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Monday, January 19, 2009

Dell Moving Irish Operations to Poland

As posted by: Wall Street Journal

DUBLIN -- Dell Inc. said it is moving its Irish manufacturing operations to Poland by early 2010, a cost-cutting measure that will result in the loss of 1,900 Irish jobs -- about half of the computer maker's Irish work force.

The company said Thursday the move is part of a $3 billion company-wide cost-cutting initiative announced last year.

Since establishing a manufacturing facility in Limerick, Ireland in 1990, Dell has become the country's second-biggest foreign employer and one of its biggest exporters. But since 2006, Dell has lost its status as the world's largest personal-computer maker as it struggles to keep up with rival Hewlett-Packard Co. Whereas Dell still builds many of its PCs in plants it owns around the world, H-P began outsourcing much of its PC assembly to Asian contract manufacturers years ago.

Computer maker Dell will move its Irish manufacturing operations to Poland by 2010, part of a company-wide cost-cutting initiative that is expected to result in the loss of 1,900 jobs at this plant in Limerick, Ireland.

Dell founder and Chief Executive Michael Dell has been trying to remake the Round Rock, Texas-based company since early 2007 by building new products and changing Dell's manufacturing system to cut costs. Dell has been trying to sell its factories, say people briefed on the matter; last year, it closed down a Texas assembly plant.

So far, the cost savings haven't allowed Dell to weather the tough economy -- shares closed Thursday at $11.27, down from more than $25 last August. Last week the company announced a reorganization that involved the departures of two top executives, including the company's manufacturing chief, Mike Cannon.

"This is a difficult decision, but the right one for Dell to become even more competitive," Sean Corkery, the vice president of the Dell's Europe, Middle East and Africa operations, said in a statement.

Economists say the cuts are another sign that the Irish economy, fueled by a construction boom and multinational investment since the 1990s, has lost its edge to less-expensive Eastern European countries.

"If you're starting to lose jobs in multinationals, it doesn't augur well for the economy as a whole," said Alan McQuaid, an economist at Bloxham Stockbrokers.

While Ireland still provides the low 12.5% corporate tax rate that attracted overseas companies in the 1990s, labor rates there remain high.

"Assuming that just because the country has a low corporate tax regime we will continue to attract foreign direct investment is extremely misguided to say the least," Mr. McQuaid added.

Ireland's National Competitiveness Council has highlighted problem areas for the country. They include productivity, labor and energy costs, increased business regulation and overall infrastructure quality.

The American Chamber of Commerce in Ireland said that Dell continued manufacturing in Ireland long after competitors left. "It's a tribute to the management and staff that this investment was retained in Ireland for so long," it said in a statement.

IDA Ireland, the state agency charged with attracting foreign-direct investment, earlier this week reported 10,044 job losses last year at IDA-sponsored companies and only 8,837 new jobs. Irish Prime Minister Brian Cowen called Dell's move a "major blow," and said "the government will continue to work with Dell to identify further development opportunities which may arise as the company continues to develop the new business model."

Dell said 1,300 sales and marketing jobs will remain in Dublin, as will 1,000 Limerick-based jobs in logistics, solutions, procurement, engineering and product development. "Limerick will remain the logistics hub for Europe," a Dell spokeswoman said.