Fears rise as to future of Dell plant in Limerick

FRESH DOUBTS were cast over the future of Dell's manufacturing plant in Limerick yesterday when the computer maker issued a warning about slowing demand and said it would seek to reduce its long-term cost structure.

The statement said "the conservatism in IT spending" it had noted when it announced its second-quarter results last month was spreading: "The company is seeing further softening in global end-user demand in the current quarter . . . The company expects to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions."

Speculation has been mounting in recent weeks that Dell will sell the Limerick facility, which employs 3,000, to an Asian contract manufacturer. A recent US regulatory filing by the company confirmed it was "actively reviewing" all aspects of its "logistics, supply chain and manufacturing". "This review is focused on identifying efficiencies and cost reduction opportunities while maintaining a strong customer experience," the filing said.

A Wall Street Journal report yesterday said Dell executives have privately been discussing closing the Limerick plant for the last two years. It claimed one source said Dell had already decided to close Limerick but hadn't established "a firm time line".

The paper said Dell is in discussion with Asian contract manufacturers to buy its plants and any not sold could face closure. Dell has failed to deny reports it is seeking to sell off its manufacturing plants and simply says it does not comment on media speculation.

Dell opened its plant in Limerick in 1991, attracted by a low corporate tax rate. Although the cost of manufacturing in Ireland has increased significantly in recent years, Dell executives have maintained Limerick is its most efficient manufacturing operation. Dell's other factories are in the US, India, China, Brazil, Malaysia and Poland.

Speculation about Limerick's future began to surface when Dell announced in 2006 it was building a second European factory in Lodz, Poland. That opened last autumn and is not yet running at full capacity.

Dell maintained its manufacturing bases in Europe to support its build-to-order business model where customers order by phone or internet. In an attempt to sustain growth and regain the title of the world's largest PC manufacturer (which it ceded to Hewlett-Packard), it has increasingly adopted retail models.

About 2,000 of the 3,000 Dell employees in Limerick are directly involved in manufacturing. Another 1,300 are based in Cherrywood, Co Dublin, where they are involved in sales and marketing for Europe. In April, Dell announced it was reducing headcount in Cherrywood by 250.

Business leaders in Limerick have suggested more than 20,000 jobs in the midwest region are linked to the computer company through ancillary firms and contractors.