Sunday, May 4, 2008

Dell looks to Poland for expansion

Dell looks to Poland for expansion

Dell looks to Poland for expansion

04 May 2008

An assurance by Dell that the Polish operation will not affect jobs in its Limerick plant will be cold comfort for the 250 Irish staff being made redundant, writes Gavin Daly.

Computer maker Dell, which last week announced 250 compulsory redundancies among its Irish staff, is doubling employment and output at its new plant in Poland.

The company expects to have 2,500 workers in Lodz by the end of the year, according to Polish reports quoting Dell executives, and Invest in Poland, the state investment agency. Dell opened the plant in Lodz in January, and is now advertising dozens of jobs, from graduate positions to manufacturing engineers, production managers and supervisors.

The firm is manufacturing laptop computers in Lodz at the moment, but is adding new production lines. It is expected to start manufacturing computer servers in the future, according to the reports. An Irish-based spokeswoman for Dell said that the Lodz plant already employed about 1,500 people, and was operating ‘‘according to plan’’.

The workers in Lodz include ‘‘a number of managers from Limerick’’, where Dell employs about 3,000 people at a manufacturing plant. The Dell spokeswoman said that some support functions for the Polish operations were also being carried out in Limerick.

Dell last week announced 250 layoffs in Ireland, although the majority of the cuts will come from its sales and support centre at Cherrywood in Dublin - which employs 1,500 staff - rather than from Limerick. The Irish employees were informed of the cuts last Tuesday, with jobs in technology support, marketing, sales and administration among those affected.

The spokeswoman said that the cuts were compulsory, rather than voluntary, because they were ‘‘role-specific’’, affecting particular groups of workers. There will be a 30day consulting period, and the first workers will leave the company around July. The full process will be completed by the end of January 2009.

It is understood that the departing workers will be paid six weeks’ salary, including the statutory redundancy requirement. Several industry observers expressed surprise that the Limerick plant would be relatively unaffected by the cuts, particularly given the rising cost of manufacturing in Ireland and the recent opening of the Lodz factory.

Sources close to Dell said that the Limerick operation - which is run by Dell vice-president Nicky Hartery - had escaped large-scale cuts because of its continued efficiency. However, other sources speculated that the Lodz plant was still in its early stages, and the Limerick operation could yet be affected as it comes fully on stream.

Dell has consistently said that the Polish plant does not pose a threat to the Limerick operation, which continues to operate at full capacity. ‘‘The second manufacturing site complements Limerick, and services different geographic markets to Limerick,” the Dell spokeswoman told The Sunday Business Post last week.

‘‘The development of the second manufacturing facility in EMEA [Europe, the Middle East and Africa] is all part of the company’s strategy globally, to reduce delivery time to customers of Dell systems - specifically for customers in central and eastern Europe.”

Lodz is already seeing the wider benefit of having a Dell factory, with sub-contractors and suppliers such as Flextronics and RR Donnelley setting up in the area, bringing additional jobs and investment. A similar phenomenon occurred in Limerick, where thousands of jobs are linked to Dell through suppliers and contractors.

While speculation about large-scale layoffs in Limerick has circulated for some time, this newspaper reported in December that the government had approved new grant aid for the Limerick operation. It is understood the grant aid would support a transition from manufacturing to ‘higher-end’ research jobs.

It is not clear what affect the layoffs announced by Dell last week could have on that plan, and the company spokeswoman refused to comment.

However, one source said that Dell’s two Irish operations were ‘‘distinct operations’’, so grant aid could still be granted for Limerick, even if Cherrywood was contracting.

In its statement last week, Dell said it was proud of its growth in Ireland, but had to ‘‘look critically’’ at its operation.

‘‘Dell Ireland regrets the impact that this will have on its employees, but is confident that the changes will position Dell strongly for continued future growth,” the company said.

The Irish cuts are part of a wider plan by the company to cut its 17,500 staff in EMEA by between 4 per cent and 5 per cent - or up to 875 people in total. Dell has already announced layoffs in the US, with the closure of four call centres and a manufacturing plant in its home state of Texas.

Those closures will result in more than 4,100 layoffs, but the company has a target of laying off more than 8,800 people in total, in a bid to cut costs by $3 billion. The firm last week pointed to recent comments by chief executive Michael Dell and chief financial officer Don Carty, who said the company needed to work harder to become more competitive.

‘‘We will go past the 8,800 target [for layoffs] previously discussed,” Dell told investors last month. ‘‘We were not participating in some of the fastest growing parts of the industry. We are not satisfied with the current state of affairs and are on a mission to fix it.”

Whatever form that mission takes could have a major impact on Ireland, as Dell is one of the biggest employers in the country and is the country’s largest exporter.

Dell Products, an Irish-incorporated company that covers its Limerick operation, had turnover of $11.3 billion in the 53 weeks to February 3, 2006, according to its most recent accounts.

The firm - which sells computer products to customers in Europe - made a pre-tax profit of $48.8 million for the year. In the previous financial year, the company paid a dividend of almost $5.6 billion back to its US parent company.

Dell Direct, the Irish firm behind the Cherrywood operation, had turnover of €150.2 million in the financial year to February 2, 2007. It made a pre-tax profit of €42.9 million for the year, including a €27.1 million gain from the sale of its former base in Bray, Co Wicklow. Costs at Dell Direct decreased by almost 5 per cent during the year, according to its accounts.

The firm had received almost €14million in grants from IDA Ireland, which ‘‘may be revoked, cancelled or abated in certain circumstances, the most significant of which is the cessation of operations’’.

Pfizer’s expansion not jobs-intensive
There was some positive news on the jobs front late last week, with the announcement of a significant Irish expansion by Pfizer, the biggest pharmaceutical firm in the world.

The company is investing €190 million in a ‘‘biologics’’ plant at Shanbally in Cork. Despite the size of the investment, it will create a relatively small number of jobs – about 100 jobs over three years – reflecting a shift towards high-value, low job creation projects.

However, it is the first time that Pfizer has located such a plant outside the US, a move that was described as ‘‘strategically important’’ by enterprise minister Miche├íl Martin.

‘‘The decision to place such a sophisticated and technologically-advanced operation here is a significant endorsement of Ireland’s wealth of talent and expertise,” he said.

Nat Ricciardi of Pfizer Global Manufacturing said the firm had chosen to locate the new ‘‘centre of excellence’’ in Cork, because of its ‘‘very positive experiences in the region over many years’’. Pfizer already employs about 2,300 people in Ireland. The new plant will be built on a 30-acre site beside the existing Pfizer facility at Ringaskiddy.

Up to 500 people will be employed at the peak of building work, and the plant should be up-and-running by the end of next year. The new plant is being supported by IDA Ireland, although the level of grant aid or other support has not been disclosed
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