The notion that a company's local impact evaporates when it's sold to a distant owner isn't always true.
When Safeco announced last month that it was selling itself to an out-of-state insurance giant, the dismay in certain circles was palpable: Seattle was about to lose yet another prominent corporate head office, and likely a substantial number of headquarters jobs.
Along with the pending sales of Getty Images and Bellevue’s Puget Energy — not to mention speculation about Washington Mutual’s future — the Safeco sale appears to be another corporate domino about to fall and take a chunk of the region’s economy with it.
But economists and others say a company’s sale or decision to relocate isn’t necessarily a body blow to the metropolitan economy.
In most cases, said Portland-based economist Joe Cortright, losing even a big corporate headquarters “is a shock to the psyche of the community more than to the economy.”
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A review of recent acquisitions and other headquarters changes shows that the direct impact on jobs are, so to speak, all over the map. Consider:
• When Boeing moved its headquarters to Chicago in 2001, about 80,000 people — just over 40 percent of its total work force at the time — worked in Washington state. About 500 headquarters jobs were lost in the move, but they were swamped by the thousands of jobs Boeing shed after Sept. 11. Today, after nearly four years of rebuilding, Boeing employs close to 75,000 Washingtonians — 46.3 percent of its total payroll.
• At its peak, Seattle biotech Immunex employed about 1,600 people in Washington. After Amgen bought the company in 2002, it cut more than 400 jobs and scaled back plans for the Helix research center along Elliott Bay. But California-based Amgen didn’t drop Helix entirely; today, about 800 people work there, along with 200 at a manufacturing plant in Bothell.
• Voicestream Wireless employed about 1,000 people at its Bellevue headquarters when it was acquired by Deutsche Telekom in 2001 and rechristened T-Mobile USA. Today, 2,500 people work at the wireless company’s head office.
• A decade ago, Tacoma-based investment adviser Frank Russell sold itself to Milwaukee’s Northwestern Mutual Life; at the time, it employed just over 1,000 people worldwide. The company (now called Russell Investments) continued to grow under Northwestern’s wing, and now about half its worldwide work force of 2,200 is in Tacoma. Russell is looking for a new Puget Sound headquarters to accommodate future growth; a decision is expected by the end of the year.
Discerning the impact of a headquarters company being acquired is more unpredictable nowadays, because where the CEO sits isn’t necessarily tied to the core operations that have most of the jobs.
“That was the General Motors idea — that the headquarters was the company,” University of Portland business professor Mary Allender said. “But with globalization and outsourcing, that’s no longer the case.”
About 1,000 people worked in Boeing’s corporate headquarters when it was in Seattle, spokesman Todd Blecher said. Around 450 people (including 150 or so who moved from Seattle) now work in the Chicago headquarters; at least some of the jobs that weren’t moved were distributed elsewhere within Boeing, Blecher said, though he couldn’t provide a precise breakdown.
More importantly, economist Cortright said, “If you think of the real assets of Boeing being its people with certain specific skills, most of them are still in the Puget Sound economy.”
A permanent loss of hundreds or even thousands of jobs certainly is nothing to dismiss casually. But such losses have to be held against the size of the Seattle metro area’s economy, which employed nearly 1.5 million people as of April.
Over the past year, according to state data, King and Snohomish counties gained an average 2,775 jobs a month — enough to dilute the impact of all but the largest mass layoffs.
Of course, there are more subtle civic and economic effects when key companies are bought out. Many in Seattle’s biotech sector, for example, say the industry has yet to recover from the losses of Immunex and Icos, which was bought by Eli Lilly in January 2007.
But more often than not, at least some operations remain after a headquarters has moved or disappeared via merger or acquisition. In the case of a utility such as Puget Energy, which is being taken private in a deal set to close later this year, virtually all of the operating assets likely will stay put.
“What people care about are the jobs,” Allender said. “If the corporate headquarters goes but the manufacturing sector stays, then I’d say it’s [mainly] a psychological impact, with a fairly short life span.”
The Portland example
Portland offers an illustrative contrast with Seattle. Of the seven Portland-area companies on the Fortune 1000 a decade ago, only two — Nike and Standard Insurance, now called StanCorp Financial — are still based in the area. Other major employers, such as US Bancorp and Freightliner, were bought out earlier.
Cortright, who studies the forces that drive urban economies, said there probably had been some impact from all those headquarters losses, but “it hasn’t been terribly large or very discernible. It would be hard to point to the trajectory of job growth in Portland and say that the downturns were tied to corporate headquarters relocations or consolidations.”
And the biggest private-sector employer in Oregon is not headquartered there, nor has it ever been. Intel employs 15,000 people at its seven facilities in metro Portland, more than anywhere else in the world. Among them is Andy Bryant, Intel’s second-highest-ranking executive.
“We’re pretty much a virtual company, so in some sense it doesn’t matter where people live,” Intel spokesman Bill MacKenzie said. “It’s not a reasonable assumption anymore that a headquarters holds all of the top people.”
Besides jobs, communities rely on their big companies for charitable donations, civic leadership and directors of nonprofit groups. When headquarters go, such contributions can be harder to round up.
But not impossible, said Jessika Allen, vice president of business development for the Oregon Symphony. Several of the symphony’s biggest donors, such as Wells Fargo, US Bank and Tektronix, are either no longer headquartered in the state or never were.
Allen acknowledged that the pool of potential big contributors has shrunk. A decade or so ago, she said, “we’d get one corporation headquartered here to sponsor a whole concert series,” at a cost of up to $125,000. Now, she said, she’ll more likely find a sponsor for each individual concert.
“It makes us as nonprofits work a little harder to get the same amount of resources.”
Economies are living, changing things, and as older corporate mainstays leave or disappear inside larger entities, new ones arise to take their place.
The Portland area is back up to five Fortune 1000 companies. Precision Castparts and Schnitzer Steel Industries have grown themselves onto the list; Portland General Electric has emerged from the shell of its bankrupt former owner, Enron.
And metro Seattle has two more Fortune 1000 companies than it did a decade ago, as both new corporate names (Amazon.com, Expedia and Starbucks) and established ones (Expeditors International, Plum Creek Timber) have joined the elite group.
Drew DeSilver: 206-464-3145 or email@example.com