IDA IRELAND is working to avert any threat to the employment of some 2,000 workers in the Limerick manufacturing plant of computer giant Dell in light of a front-page report in the Wall Street Journal, which said the company plans to sell its global network of factories.
The report, regarded as authoritative in Irish inward investment circles, said Dell had approached contract computer manufacturers in Asia with offers to sell its factories. The contractors would sell computers back to Dell, reducing costs in a business whose share price has dropped sharply as it comes under severe pressure to increase its profits.
In addition to the Limerick operation, Dell has factories in the US, India, China, Brazil, Malaysia and Poland. A sale of these factories would represent a fundamental strategic shift by Dell, which typically makes its own computers but has lost out on savings achieved by rival companies who are heavy users of contractors in low-cost locations for the production of labour-intensive laptop devices.
There was no comment on the newspaper report from IDA Ireland or from an Irish spokeswoman for Dell. One of the largest multinational employers in the State, the company is an important provider of jobs in the mid-west region and a source of many spin-off economic benefits. The Irish operation at large is estimated to account for some 5 per cent of gross national product.
In addition to its 2,000 manufacturing workers at Raheen Industrial Estate in Limerick, Dell employs another 1,000 people at that site in financial, marketing and other positions and a further 1,300 sales support staff at Cherrywood in south Dublin. The company moved last April to eliminate another 250 jobs at Cherrywood.
Dell's reported intention to sell most and possibly all of its factories within the next 18 months raises the prospect that the Limerick factory would be acquired by new owners.
It would be open to such owners to eliminate jobs in the factory, reduce employment terms, change the nature of the work carried out there or close the plant altogether as part of a wider deal to relocate manufacturing for Dell to low-cost locations.
Still in question, however, is the extent to which the company might find it necessary for tax planning reasons to retain a big Irish manufacturing operation.
Dell, like many other multinationals, uses its Irish business to reduce the "blended" tax rate it pays on its profits throughout the world by concentrating significant activity here to take advantage of the 12.5 per cent rate of corporation tax, which compares favourably with many other locations.
It is conceivable, therefore, that Dell will examine the extent of the cost savings it could achieve by selling the Limerick plant and the burden of any increase in its tax rate that might arise if the company itself ceases those manufacturing operations.
For the moment at least, there is no perceived threat to the company's other Irish operations.
Dell has received some €55 million in grant assistance from the government since 1990 in respect of the Limerick plant and a further €20 million in respect of operations in Cherrywood and, previously, in Bray, Co Wicklow.
As IDA Ireland seeks to minimise any threat to these operations, the agency is likely to examine the feasibility of assisting new operations for the company or providing further grant assistance for its existing operations.
Tánaiste and Minister for Enterprise Mary Coughlan said yesterday that she had raised the Wall Street Journal report with Dell via IDA Ireland, adding that the company had said it would not be making any comment. "IDA Ireland does - and will continue to - keep in constant touch with Dell as regards its Irish operation."
