Dell, the American computer manufacturer and the world’s number two PC maker, decided to move its manufacturing base from Limerick in Ireland to its plant in Lodz, the third largest city in Poland.
According to the Irish Times, all production of computer systems for customers in Europe, the Middle East and Africa (EMEA) is moving to the Polish plant over the next 12 months.
Dell, one of Ireland’s largest corporate employers and its biggest exporter, said that it was cutting 1,900 jobs in Limerick. The company will still continue to employ about 1,100 people in Ireland. The workers in Limerick would continue to coordinate manufacturing operations throughout Europe, as well as research and develop new products. The Global Innovation Solutions Centre and EMEA Command Centre will remain in Limerick. Likewise, the sales, marketing and technical support divisions located in Cherrywood in the vicinity of Dublin will continue to operate.
Sean Corkery, vice-president of Dell’s operations for Europe, the Middle East and Africa, said the decision to cut jobs was difficult but the right one if Dell is to become even more competitive, according to the Irish Times. He also denied that Dell had planned to close manufacturing in Limerick when it built the plant in Lodz, in 2007. “At the time, we needed extra capacity and wanted to be close to our customers in Central and Eastern Europe,” he explained. The increase in sales of portable notebook computers and the decline in desktop sales changed the economic model for Limerick. He also confirmed that the move is part of a $3 billion cost reduction initiative that the company announced in 2008 as a result of a review of its global supply chain.
The minimum wage in Poland is 317 euro per month, compared with over 1,560 euro in Ireland.
Dell CEO Michael Dell officially opened the newest and most advanced Polish manufacturing facility on January 23rd. Paweł Wojciechowski, head of the Polish foreign investment agency in Warsaw, stated, “I am very pleased with the fact that Dell opted for Poland, especially in the face of the global economic slowdown. The decision confirms the competitive advantage of Poland as attractive for investment. Projects from the IT sector do create a solid base for future innovation development [which is] attractive for the country, especially thanks to the competitive university education offered in the field [in Poland].”
However, the Financial Times describes this decision as “a blow for the Irish economy” and suggests that there are concerns that the 53 million euro offered by Poland could breach rules on state aid. The region of Poland where the factory is located qualifies for regional help because of low living standards and high unemployment.
The European Commission will check if the Polish government followed all the strict rules for regional aid. “We need to investigate all of 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,” Competition Commissioner Neelie Kroes told Reuters UK. In December 2008 Brussels ordered a detailed investigation into a Polish government proposal that invested 52.7 million euro into providing new facilities for Dell at its new plant in Lodz. If they find the proposed subsidies are not compatible with state rules, then the American investor will not be able to receive the money. According to information from the Commission the total cost of the development is almost 90 million euro. The investigation will check if the proposed subsidies could lead to a disproportionate distortion of competition. The duration of the inquiry could last from six to 18 months.
According to official company information, Dell’s new 37,000 square-metre manufacturing facility represents a 200 million euro investment. 1,200 employees work in the plant. Complementing the successful Limerick-based manufacturing operation, the Lodz facility will initially produce the Latitude and Inspiron lines of laptop computers, customised to meet the specific needs of retail and business clients. The location of the new factory means that Central and Eastern European and Nordic customers can expect at least a two day reduction of current delivery times.
The Polish Information and Foreign Investment Agency and the Warsaw Voice daily awarded Dell first prize for being the top new site or “Greenfield” investor employing the highest number of workers. Forbes also granted the Major Investor of the Year Award to Dell.