Saturday, April 26, 2014

IBM, Vermont Yankee and Shumlin: A Trip Down Memory Lane

Silicon Wafers
Wafer Fab facility for sale

The IBM wafer fab facility in Essex Junction employs approximately 4000 people, making it the largest private employer in the state.  It has been going through hard times, including laying off 400 people last year, and another 100 or so this year.

It is widely known that IBM wants to get out of the wafer fab business, and indeed, it has announced that its fab facilities are for sale. Earlier this month, an industry newsletter described the negotiations about selling the various IBM fab facilities: apparently Global Foundries is the front-runner.

Whatever new company buys the Essex Junction plant, it is unclear whether they will choose to keep it running or shutter it. The equipment is out of date, but not every type of chip needs to be made on the latest version of chip-making equipment.  The industry newsletter (referenced above) has a fairly long and complex essay on this subject.

In any case, the further operation of the Vermont IBM plant is certainly at risk.

Vermont to the Rescue?

In reporting on IBM's announcement of the latest round of layoffs in Vermont and elsewhere, Vermont Digger reported that Governor Cuomo of New York has struck a deal with IBM. IBM will add jobs in Buffalo and maintain jobs in the Hudson Valley.

In mid-April, Governor Shumlin announced a $4.5 million incentive fund: this fund will be used to induce a company to stay in Vermont.  When asked if IBM was the target recipient, Shumlin replied that: "I have read the same information that you have in the press about IBM."

The Vermont Digger article about this incentive plan is  IBM Candidate for Proposed $4.5 Million  Incentive. It has a vigorous comment stream.  Many comments point out that the multi-billion dollar sale of wafer fab assets will not be influenced by this relatively small sum from the state of Vermont.  I encourage you to read the comment stream.

Shumlin and IBM: Shumlin accused them of lying

A few years ago, IBM was concerned that fees assessed on Vermont Yankee would raise overall  electricity bills significantly. This would make it hard for the IBM plant to compete.  At that point, Shumlin had no compassion for the IBM plant, and no million-dollar incentives were forthcoming. Indeed, Shumlin accused the IBM lobbyist of lying.

In 2008, Shumlin was President Pro Tempore of the Vermont Senate.  The Senate was passing a bill saying that any company buying Vermont Yankee had to put up a line of credit of $300 million for decommissioning.  VPR reported:  Yankee decommissioning bill prompted political spat. 

John O'Kane, a lobbyist for IBM, objected to this plan. O'Kane said the decommissioning money was there already, and it was growing. If the state asked for more money, this would raise electricity rates for Vermonters.  Here's a quote from the VPR article:

O'Kane "Money has time value, and you're changing the time..
Shumlin: "We are not asking for the money. You're lying about that. We are not asking for the money.
Governor Peter Shumlin
The bill says..."

O'Kane: "Peter, that is.. You just called me a liar.."
Shumlin: "I said you're not telling the truth about that, John."
O'Kane: "You called me a liar. That is unacceptable. You're the president of the Senate, and you're calling me, a representative of the largest employer..."

Eventually, Governor Jim Douglas smoothed most of this over. You can read more in the VPR article.

IBM Should Build a Power Plant

The question remained, however--IBM cannot pay higher prices for electricity, so what should be done?  In 2011, about three years after Shumlin called the IBM lobbyist a liar, the economic development committee of the Vermont Senate visited IBM.  The WCAX story IBM Warns Lawmakers about the loss of Vt. Yankee describes this meeting.  Some quotes from that article:

IBM pays about $35 million a year to power its Vermont facility. And the company estimates those costs will go up by 25 percent if Vermont Yankee goes off line....

(Senator) Illuzzi wants to explore the idea of a combined heating and power plant created on IBM's campus as a way for the company to address its power needs.....

"I don't want to own and IBM doesn't want to own a power plant," Bombardier said. "We don't want to run a power plant; we want to invest in semiconductors-- we don't want to invest in power generation source."

In other words, Vermont suggested that IBM just build its own power plant.  IBM replied that it wasn't in the power plant business.  It was in the semi-conductor business.

It Probably Didn't Matter

Considering the economy, it probably didn't matter much that Shumlin insulted an IBM spokesman and that Vermont legislators suggested that the company build its own power plant.  So I don't want to refine too much on the reason IBM is selling its facilities.

But still.  How will the new owners look at this history?  Will $4.5 million make them eager to stay in Vermont?

End note: A blog post of mine on this subject from 2011. The post includes more references and is also a bit snarky.  Some notes on IBM and Yankee: How I found Vermont's Energy Plan.

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