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Dell shifts manufacturing from Ireland to Poland
January 8, 2009 / 7:31 PM / 9 years ago

Dell shifts manufacturing from Ireland to Poland

DUBLIN (Reuters) - Dell, the world’s No. 2 PC maker, is moving its European manufacturing base from Ireland to Poland and cutting 1,900 of 3,000 jobs at its Limerick plant in a bleak start to the year for the shrinking Irish economy.

Dell, which ranks itself as Ireland’s largest exporter, largest technology company and second-largest company overall, said on Thursday it would move production to its Polish plant and third-party manufacturing partners.

The cuts at Dell’s Limerick base, part of a $3 billion (1.98 billion pound) cost-reduction plan announced last year, come just three days after Waterford Wedgwood, one of Ireland’s premier luxury brands, called in receivers.

“This is a difficult decision but the right one for Dell to become even more competitive,” said Sean Corkery, Dell vice-president of operations in Europe, Middle East and Africa, citing lower labour costs in Poland.

The monthly minimum wage in Poland is $406, compared with over $2,000 in Ireland.

“This decision confirms the competitive advantage of Poland as attractive for investment. It is a good sign, especially in these difficult times,” Pawel Wojciechowski, head of the Polish foreign investment agency, told Reuters Television in Warsaw.

But the European Commission said on Thursday it would investigate nearly 53 million euros in Polish state aid for Dell’s new manufacturing plant in Lodz, southwest of Warsaw, to see if it complies with rules on regional aid.

“We need to investigate all the effects of this aid to verify that it contributes to regional development and to ensure that it will not reinforce Dell’s position or create significant capacity in a market on the decline in the Eastern Economic Area,” said Competition Commissioner Neelie Kroes.

COMPETITIVE EDGE

Dell cut more than 8,000 jobs last year but has still struggled to regain market share it lost to larger rival Hewlett-Packard. It also said last year it would outsource more manufacturing to cut costs.

The Round Rock, Texas-based company has lagged behind competitors in coming up with a streamlined system to build portable PCs.

But falling demand for computers is hitting the entire industry, and earlier on Thursday, Lenovo Group, the world’s fourth-biggest PC maker, forecast a quarterly loss as China’s slowing economy hit sales, and said it would cut 2,500 jobs.

Dell’s move indicates how Ireland’s high costs have dented its competitive edge, but it has few implications for many other multinational companies that are engaged in less labour-intensive activities in Ireland, one economist said.

“I don’t think there is necessarily a readthrough to the rest of the multinational sector,” said Rossa White, chief economist with brokerage Davy.

“I don’t think you can compare it to say Google, Facebook, Pfizer... or even Microsoft or Intel which is at the more high-tech end,” White said.

In Limerick, a traditionally impoverished area made famous by the book and film “Angela’s Ashes,” people were struggling to digest news of the lay-offs, which will start in April and wind up next January.

Thousands of workers in support industries are also expected to be affected.

“Limerick is finished. It’s just finished,” one woman told state radio.

Dell will continue to employ about 1,100 people in Limerick as well as sales and marketing staff in Dublin.

Ireland was the first euro zone country to slide into recession last year, and dole queues are expected to lengthen this year as the global economic downturn grips and the weakness of sterling against the euro further hits exports.

Economists expect unemployment to exceed 10 percent by the end of the year, the highest in more than a decade, from 6.3 percent in the third quarter of 2008.

Editing by Carmel Crimmins/Will Waterman

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