Dell shifts manufacturing from Ireland to Poland
DUBLIN (Reuters) - Dell (DELL.O), the world's No. 2 PC maker, is shifting 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 of computer systems for customers in Europe, the Middle East and Africa to its Polish plant and third-party manufacturing partners.
The cuts at Dell's Limerick plant, part of a $3 billion cost-reduction plan announced last year, comes just three days after Waterford Wedgwood (WTF_u.I), 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.
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 hits exports.
On Tuesday, a union at Tara mine, Europe's largest zinc mine, said Swedish owner Boliden (BOL.ST) was considering stopping production with a potentially devastating impact on the local community in county Meath, outside Dublin.
Dell layoffs in Limerick, a traditionally impoverished area made famous by the book and film "Angela's Ashes," will start in April and wind up in January, 2010.
Dell will continue to employ about 1,100 people in Limerick as well as sales and marketing staff in Dublin.
Overall, economists expect unemployment in Ireland 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.
COMPETITIVE EDGE
The Irish government has partly relied on multinational technology companies to help drive the "Celtic Tiger" boom of the 1990s.
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 labor-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 (GOOG.O), Facebook, Pfizer (PFE.N) ... or even Microsoft (MSFT.O) or Intel (INTC.O) which is at the more high-tech end," White said.
Dell cut more than 8,000 jobs last year but has still struggled to regain market share it lost to larger rival Hewlett-Packard Co (HPQ.N). 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.
Contract manufacturers can generally produce PCs for less money because their entire operations are focused on finding production efficiencies, as opposed to large firms like Dell, which must balance marketing and other considerations.
"I recognize that a fundamental change in its business model was considered necessary by the company to enable it to continue to compete in the global market," said Ireland's Deputy Prime Minister, Mary Coughlan, who is also minister for enterprise, trade and employment.
Earlier on Thursday, Lenovo Group (0992.HK), the world's fourth-biggest PC maker, forecast a quarterly loss as China's slowing economy hit sales, and said it will cut 2,500 jobs as part of a restructuring to cope with falling demand for computers.
(Editing by Carmel Crimmins, Hans Peters and Andrew Macdonald)
