Business

Dell to close N.C. plant, eliminate 905 jobs

Posted October 7, 2009 2:52 p.m. EDT
Updated October 8, 2009 7:45 a.m. EDT

— Four years after opening a computer manufacturing plant in Forsyth County, Dell Inc. announced plans Wednesday to shutter the operation, laying off all 905 workers.

The Winston-Salem plant, which makes desktop computers, will close in January as part of Dell's ongoing effort to simplify operations and improve efficiency, company officials said.

"If you look at it from a holistic perspective, this is a desktop manufacturing facility and we've seen the customer prefer laptop computers," Dell spokesman Venancio Figueroa told The Associated Press. "Given the dynamics at play across the landscape, we made the difficult decision to shut this down."

“This is a difficult decision, especially for our North Carolina colleagues, but a necessary one for Dell customers and our company," added Dell Vice President Frank Miller in a statement. "The efforts of our team members there have been significant, and we’re committed to helping them through their transition. Of course, we’ll continue to honor all agreements with North Carolina, Forsyth County and Winston-Salem.”

About 600 Dell workers will be laid off in November, officials said. Affected employees will receive severance pay, incentive payments, benefits continuation and outplacement services, they said.

Gov. Beverly Perdue said in a statement that the loss of the plant is the latest hit to North Carolina from the recession.

“The Dell plant closure shows why we must continue to fight for economic recovery here in North Carolina – the effects of the global recession are far from over," Perdue said. “We will continue to aggressively pursue new business and job opportunities, and we will do everything we can to work with the local community to make sure that the displaced Dell workers and their families have the resources and support they need.”

State lawmakers approved a $242 million package of tax breaks and other incentives in 2004 to lure the Texas-based computer maker to North Carolina, and Forsyth County and Winston-Salem kicked in another $37 million in incentives.

Many of the incentives were linked to employment and investment targets over time, and it was unclear Wednesday exactly how much money the company actually received from state and local sources.

When Dell selected North Carolina for its new plant, the company promised to invest at least $100 million in its plant and create at least 1,500 jobs by 2020. Its 750,000-square-foot plant opened in late 2005 with great fanfare – company founder Michael Dell joined state and local officials at the dedication.

The North Carolina Institute for Constitutional Law, led by former Supreme Court Justice Bob Orr, challenged the incentives package, but state courts ruled in favor of the deal and the state Supreme Court last year refused to hear an appeal in the case.

Orr said in a statement Wednesday that he was sorry to see the plant close but said it highlights the "folly of the incentives game" North Carolina and local governments play to attract industry.

"No matter how big the incentive package, operational decisions by businesses headquartered out-of-state will be driven by corporate financial considerations and not by any sense of loyalty to the community being left behind," he said. "To the extent North Carolina state government and local governments feel compelled to invest in businesses through the use of incentives, those investments should be in smaller, local businesses and not in multi-billion dollar interstate and international businesses.”

Dell's Figueroa said the company will repay incentives if those conditions are included in its agreements.
Winston-Salem Mayor Allen Joines issued a statement Wednesday night saying Dell would repay all the money the city provided to the company in upfront costs and annual incentive payments.

Joines said he was assured by Kip Thompson, vice president for facilities, that Dell will honor its commitment to repay the $15.56 million the city has provided since Dell agreed to build the plant.

But millions of dollars won't be returned. Public agencies paid to prepare the Dell site for construction, widen roads leading to the plant, and equip community colleges to train company workers before the plant opened.

The Round Rock, Texas-based company said it was part of an effort to simplify operations and improve efficiency, while retaining U.S. plants in Miami, Fla.; Nashville, Tenn.; and Austin, Texas. The company had announced a drive to save $4 billion a year by 2011. Dell previously sold its Lebanon, Tenn., remanufacturing plant in June and is moving its Ireland manufacturing operations to Poland.

Dell is also joining fellow tech bellwethers Hewlett-Packard and IBM in moving away from hardware and into more profitable technology services. Dell said last month it will spend $3.9 billion for Perot Systems Corp., adding consulting and computing services like systems integration to Dell's offerings.