Archive for February 18th, 2010

Once the city’s biggest private employer, still a major player

TEYA VITU

tvitu@tucsoncitizen.com

quarter of a century ago today, IBM dedicated its sprawling high-tech plant on Tucson’s Southeast Side.

The town was giddy: We landed Big Blue. The high-tech research and manufacturing operation employed 1,000 workers and was expected to grow to 5,500.

Eight years later, IBM announced it would shut down the manufacturing portion of the facility, laying off 2,800 people.

Related story:

Reach of local IBM spans globe

Fast forward 17 years and Tucson still has not recovered – at least in manufacturing.

IBM’s downscaling hit so hard that to this day a number of people living here believe IBM “left” town, even though the company today is Tucson’s No. 2 high-tech employer with 1,850 employees.

“I’m not sure we recovered to the point to where Tucson was in the first few years of (IBM) production,” said George Leaming, owner of the Western Economic Analysis Center in Marana. “There’s been nothing to replace IBM. The IBM loss and Texas Instruments cutback (from 1,300 under the Burr-Brown name to about 900 today), has had a depressing impact on the commercial industry and the labor market. It’s made it much less stable.”

IBM’s campus, however, provided a template that has allowed Tucson to launch a next-generation high-tech sector built around much smaller technology firms in the areas of optics, bioindustry, plastics, information technology, nanotechnology, environmental technology and aerospace.

“These are the jobs that every city lusts over,” said Marshall Vest, UA’s economic forecaster. “It’s clean industry, high value, high-wage jobs.”

Tech park acts as launching pad

IBM’s massive campus, with 11 buildings and 1.9 million square feet of floor space, was essentially given to the University of Arizona in 1994 and has reemerged as the UA Science and Technology Park. Today the park houses 30 companies instead of one and employment has topped 7,000 – more workers than IBM ever had on the property.

IBM, which still fills four buildings (and parts of two others), remains a dominant tenant along with Raytheon.

“The science park is a major asset to this community,” Vest said. “If a city is offered a portfolio, one big company or 30 smaller companies, a city would take 30 companies every time. It’s a portfolio management idea.”

As the tech park’s chief operating officer, Bruce Wright orchestrated the former IBM campus’s reinvention to top-rated university research park. Wright is on the verge of diversifying beyond industry by building a 250-room hotel at the park with other plans calling for housing.

The tech park has added an average of 500 employees a year since UA acquired the property.

“Despite the fact there is a lot of churn in high-tech, we’ve seen this to be pretty steady,” Wright said. “The high-tech world is highly competitive and ever changing and you can’t embrace a formula and expect it to carry you long into the future. We have to constantly track trends. We’re trying to understand what’s happening with the nano and bio industries.

“The goal in economic development is diversification. If you’re doing this right, the big companies will attract the medium-sized companies. In the main, the park is much stronger because of the diversification we have.” Back in 1977, the goal was the bigger the better and nothing was bigger than IBM announcing it would build a massive manufacturing plant on land it had been piecing together since 1969.

Everything went hyper-speed with this project, even John Carter’s hiring as the first general manager for the Tucson plant.

“At home (in Rochester, Minn.), I got a call Friday and was asked to be in a meeting at 8 a.m. Saturday in San Jose,” Carter said. “I went to San Jose, was offered the job, flew back because I had a bridge party in Minnesota Saturday night. I started (in Tucson) on Wednesday.”

Broad impact

IBM brought much change to Tucson.

The company imported bushels of intellect. IBMers showed up at group mixers and networking events, triggering many a “chance meeting,” said David Taylor, the city’s planning administrator.

“There’s a synergy that would not occur otherwise,” Taylor said. “That starts more research and development. There’s no meter on that.”

Nonprofit organizations received a big boost.

IBM and its employees have given to United Way more than $13 million since 1977, the second highest total behind Raytheon, IBM spokesman Lon Levitan said.

“Even in 1994 (when the company had only 850 employees), they were still the second largest contributor,” said Duff Hearon, chairman of the Ashland Group investment firm and United Way chairman in 1994.

This month, 600 IBM employees took part in United Way’s Days of Caring, in which 2,500 community volunteers worked for two days on 168 projects for 59 agencies. IBM is the driving force behind Days of Caring, the largest volunteer push of the year, said Ed Parker, executive director of the United Way of Tucson and Southern Arizona.

Home prices soar

The company’s employees also caused real estate values to shoot up.

Home prices surged 10 percent to 15 percent in 1977-78 as thousands of IBMers flocked to town, said Chuck Pettis, former president of Tucson Realty & Trust.

Average home prices in Tucson jumped 13.5 percent in 1977, the year IBM announced its intentions, and then escalated 24.6 percent in 1978 and 30.2 percent in 1979 as thousands of IBMers moved to Tucson, according to statistics provided by Vest.

“They certainly had an important role, particularly the first wave of more expensive homes in the foothills,” said Pettis, today a real estate consultant for the University of Arizona Foundation.

And IBMers found the Northwest Side – clear across town from the plant – jump-starting a housing boom there.

“They found the commute by freeway was just as easy or easier than going through town,” he said. “(The Northwest Side) had not boomed yet.”

UA big winner

IBM’s influence at the University of Arizona goes beyond the Science and Technology Park. Only four universities provide more graduates to IBM nationwide than UA. More than 100 Wildcats in the past three years went to work for IBM, Levitan said.

Many of those came from the No. 2-ranked management information systems program at UA’s Eller College of Management. Eller’s management information systems program was one of 12 business schools to get $1 million from IBM in the early 1980s, and since then IBM’s Tucson plant has donated computer equipment, ranging from services and storage systems to wireless systems and PCs.

“IBM has been instrumental in the initial development of the MIS program and its continuing prominence as a major player in the MIS field,” said Mohan Tanniru, head of the MIS program.

IBM’s $1 million put Eller on the map and opened the door to other institutions giving nearly $50 million to MIS. The program pioneered developing technology systems for group decision making before the group management mentality gained popularity, and UA’S MIS developed COPLINK, which links law enforcement databases and gained prominence during the Washington, D.C., area sniper shootings.

“In general, IBM hires our students, they evaluate our student projects They are an integral part of our education process,” Tanniru said.

IBM Employment

1964 – 41 engineers and technicians to maintain IBM equipment here

October 1977 – announced building of manufacturing plant with possible 5,000 employees

October 1977 – projected to employ 1,000 by the end of 1979, a few months later increased that to 1,500-2,000

March 1978 – said could have 5,000 by 1983.

1988 – 5,500 workers

June 29, 1988 – IBM announces it will eliminate 2,800 jobs at its Tucson manufacturing plant. Many accepted a generous buyout (see tomorrow’s article).

1991 – 2,500

1993 – 1,700

1994 – 850

2005 – 1,800

Source: Tucson Citizen archive

BY THE NUMBERS

1,850 employees

$ 150M payroll

$ 12M paid by IBM and its employees in state income, local sales and property taxes each year

800 IBM employees volunteered locally in the past year

100 graduates of local colleges hired by IBM in the past year

1,300 retired IBMers live in Tucson

Tucson

It’s been 25 years since IBM dedicated its Rita Road facility. Although its corporate presence in Tucson has been erratic, the company has helped shape the city’s business environment, economic development and community service.

Today – Even when IBM drastically downsized its Tucson operation, the city benefited. The original campus now houses 30 small businesses.

Tomorrow – When the company laid off thousands of employees about 15 years ago, many left with healthy buyouts. Some of them started businesses that are still here.