Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.
RALEIGH, N.C. – The news that (Nasdaq: DELL) will close its mammoth manufacturing plant in Winston-Salem struck like the impact of a bomb.
First, the pressure of the announcement envelops you. Then the reaction – disbelief, sorrow, regret. What do those soon-to-be poorer workers do? How does our state respond?
WS 1 – the company’s name for the 750,000 square foot facility – will soon be no more. However, none of us should be surprised. The warning signs have been there for astute observers in recent months as the global recession worsened and PC sales – especially for desktops – plunged. Layoffs have occurred. Rumors that Dell might sell the plant have circulated for many months.
Unfortunately for our state and many dedicated, hard working employees, WS-1 produced desktop hardware and servers.
The worst immediate fallout – 900 people are going to lose their jobs, most of them just in time for Christmas.
The longer-term radioactive impact – the state’s high-tech sector is suffering a huge, huge blow. Yes, the Dell jobs were manufacturing and not high-tech R&D such as at an IBM or Cisco. But these also weren’t tied to dying sectors such as textile or tobacco or furniture.
Was N.C. Ripped Off?
Critics will howl that Dell ripped off the state for the estimated $300 million in tax incentives it received for the plant. However, much of that money was geared to employment and PC sales. As for money already invested for infrastructure to help Dell build the plant, a bill should be sent – and paid.
Even if Dell were to be billed and paid, however, the state would have been far better off if WS 1 remained open.
The Dell debacle also could very well mean that future tax incentives for other employers will be harder to get. The hunch here is that neither Google nor Apple would get the hundreds of millions promised them for far fewer jobs if they were looking to build today.
North Carolina could point with pride to the fact that two of the world’s top four PC manufacturers (Dell, 2nd behind HP; Lenovo, 4th behind Acer, Dell and HP) had major operations in the state. Not for much longer.
Cree, maker of semiconductor chips and light-emitting diodes, will announce new jobs for the growing “green” sector. The number is unknown. Perhaps the total will offset the losses at WS 1 and probably pay better wages as well. But the new jobs here won’t help the Triad.
Michael Dell’s Visit and Salute
Just three years ago in May, Dell founder and Chairman Michael Dell visited WS 1 to celebrate the manufacture of the 1 millionth PC there. With pride, he talked about how workers would soon be producing a PC every 2.5 seconds, up from one-per-5 seconds as of his visit.
Dell invested $100 million in the plant and received much criticized local and state tax incentives to build it in North Carolina. But at a 45-minute press conference during his visit, Dell smiled as he talked about the 1,100-plus workers – 350 more than planned at the time – and his intention to hire more.
The plant had opened the previous October.
"When I was here last, we talked about creating 750 jobs. Today, we’ve exceeded that. We have 1,100 employees, and we expect to add 200 more," Dell said.
He especially lauded the WS 1 workers for their productivity, their loyalty and their motivation.
His company was riding high at the time as well, ranking No. 1 in global PC sales.
How times have changed.
Hardware Is not Dell’s Future
PCs have become a low-profit commodity, and HP is now the world leader. Dell is diversifying, moving into technology services with a far less heavy reliance on hardware. IBM made a similar decision when it sold its PC operations in Raleigh to Lenovo. HP is following a similar path.
During that visit, Dell, with his Dell-labeled bottled water in front of him, even touted using WS 1 for PowerEdge server production.
"Obviously, we are ahead of our plan," Dell said. "The plant is coming up very well."
Soon the plant’s doors will close.
North Carolina’s economy gets an immediate black eye with the job losses, but you can bet state leaders will try to spin the loss as an indicator that the state must continue to seek more life science/biotech jobs and so-called “green jobs.”
Critics will note that the Tar Heel state remains heavily reliant on manufacturing – such as the Dell jobs – and thus so vulnerable to recession. That’s a major reason why North Carolina’s unemployment rate is among the nation’s worst – and headed higher.
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