Dell to pull out of Limerick…

They are having it bad down there. First Shannon and now 1900 jobs to go by next year when Michael Dell moves his factory to Poland. Limerick Newswire has all the detail… (H/T Irish Election) Former Fine Gael leader and local TD Michael Noonan wasted not time getting the boot into the government:

It knew for at least a year that many Dell jobs were at risk, and knew for at least three months that all manufacturing at Dell, together with 1,900 jobs, was being transferred to Poland. But the Government sat on its hands and has done nothing effective.

And Mr Noonan suggests that the something that must be done is to:

…immediately declare Limerick an unemployment emergency area. It must instruct the State’s job creation agencies to give absolute priority for new jobs to Limerick and it must immediately instruct the relevant State agencies to provide the retraining necessary so that Dell workers who need to improve their skills are provided with the facilities to do so.

And who says Fianna Fail has cornered the market in political populism?

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  • ZoonPol

    Gosh that is a massive blow. Let’s hope if Dell is moving to Poland they pay the Poles, et al, who work there a living wage that is above the EU Minimum set and that all safety laws are met.

  • Limerick Newswire has all the detail… (H/T Irish Election) …

    Actually Mick, both RTE and the Irish Times within minutes of its announcement – at 09:56 on RTE, and 10:06 on the IT website for example. It seems to have taken you three hours to notice it!

  • … both RTE and the Irish Times carried the story within minutes of its announcement … , I meant to say!

  • smcgiff

    To take some solace, the good news here is that 1,200 or so high end jobs are remaining in Limerick (however long), and the redundancy package seems good for those unfortunate enough to become laid off.

  • Glencoppagagh

    It’s a savage blow for Limerick but a timely reminder for the Irish in general to stop believing the absurd “richest people in Europe” delusion and do something about their competitiveness.
    One radio report suggested (I think)that Dell accounted for 5% of Irish exports. If that’s anywhere near true, this will have a considerable impact on the natonal economy as well.

  • DC

    That’s not very patriotic of Mr Mehall Dell.

  • slug

    With a non unionist workforce, its easy as Dell.

  • … a timely reminder for the Irish in general to stop believing the absurd “richest people in Europe” delusion …

    Quite right. The arrogance was matched only by the stupidity of it.

    That’s not very patriotic of Mr Mehall Dell

    He’s American. Ireland, Poland, wherever, it’s all the same to him. His responsibility is to his shareholders (probably mostly himself, I guess), and thus a move to lower-cost Poland is entirely correct. Also, in purely economic terms it is correct that production should move to wherever it can be done most eficiently. If Irish wages are so high, it must be because Irish labour is more productive than that elsewhere. In which case the workers have little to worry about as other investors will flood in to take advantage of them. If they are not so productive then sorry but wages (real) must drop.

  • That’s hardly an example of primo FG pandering. Remember the proposed E25m fund to compensate taxi drivers in 2002? Now THAT was pandering.

  • DC

    Ah so he is, so all Americans aren’t Irish after all.

  • frustrated democrat

    Another ‘screw driver’ plant disappears in an instant.

  • Greenflag

    A serious blow for the Limerick region but good news for the Poles at least for the next decade or so by which time the Poles will have to compete with the Bulgarians or Romanians .

    One wonders what the total economic impact will be . There will presumably be many local contractors and possibly even suppliers who will be effected . Dell has been in financial trouble for a few years back and something had to be done . The fact that it took so long surprises me .

    This kind of thing is part of a world wide economic phenomenon which will make it even more difficult for the West to pull itself out of this ‘recession’.

  • mnob

    But Greenflag Dell aren’t stopping making PCs – they aren’t even stopping making them in the EU.

    So why should this affect the ‘west’ negatively ?

    In fact if the result is cheaper DEL computers then arguably there will be a net benefit.

    It just goes to show what happens when you compete to be the cheapest region. Sooner or later someone will undercut you. It is a tiny bit rich when you complain about it though.

  • dunreavynomore

    Greenflag
    yes indeed, according to RTE radio several thousand jobs in service industries, light engineering, transport, for example, depend on dell and their future looks bleak!
    The reality is that multi national companies have NO loyalty to any country including their own, that’s why dell came to Ireland in the first place.Indeed, it’s questionable if any company retains loyality to its home country once it reaches a certain size.

  • mnob – I think Greenflag meant “the Wesht”, not “the West” as it is meant geopolitically.

  • Mack

    dunreavynomore
    The reality is that multi national companies have NO loyalty to any country including their own, that’s why dell came to Ireland in the first place.Indeed, it’s questionable if any company retains loyality to its home country once it reaches a certain size.

    Nor should they have. If they maintain an unprofitable presence out of loyalty to a state their international competitors would out-compete them, they’d wind up bankrupt and their workers would be laid off anyway.

    I don’t think Ireland can compete with Poland, China and the like on wages. We have to offer more.

  • mnob

    ah thanks for that dunreavynomore – I understand now.

  • Greenflag

    I meant the WEST in a geopolitical and economic sense ( not the Irish west)

  • Greenflag

    mack

    ‘I don’t think Ireland can compete with Poland, China and the like on wages. We have to offer more.

    This is of course where the ‘fallacy of composition ‘ takes effect in global economics . Thomas Friedman said the world is becoming flatter i.e the rest of the world was being dragged up to western living standards at the same time as the western world was slowing down . What has happened instead is that the West has sourced out it’s ‘manufacturing ‘ and hopes to live /maintain living standards by services alone .

    Not sure if anyone out there has written the definitive economic scenario of how it’s possible to live peacefully in a world whereby everything is manufactured in China and Asia and most of it is consumed in the West with the rest of the world in the background going to war over ever scarcer natural resources .
    The ‘end is nigh ‘ as the sandwich man’s board said 🙂 Or perhaps ‘nigher ‘ might be more accurate – The end of what though ?

    A whole new world order is coming into existence but it’s outlines are still only dimly discerned .

    Bernard Madoff’s family won’t be fussed . With tens of billions converted into gold in Swiss vaults they should be able to survive until the new Jerusalem appears ;(

  • It was Sammy Mc Nally what done it

    Given the economic realities the fact that “The remaining 1,100 Dell staff will primarily work in product development, engineering and logistics, focused on supporting overseas manufacturing. ” almost seems like good news – as I had assumed they were going to do a complete runner.

  • dunreavynomore

    Mack.
    ‘nor should they have’
    I know that that applies to multi nationals which have no interest in people apart from how they can add to company profits but should none of us have any loyalty to anything except our pockets.Is the multi national the only way to go? Should we pay our workers as litle as we can get away with, charge as much as possible for our products regardless of the effects (no medicine for those pesky poor people in Africa),educate our people only to the degree that we need them educated, if fact, to hell with the very idea of society, never mind country or nation. Ah yes, old Maggie Thatcher was right!

    Does no one out there believe that it is possible to build a system and a society that is not founded on greed? So I’m an idiot!!!

    mnob
    we are both good at stating the obvious.

  • Mack

    Dunreavynomore

    Greed? Or ambition to better the living conditions for yourself, your family and society?

    Profitability is parmount. Outsourcing or off-shoring is a risky business, not to be untertaken lightly. But, if your business is loss making, you don’t have a business. I would have thought employee relations are critical to the profitability of a business. If your employees aren’t happy and productive, chances are you’re in trouble or will be shortly. If you have a great workforce in one location and a profitable business too – you are taking a huge risk by moving it to a location with cheaper wages (total costs may not be cheaper).

    If you work producing a product or service – does that product or service not enrich the lives of others? If you risk your time and capital setting up a start up – does the product or service you develop not incrementally improve the lot of your customers? If your product can save lives – have you not done good? It’s a tough moral issue – of what to do about those who can’t afford that product – but why should that responsibility lie with those who created it and not wider society? (Which emphatically does exist).

    Thatcherism is a political idealogy – capitalism an economic one.

    Companies compete in a Darwinian survival of the fittest – when governments don’t intervene the fittest companies win out over the worst. Normally, the effect of this is the opposite of what you write above. Probably the two most important attributes are (1) the quality and (2) the cost of the product or service. Companies with the best educated workers tend to win out against those with a less educated work force. They either innovate on process – driving down costs (see high wage, heavily mechanised Germany or Japan), or they win out with a better quality product (Google, Nokia, Intel etc).

    Cheaper & better quality products and services drive living standards higher for everyone.

    States can and should provide the basic infrastructure for free enterprise to flourish and to provide regulation of that enterprise to prevent some of the abuses you hint at above. Where possible, states shouldn’t bail out failed capitalist enterprises such as vampiric banks (otherwise it’s morally twisted socialism for rich people ).

  • Greenflag

    dunreaveynomore ,

    ‘Does no one out there believe that it is possible to build a system and a society that is not founded on greed? ‘

    Well let’s see . There have been plenty of phiosophers down through the ages who have commented on this from Buddha to Confucius to Jesus Christ to Karl Marx etc etc . As I recall the one who tossed the money grubbing pharisses out of the temple for their greed was crucified for his efforts and his followers all over the world since then have upheld his (JC’s ) ideals as worthy of their pursuit -to the point of course in many instances of putting millions of recalitrant heretics and dubious cynics to the sword .

    And then we had the ‘aristocratically ‘ based ‘divine rule ‘ period which somehow ended in so much greed that many of said aristocrats lost their heads not just in the figurative sense . And then came ‘new democracy ‘ followed by it’s populist aberrations of the early and mid twentieth century -national socialism and communism which societies were based on two higher ‘principles’ than that of mere ‘greed’ i.e the one based on racial superiority and the other on a classless society . Both seemed to have ended with a lot of greedy people making off woth a lot of loot and getting millions of others killed in the process .

    But then there were of course the Puritans who tired of religious oppression in England fled to the Americas where they could be free to practice their own religion and tyrannise or expel to the hills those who did not agree with their version?

    Is the multi national the only way to go ?

    An interesting question which appears to have been answered by the wholesale buying in to the world economic globalisation process now underway some 25 plus years at least . This process has of course been aided and abetted by the huge technological and internet related communications advances in recent decades which have speeded up the transfer of information ‘exponentially’ in recent years .

    It’s the nature of the beast i.e human nature transferred or writ larger onto business culture . Companies have to grow or they die . It appears to be an unalterable consequence of the nature of capitalism . The ‘economy’ is not a static thing even if some wished it to be .

    We can of course hope to moderate that ‘greed ‘ by regulation and control . I don’t believe we can ever remove it certainly not from those who are ‘motivated ‘ by said condition .

    If we had no greed we would no longer be human .

    Accusing ‘multi nationals ‘ of having no regard for people is wrong . They have as much regard for their employees some would say even more so than so called one country companies do . It’s just that under the rules of the global economy game and the rules of business generally their first responsibility is to their shareholders .

  • runciter

    when governments don’t intervene

    Governments always intervene.

    otherwise it’s morally twisted socialism for rich people

    Welcome to the world.

  • Greenflag

    runciter ,

    ‘Governments always intervene.’

    Well at least since ‘government ‘ was established which was about the time the first group of settled farmers had a ‘quarrel’ with the local hunter gatherers and forest dwellers over a piece of property and the fact that chasing deer or wild boar through their crops was not conducive to their survival . Over the last 8,000 years or so Government has increased it’s hold over all of us which given 6 or 7 billion people on the planet has to have been a necessity . Finding the balance between our ‘individual ‘ and communal needs and the corporate and public sector is and will continue to be an ongoing task as long as we remain ‘human ‘. Well most of us anyway 😉

  • Dave

    The average industrial wage in Lodz (where Dell is located) is €7,368 per year (2,484.00 PLN per month), compared to €36,000 in Ireland. In other words, the annual industrial wage in Poland is 80% less than it is in Ireland, allowing a Polish employer to employ 5 times as many workers as an Irish employer for the same cost. The minimum wage in Poland as of Jan 1st, 2008 is 1,126.00 PLN per month (€278.670), whereas the weekly minimum wage in Ireland is €346 per week – higher per week than it is in Poland per month.

    As Poland is a member of the EU, workers at Dell in Limerick had the privilege of paying taxes in Ireland that the Irish government then granted to the EU to spend on improving Poland’s infrastructure, thereby allowing their own jobs to be transferred to Poland. In much the same way as the residents of Ireland’s offshore islands moved to the mainland due to the prohibitive costs of crossing water, Ireland is itself an offshore island of the EU and it will make more sense for Irish manufacturers to base themselves on said mainland as Ireland becomes ever more fully economically and politically integrated with the EU, accepting its self-imposed declining status as an isolated region of the EU motherland.

    In the meantime, Dell escapes the Eurozone which has seen the rise of the Euro make it exports from Ireland wholly uncompetitive (with the Euro doubling in value against the US Dollar and increasing against other currencies), positioning itself as an outsourcer of manufacturing productivity that will allow it to become, if not stateless, at least mobile as more lock themselves into currencies that make exports into the stuff of dreams.

  • Mack

    Dave – In fairness, they are a US company rather than an Irish one.

    I don’t know how far the Euro has risen against the Zloty recently, but even if it doubled Poland would still have been massively cheaper.

    You should note that Polish workers will now work to produce profits, the tax on which will be paid in Ireland funding our gloriously overpaid public sector.

    My understanding of Irish logistics is that they are top quality and constitute a tiny fraction of the cost of goods manufactured here.

    On isolation – Israel runs a successful economy, rather isolated from it’s neighbours. Geographic proximity isn’t as important as it once was – more value is often added via non-physical abstractions these days (software, research, patents, internet based services etc) than in banging things together.

  • Dave: I make 7368 Eur as 29,539.8671 Polish zloty (as opposed to 2484)

    (the search term in google is 7368 EUR in PLN – handy little feature that.)

  • Sometime back I posted on Slugger a statement that Dell represented 6% of the RoI GDP. Where I got that from for the moment escapes me (and googling don’t help much, either).

    So I cannot confirm.

    That said, this is big, big bucks.

    What immediately crosses my mind is that, over decades, Governments (and that means almost every political grouping — except the untouchables of SF) have shovelled money into a limited occupational curriculum. Higher education has been designed (among other targets) to create an Emerald Silicon Valley.

    Now what?

    [Sigh of contentment. Thank all that’s wonderful I’m an Arts graduate. I read books.]

  • kensei

    Dave

    The average industrial wage in Lodz (where Dell is located) is €7,368 per year (2,484.00 PLN per month), compared to €36,000 in Ireland. In other words, the annual industrial wage in Poland is 80% less than it is in Ireland, allowing a Polish employer to employ 5 times as many workers as an Irish employer for the same cost. The minimum wage in Poland as of Jan 1st, 2008 is 1,126.00 PLN per month (€278.670), whereas the weekly minimum wage in Ireland is €346 per week – higher per week than it is in Poland per month.

    There is undoubtedly a huuuuuuuuge gap there, but simply comparing averages isn’t entirely instructive. What matters is the Load Labour Rate – wages, required taxes / social security. building costs, energy costs, transport costs excetera. There will still be a monster gap, but that tends to close it a bit. A few years ago when I started my job I was told that one Belfast employee equated to approximately 3 off shores in India. The wage gap would have been much bigger.

  • Comrade Stalin

    Dave, have you seen the signs all over every bus, train and motorway in the state about EU structural funds ?

    Malcolm:

    What immediately crosses my mind is that, over decades, Governments (and that means almost every political grouping—except the untouchables of SF) have shovelled money into a limited occupational curriculum. Higher education has been designed (among other targets) to create an Emerald Silicon Valley.

    Silicon Valley isn’t about assembling low-cost mass produced computers, which is what they were doing in Dell Limerick. The majority of the jobs lost today are manual assembly workers. That in no way makes the news any more cheerful, but so far there haven’t been any serious blows to the knowledge-based IT sector.

    Assembling computer and electronic equipment is the modern-day equivalent of the linen mills. There’s still a vibrant market both in Ireland and in the UK for IT workers who have a bit of clue. Perhaps I am misguided by clinging onto the rather snobbish notion that producing software is different from bashing bits of metal and plastic, but so far, ten years of outsourcing to India hasn’t diminished the need for a local IT software engineering labour force.

  • Comrade Stalin

    Mack:

    On isolation – Israel runs a successful economy, rather isolated from it’s neighbours. Geographic proximity isn’t as important as it once was – more value is often added via non-physical abstractions these days (software, research, patents, internet based services etc) than in banging things together.

    Israel seems to have come out of the blue. It turns out that the whole time, their universities have been turning out top-notch electronic engineers and software/systems architects. The first I heard of this is when an Intel design team working in Israel designed the first Pentium M chip by going back to the Pentium 3 design and adding some extensions. The device ran almost as fast as the then-new Pentium 4 and drew considerably less current.

    That’s the kind of stuff we need to be doing in Ireland; showing up well-paid architects in the US who have gotten complacent by doing things better and cheaper. At the same time, we need to be careful that we don’t fall into the same trap. I’m not sure that the Irish government understand this, with their crazy idea of charging people a tax on their university fees.

  • Mack

    Comrade Stalin –

    Yeah true, it’s important to fund good quality universities somehow and both Trinity and UCD are certainly that. There are no college fees in Ireland by the way, just that relatively small entrance tax or whatever it’s called you speak of.

    Israel has a great network of business angels and VC’s who are willing to invest in tech start ups – it seems to work really well. If the Irish would just invest the money poured into bricks and mortar into tech we’d be well on our way to emulating Israel.

    There are a ton of early stage startups in Ireland – how many will manage to scale up is another matter.

    some examples :-

    http://www.newbay.com/
    http://putplace.com/
    http://www.loudervoice.com/
    http://www.heystaks.com/
    http://www.pixenate.com
    http://www.statcounter.com

  • kensei

    Mack

    Companies compete in a Darwinian survival of the fittest – when governments don’t intervene the fittest companies win out over the worst.

    This isn’t even close to true, even if we could somehow come to terms on what “fit” means.

    Real life markets are neither have have minimal barriers to entry, nor perfect competition, not perfect information. They are quite capable of generating all manner of absurdities without any help from the government.

  • Mack

    Kensei – hence the use of the phrase fittest over best. Sometimes they correspond, sometimes they don’t. By definition, it simply means best matched to it’s environment.

    If governments don’t bail them out, unprofitable companies go bust.

    Companies can be outcompeted by competitors. Prudent companies, with good staff, processes, products & services are more likely to survive & prosper in the aggregate than those whose attributes are not so good or well matched to their environment.

    Evolution works similarly, there are cases of perfectly good species going extinct and less likely species surviving. But in the aggregate these would be abberations running against the trend.

  • kensei

    Mack

    I don’t buy the market fundamentalism — particularly in the current climate.

    “Fittest” might mean that you have a massive monopoly which you abuse to shut out other comeptitiors or muscle in on other areas. As for trends – “Markets can stay wrong longer than you can stay solvent”.

    I agree that markets are a high useful tool for solving many coordination problems. But they have plenty of problems which need the government to intervene to sort out. And they are not necessarily appropriate always and everywhere. Markets = good. blind market fundamentalism = bad.

  • slug

    What kensei said 11.56.

  • Mack

    Kensei – You’re reading too much into what I am saying. My initial comment was in response to someone who seemed opposed to the very idea of companies operating for profit.

    1. Companies compete – can we agree on that?
    2. If governments don’t intervene insolvent companies go bust.

    —- That’s pretty much it – but to answer some of your points.

    3. Even where governments intervene – companies still compete – the favoured company competes at an (unfair?) advantage.
    4. Even if you have communism or socialism – the states will then compete for resources. I just can’t see a centrally planned beurocrat system meeting the diverse needs of all it’s citizens – in the way in which a system which allows any citizen who sees a need to engage in an enterprise to fulfill it.

    In the current climate government interventions are to bail out the feckers who ensured that the markets stayed irrational for longer than the average Joe could stay solvent and purchase shelter at a reasonable price.

    This is not capitalism, it absolutely is not the free market. What went before was not the free market either, because the feckers thought the governments would never let them fail (moral hazard). It’s socialism for rich people. Bad economics & terrible morality.

    With apologies to Jim Rogers.

    In Ireland government intervention excerbated the problem – not alleviated it.

    1. They gave huge tax breaks to property investors as a bubble boomed
    2. Government agencies allowed banks to relax lending standards to home purchasers
    3. They increased mortgage interest rate relief
    4. They hugely boosted public sector wages on the back of unsustainable property related rises in tax revenues.

    Monopolies – are not part of capitalism either. In order to function capitalism requires proper competition – to drive innovation, prices down, quality of service up and wages up for workers. I’ve never met anyone who with a genuinely pro-capitalist outlook who favoured monopolies. Either of the state – or in the private sector.

  • Comrade Stalin

    Mack, just a comment to throw out there (I broadly agree with what you said). I think monopoly is entirely consistent with capitalism. The typical profit maximising entrepreneur will do whatever he can to increase their profits, and if that means increasing an inefficient monopoly and using illegal/unethical means to eliminate their competition, then so be it. There are large businesses and firms that put ethics before profits, but by definition they’re not run by profit-maximising entrepreneurs from whom the benefits of the market are supposed to flow.

    The argument that monopolies are always bad is not without it’s exceptions, and it is one of those generally accepted axioms that I think may come to be re-evaluated. Bell Labs, the research arm of AT&T;, has introduced many of the technological innovations that make our current lifestyle what it is – starting with the transistor, through to things like the C programming language, UNIX (which remains today the only proper way to use a computer), C++ (the jury’s out on that one), digital sound synthesis, speech recogition, etc. And you’ve got all those cool computer-related innovations which were innovated in that monopolistic photocopier manufacturer, Xerox, at their Palo Alto research facility – like graphical user interface/mouse, object oriented software, etc.

    I think it’s a mistake to conflate capitalism with free market economics.

  • Mack

    Comrade Stalin – Linux ?