to make this new relationship a success.”

Update 11:45 a.m.

Lt. Gov. Phil Scott said in a statement that Vermont must focus on keeping the 4,000 jobs at the Essex Junction plant.

As we wait for exact details on what the sale of the IBM Essex Junction plant means for Vermont, our top priority must be the well-being of the thousands of employees – and the Essex Junction community -- whose futures were in limbo. Today’s news provides some much-needed certainty after months of questioning. It is my sincere hope that GlobalFoundries will keep these valuable, high-paying jobs here in Vermont. But as we know all too well, the devil is in the details, and I stand with others, ready to help in any way I can, and will do whatever is in my power to impress upon the plant’s new owners how critical it is that those jobs remain here and continue to contribute to Vermont’s economy. 

We must also learn from the past and partner to assist companies such as this in growing and succeeding in Vermont. It is my belief that we, collectively, need to establish policies in order to make Vermont’s business climate more conducive to growth for large-scale employers such as GlobalFoundries and IBM. I look forward to working in conjunction with other state leaders to ensure that’s our state’s business future is on more solid ground.

"You can't buy a device right now without at least one or eight or nine ... chips in your phone from all kinds of companies," Gov. Shumlin said Monday. "Those chips are only made in Essex Junction, so we have a robust business there."
Credit Taylor Dobbs / VPR

Update 10:28 a.m. 

In a statement, House Speaker Shap Smith praised the Vermont workforce that distinguished IBM's Essex facility. "The ingenuity of Vermont's workforce has been key to the development of IBM's Essex Junction facility as one of the country's premier microelectrics manufacturing centers," Smith said.

Smith continued: 

"With today's announcement that ownership of IBM's Essex Junction facility will transition to GlobalFoundries, Vermont's workforce is once more presented with an opportunity for growth. I am pleased to learn that GlobalFoundries plans to retain the present workforce and continue operations in Vermont. It is my hope that with new management, energy and investment, GlobalFoundries's Vermont workforce will continue to distinguish itself as a leader on the global stage. I look forward to working with GlobalFoundries, its management and its employees to ensure that the Essex Junction plant continues to be a world class manufacturing facility.”

Update 10:08 a.m.

Gov. Peter Shumlin held a press conference about the sale at the BGIC and Lake Champlain Regional Champer of Commerce in Burlington. VPR's Taylor Dobbs sent these updates: 

Update 9:56 a.m.

Sen. Patrick Leahy released the following statement on the sale:  

"Vermont has always had a special relationship with IBM.  While this marks a new chapter for the plant, I appreciate that Global Foundries recognizes that the most valuable asset they are acquiring is the talented workforce in Essex.  These are some of the most highly skilled workers in the entire nation, and I remain committed to working with them and the new ownership to keep an active and vibrant plant as part of Vermont’s economic landscape."

 

Rep: Peter Welch also released a statement:

“After much speculation, the highly skilled employees at IBM Vermont now know with certainty that GlobalFoundries will purchase their extraordinary facilities,” said Welch. “What they know, what Vermonters know, and what GlobalFoundries will soon discover, is that the work force and facilities at the Essex Junction plant are second to none in quality, innovation, and productivity. I look forward to working with Governor Shumlin, IBM employees, and the state's business community to ensure that the plant continues to be a leader in semiconductor manufacturing.”

Update 9:25 a.m.

Gov. Peter Shumlin told VPR, “this is a real affirmation to the extraordinarily talented workforce at IBM. GlobalFoundries is in the chip-making business; research and development will remain in Vermont; manufacturing will remain in Vermont; and this is their core business. There’s been uncertainty for years about IBM’s commitment to this particular part of the business. So it’s really good news for our workforce, good news for hardworking Vermonters.”

Global Foundries has a plant nearby in Malta, New York. Shumlin said he is not concerned that jobs will move there. 

“The Essex Junction plant is making chips primarily for cell phones. You can’t buy a device right now without at least one or eight or nine of those chips in your phone from all kinds of companies. Those chips are only made in Essex Junction, so we have a robust business there,” he said. “GlobalFoundries very much wants to keep that business alive. So what we’re doing here in Essex Junction is not easily transferable to another plant.”  

Shumlin said he’s had a good relationship with IBM and he’s optimistic that will continue with GlobalFoundries. He plans to meet with the CEO today.

Tom Torti, president of the Lake Champlain Regional Chamber of Commerce said the sale brings a potential for growth of jobs in Essex.

Torti said that IBM has been a good partner to the state for decades, and that people who he has spoken with in New York say that GlobalFoundries culture is a lot like IBM’s.

“They are very good to their employees. They provide good salaries, good benefits to their employees,” he said.

Over the past several months, as rumors about the plant’s future have circulated, many worried that a plant closure could have been devastating to the region’s economy. Torti said planning was underway for that possibility, but he’s heartened and pleased that the plant has been acquired by GlobalFoundries.

“Now we have a path to the future with that facility, with a new strategic partner. It’s a new day in the industry,” Torti said.

From original post 8:54 a.m. Governor Peter Shumlin says GlobalFoundries plans to maintain the workforce and continue operations in Vermont. He released the following statement:

"Global Foundries plans to maintain the workforce and continue operations in Vermont, good news for the talented Vermonters employed by the plant and for our whole state.

IBM has been a part of the Vermont fabric for decades, driving economic development and innovation. But we have felt the uncertainty regarding IBM's future in Vermont for the last several years, as its business model has changed.   

That is why it is very good news for Vermont's long-term future that IBM's facilities here will be acquired by GlobalFoundries, a successful and growing chip manufacturing company that views our highly-skilled workers and advanced R&D and manufacturing facilities as important to its strategic growth.  We have learned in recent weeks that business at the plant is strong, and the plant is hiring more workers to meet demand. We expect that demand to continue and strengthen under GlobalFoundries."