Dell gets a cool Polish reception

 

Dell’s decision to move its production to Poland was met with a muted response on the Polish factory floor

THE LONG, LOW line of the factory rises slowly on the horizon, barely visible against the grey sky, heavy with snow. The stars and stripes hangs limply on a flagpole at the entrance beside the red and white flag of Poland. Melting snow drips from the three-dimensional logo: “Dell.”

Besides the car-park, two other grey warehouses and a bus stop, there is nothing around here but endless, snow-covered Polish fields.

Employees hurry out, pulling their coats tight in the minus-seven-degree cold and shake their heads when approached.

“They’ve told us we are forbidden from talking to the press, particularly the Irish press,” says one worker apologetically, rushing away, then returning. “Please don’t even describe what I look like. I don’t want any trouble.”

A few minutes later, a security guard shows up.

A Dell spokesperson says this plant, in the central Polish city of Lodz (pronounced woodge), is the most modern of its kind in the world. But the spokesperson refuses requests to visit this industrial wonder or talk to Dell management and staff, saying: “We want to keep the story from the people so that they concentrate on their work.”

But people always talk, and when they do it’s clear they are fearful people, far from happy about the 1,000 new jobs that might come here after the Limerick redundancies.

“We were all very sorry when we heard about our Limerick colleagues. When they announced in the factory that jobs were going in the company, I held my breath,” says one worker, far from the car-park security cameras. “When they finally said they were in Limerick and not in Lodz, I can tell you that nobody celebrated.”

Work on the Polish production line, the worker says, pays zl.12 (€2.89) an hour gross, which can rise to zl.2,500 (€602) per month.

Engineers earn the equivalent of €20 an hour while supervisors can earn up to €1,500 gross per month. Similar senior managers in Ireland earn between €3,500 and €10,000 per month.

The hourly rates seem low by Irish standards but are standard industry rates in Lodz, where the cost of living is between 10 and 30 per cent lower than Warsaw, 130km northeast of here. Considering they are paid benefits and time-and-a-half overtime – not always a given with Polish employers – most workers say they have nothing to complain about. But they have no illusions about their employer either.

“I work for today. Who knows what Dell will do tomorrow,” says another person, who agrees to talk anonymously, away from the forbidden factory.

IT’S THREE YEARS since Dell chose Lodz, Poland’s second-largest city, as the location for its latest European factory. Like Dell’s Irish base, Lodz has a notoriety in Poland that is difficult to shake. Its manufacturing history earned it the name “Poland’s Manchester” – today it’s used in the pejorative sense. In a stylish courtyard bar, one woman claims that Lodz is Poland’s “Stab City”, the capital of domestic knife crime.

On the pretty main drag, Piotrkowska, there are appealing Jugendstil villas and imaginative sculptures of pianist Artur Rubenstein and other natives. Behind that, though, are rows of crumbling buildings and streets that are depressingly grey, even by Polish standards.

Further out are hundreds of 19th-century red-brick industrial buildings, cathedrals to early capitalism. They have been empty since the textiles industry that powered the city for a century collapsed 20 years ago. Almost overnight, unemployment jumped to 50 per cent.

Today these empty warehouses and greenfield sites are finding a second life as a special economic zone (SEZ), one of 14 in Poland that under EU law entitle job-creating foreign investors to special subsidies and tax breaks. Large companies can write off half their investment against taxes and might be exempted from property tax.

“We learned a lot from Ireland, particularly the Shannon zone, and we’re just doing what Ireland did. All countries fight for this kind of investment,” says Marek Cieslak, president of the Lodz SEZ.

Like many in Lodz, Cieslak expresses sympathy for Dell’s Irish workers. But sympathy in Lodz is waning with rumours that the Irish Government lobbied the European Commission to launch its investigation into Poland’s Dell subsidies. Polish MEPs claim the commission launched its probe in a bid to keep Ireland sweet ahead of a second Lisbon vote.

After days of whispers, the Government denied the claim on Thursday, when it made the front page of the national Polish daily Gazeta Wyborcza under its headline: “Lodz-Ireland: War over Dell.”

Polish officials close to the deal say they have nothing to hide over the Dell subsidies. “Personally, I don’t support subsidising profitable companies to set up business, but unfortunately this is the game we are in and everybody is at it,” said Pawel Stelmaszczyk, a board member of the Polish Information and Foreign Investment Agency (PAIiIZ). “I don’t think in Poland we are playing the subsidy card any harder than others.”

Similar views are aired at Lodz city hall, where officials say last week’s decision was not against Limerick or for Lodz. They claim Dell managers told them it was about whether to keep production in Europe or shift it to Asia.

They gently suggest that Limerick was too dependent on Dell. Lodz, on the other hand, experienced that 20 years ago when its textiles industry collapsed and the city is determined not to let history repeat itself.

Lodz’s 900-hectare special economic zone has attracted companies as diverse as Dell and Proctor Gamble, bringing zl.l2 billion (€2.88 billion) in investment and 20,000 jobs. Another 15 hectares has just been added to the zone.

Word is spreading: last year several leading magazines and consulting agencies dubbed the city Poland’s best place to do business.

Unemployment is at six per cent and sinking; the city’s five third-level institutions produce 20,000 graduates annually, a 10th of the country’s total.

“We keep reading about companies closing in this city and that city but we haven’t felt the crisis here,” says Kajus Augustyniak, a spokesman for the city’s mayor. He declines to discuss the city’s agreement with Dell but people familiar with the details say Dell got a sweet deal.

If it stays until 2020, the company will allegedly pay no corporate tax or property tax for the first decade. A source also says that Dell got a discount on the price for its 56-hectare factory site, although it later emerged that part of the site belonged to the national train company and was not the city’s to sell.

BEYOND SUBSIDIES, the attractions for Dell are obvious. More than 95 per cent of its Polish employees are semi-skilled workers assembling laptops for two-thirds less pay than their Limerick counterparts.

Laptop-laden lorries can be in Berlin in five hours, in Brussels in 12, not to mention the growing markets in Poland itself, and further east in Ukraine and Russia.

Officials in Lodz proudly declare that 230 million potential Dell customers live within 1,000km of their city.

The potential of Lodz hasn’t been lost on Dell’s Irish associates, either. At least four secondary suppliers have followed their biggest client out here, with some even involved in building the plant. That experience has given these Irish companies the confidence to pursue business in the EU’s largest emerging market.

After installing conveyors, lifts and waste-disposal facilities in Limerick, Athlone’s IO Systems (IOS) won the Lodz contract. “We still need to deliver to Dell the best quality products and services at a competitive price,” says Bartlomiej Debski, IOS Poland’s country manager. “By setting up in Lodz we hope to keep doing business with them and look for other companies.”

A Lodz native, Debski says Dell’s demand for professionalism has raised business standards in the city. But, with wage costs rising, people here know they may have just a decade to make the most of the “Dell Effect” before the company vanishes again.

“I’m not giving my heart to Michael Dell,” jokes SEZ president Marek Cieslak. “If they decide to move to Ukraine, hasta la vista.”

The workers seem to be equally pragmatic, although some admit they might feel differently in 10 years when they have become accustomed to the salary.

“Its no consolation to people in Limerick, I know, but it does give people here an opportunity – for now,” says one worker. “But we know the way things work in the world. We know you cannot depend on Dell.”