IBM cuts chip plant pay, following job cuts

IBM is cutting workers' pay at chip plants in Vermont and New York. This follows job cuts at the Vermont facility.

IBM is cutting pay for workers at chip manufacturing plants in New York and Vermont. This comes on the heels of job cuts at the Vermont facility.

IBM chip manufacturing facility
IBM chip manufacturing facility IBM

Some shift workers at IBM's semiconductor plant in Essex Junction, Vt., will see net pay reductions of up to 10 percent in early 2009, said Jeff Couture, an IBM spokesperson.

In effect, a 20 percent premium for shift workers is being eliminated, according to Couture. To mitigate employee earnings losses, IBM is making a one-time base pay increase, he added. However, even with this increase, the "net for employees will range from no impact to a maximum of 10 percent (pay cut)," he said.

The report first appeared in the Burlington Free Press.

Overall, pay cuts would affect about 3,500 workers at plants in Poughkeepsie and East Fishkill, N.Y., as well as Essex Junction, Couture said.

Though revenue from IBM's Systems and Technology segment totaled $5.2 billion in the second quarter, up 2 percent year over year, revenue from "microelectronics OEM" (which is within the Systems and Technology group and includes chipmaking-related operations)--decreased 19 percent, according to the IBM 2008 second-quarter earnings report.

One aspect--not surprisingly--of the pay-cut move "is to reduce costs," Couture said. The other imperative is to remain competitive with rivals that don't pay the kind of premiums that IBM is paying.

IBM competes worldwide with companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Chartered Semiconductor.

The Essex Junction facility is a contract manufacturing operation that builds chips that go into cell phones, DVD players, TVs, and other consumer electronics devices, Couture said. East Fishkill, on the other hand, builds the specialized processors that go into Sony's PlayStation, Microsoft's Xbox, and the Nintendo Wii, among other products.

Earlier this year, IBM announced 180 job cuts at the Essex Junction plant, reducing the employee count to about 5,400.

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