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Friday 9 January 2009

Dell Ireland

Dell finally announced yesterday that they are winding up their manufacturing operations in Limerick, and instead focussing their European manufacturing investments in Lodz, Poland.

Dell has been a major employer in Ireland, responsible for 5% of GNP according to one estimate. The immediate loss of jobs in the Limerick plant will be 1,900; and with estimates of consequences for a further 1,500 jobs which in firms which directly supply the plant, and a further 7,000 jobs in other industries at risk.

Although the demise of Dell's manufacturing was not a surprise, I was frankly surprised and disappointed by aspects of the way the announcement was made. Dell quite rightly insisted that they would tell their own staff first before anyone else. However I believe it was unprofessional and pusillanimous of Michael Dell, the Dell CEO, not to make the announcement in person himself in Limerick in front of his own staff. He instead sent his VP Operations, EMEA. Michael has been the beneficiary not only of professional work by his own manufacturing staff in Limerick, but also personally of the plaudits by the local community on his several visits to Limerick over the years, not least an honorary degree from the University of Limerick. He was a gentleman enough to receive these accolades, but not man enough to deliver his savage news in person to his own staff.

I was also astonished that the Minister for the Department of Enterprise, Trade and Employment (DETE) and co-incidently also the Tanaiste (Vice Prime Minister), Mary Coughlan chose not to appear in person in Limerick. Instead she relied on the local Limerick Minister, the Minister of Defence Willie O'Dea, to be present. In my recollection, previous Ministers of DETE have usually been on hand at the times of major job losses. In fact, as a result of her absence and residence in Dublin Mary Coughlan may have sent the Irish public a not so subtle message: maybe she does not support Willie O'Dea in Limerick and his statements about the future prospects with Dell.

Mary Coughlan is apparently due to travel with the Taoiseach (Prime Minister) Brian Cowen to Japan next week to lead a trade delegation from the Irish business community. The timing of this trip could probably not be worse relative to the Dell announcement and the general poor economic condition. One can only hope that Brian Cowen and Mary Coughlan will return to Ireland with very major significant positive news of substantial Japanese investment and business contracts: presumably that is why they are still travelling despite the rapidly deteriorating domestic economic situation and the anxious Irish public.

I said in my opening statement above "finally announced". I think there was a strong fear for some time - maybe even two years or longer - that Dell would stop its Irish manufacturing sooner or later. That being said, I personally do believe the stated Dell corporate position that the decision was only made within the last week, despite some Irish media accusations to the contrary. In a public company, such major announcements are generally material, from the legal perspective, to the public investor community. Public announcement of a major decision thus usually follows immediately after the decision itself: otherwise there is a danger of leaks and the strong possibility of criminal "insider trading". The actual decision was therefore in fact almost certainly only made very recently.

Nevertheless, there was indeed a fear and suspicion for some considerable time that Dell would stop its Irish manufacturing. It is surprising therefore that our Government appears to have poorly handled the announcement. There was plenty of time to prepare a well considered contingency plan, and immediately initiate it. Indeed, I suspect that such a plan was almost certainly prepared by agencies such as the IDA, Forfas and Enterprise Ireland - they are staffed by competent professionals. Perhaps the apparent mismanagement of the consequences of the announcement by the Cabinet and Ministers is symptomatic of a much deeper issue: the Cabinet is overcome by the tsunami of bad economic news, does not know what agencies and advisors to work with or even trust, and is frankly paralysed and frozen in the headlights of the media and of public anxiety.

A senior civil servant today commented to me that it is amazing to consider the turn around in Prime Minister Brown's performance and public perception in the UK. From a period just last July, when he faced a back benchers revolt and the opposition leader David Cameron looked to be the inevitable victor, Brown has executed a stunning turnaround and is now neck and neck with Cameron, if not ahead.

Prime Minister Brown is performing. He is taking visible and urgent actions and steps, and has set out a direction to lead his people...

Looking ahead here in Ireland, it is very clear that we cannot rely on manufacturing activities to sustain our economy. We do have very valuable operations continuing here, not least in IBM, Intel, Apple and HP. The challenge is whether we can nurture our own cohort of Irish companies to leverage such multinationals as a global distribution channel. Are there products and services which we can supply to these companies regardless of where they happen to currently position their own manufacturing operations (hopefully yes in Ireland, but not guaranteed to continue to be so) ? What new products and services can we build, offer, license to them that add value regardless of where they happen to have their operations ?

The answers of course include both new innovations and more efficiently produced current products and services. But amongst the answers is also the strong possibility of building businesses by sublicensing results from the multinationals themselves, with early and nascent markets - I wrote about this in an earlier article.

Our enterprise strategy must evolve - quickly - in Ireland. We need to focus increasingly hard on innovation in Ireland, and building our own companies by exploiting the opportunities which the presence of the multinationals here create.

The doomsday is that Ireland deteriorates to become a domestically traded services economy: services sold within Ireland to support the goods and services we import.

We do not need to "up-skill" so much as "core-skill". "Upskilling" is nice political camouflage, but frankly a shallow aspiration. We instead need to ensure that we have a strong foundation in the core skills - not the "up" skills whatever they are - which are necessary for innovation, insight, and the development of a true indigenous enterprise culture.

12 comments:

Teknovis said...

This is indeed bad for the employees of Dell in Limerick.

Although the demise of Dell's manufacturing was not a surprise, ...

I agree, and I think that it was only a matter of time before it happened. I saw a program by George Lee a few years ago where he visited Dell's new operation in Poland. It really made me feel that it was inevitable.

I was also astonished that the Minister for the Department of Enterprise, Trade and Employment (DETE) and co-incidently also the Tanaiste (Vice Prime Minister), Mary Coghlan chose not to appear in person in Limerick.

I am not surprised at all. I think that she is truly out of her depth in her current role. I cannot think of another Vice Prime Minister who had such a low profile. She should have been one of the leading voices in the recent Lisbon referendum!

The doomsday is that Ireland deteriorates to become a domestically traded services economy: services sold within Ireland to support the goods and services we import.

Scary indeed! If that happens it will show that we did not learn anything from the mistake of depending on a local (property) boom in the past :(

Paul Sweeney said...

Truly great post. Good on you.

David Quaid said...

Hi Chris,

How is it the governments fault? What do you want the government to do? The IDA is held in huge regard the world over for its track record in attracting FDI. The only thing the government can do is find a replacement - and if there was one, they'd already be talking to them. Why does Coghlan have to be in Limerick? We've all had dramatic pay rises in Ireland, many of us without having to reskill or +skill, we've seen and led a demand for lower prices for everyhting from laptops to clothes to everything. Dell moved for a variety of decisions that they haven't had to let on about. They have 200 acres in Poland and 20 acres in Ireland. Its not just line labour that's cheaprer, its trucking, recycling, shipping etc.

There are also EU limits on what the government can do - remember Intel Fab 4? Dell gave a lot of opportunity to a lot of my friends and past colleagues. They put in 140million a year in just wages. Government grants aren't as much as we think - sometimes its less than 10% of the total employee cost - it's not a magic band aid. Dell left. We need to come up with a solution - and it's probably going to involve/need an increase in entrepenurial activity....

chris horn said...

Hi David,

In my view, Mary Coghlan should have made the effort to personally appear in Limerick, in her capacity as Minister of Enterprise Trade and Employment. She is the Minister responsible, Dell is (still) a crown jewel in her portfolio, and the staff and voting public in Limerick had a natural right to see her there. I also strongly feel that Michael Del should have personally explained the news to the staff.

I am of the view that Government aid and tax incentives can only be part of the overall picture for any multinational investment and commitment: they are, as somebody said, just checkbox items. Ireland has to offer them, because other countries do. Not doing so would be a negative. But on their own, they are insufficient.

I agree with you for the basis for a solution. I tried in my original posting here to allude to what I believe is the foundation for the answer and solution: "Our enterprise strategy must evolve - quickly - in Ireland. We need to focus increasingly hard on innovation in Ireland, and building our own companies by exploiting the opportunities which the presence of the multinationals here create." I also referred to a previous blog posting and via it to an article in the Irish Times Innovation magazine..

Thanks, sincerely, for taking the time to comment!
Best,
Chris

John Smyth said...

The closure could not have been a surprise to anyone - Dell Poland sent their staff to the Limerick plant for training (just as Dell Ireland sent their staff to the USA, when the jobs were originally moved from the US to Ireland all those years ago).

The real worry in the IT sector is that Ireland is becoming very uncompetitive for even the higher-value jobs (programming, R&D, global IT services) and I don't really see much government activity to address this.

If only the govt. had encouraged investors during the boom to spend some of their cash on ICT investments rather than property....

David Quaid said...

Hi John,

I think your comment there is widely incorrect. When Dell setup in Limerick it wasn't a move from the US (where did you get this from). Indeed Dell has opened more facilities in the US than it has in Europe. Back in the early 1990's, PC's were shipped from the US to Business Units across Europe and configured for European Customers. This was expensive and slow, thus EMF1 in Limerick was established.

How are R&D jobs becoming uncompetitive in Ireland? Pharma & BioTech lab jobs are the only jobs being created....We can't blame the government for everything. People in Ireland have been greedy. Every Irish person I've met has a firm belief that property cannot lose money. I've been hearing it for 11 years now. We are responsible for a lot of the over-leveraged, over-borrowed society we have created.

Barry James said...

Chris, my guess is that Mary and Brian will take the credit for this: http://www.rte.ie/news/2009/0114/jobs.html

chris horn said...

Barry,

and so they should take credit. They are the Taoiseach and Minister for Enterprise, Trade and Employment; and although she didn't in fact go to Japan with him, they are both ultimately responsible for incentives for job creation. 100 jobs in Cork, 50 in the Digital Hub, and further details of R&D jobs in NUIG and TCD to follow.

But I suspect not quite what Limerick might have hoped as a result from the Taoiseach spending this week in Japan..

best
Chris

topgold said...

Chris, your idea on "core skills" needs to be embossed in the documents used by Irish government and Irish education leaders. I'm interested in hearing how you define those core skills and if you map them into primary school. It sounds like you've revisited some ideas shared to the ICS.

chris horn said...

topgold,

The issue of "core skills" will be an imminent post to this blog, perhaps next week.. - I've written the article, but running it past some other folks first.. Not sure who you mean by the "ICS" - Irish Computer Society perhaps ? If so, I'm unaware of the ideas shared with them..

best
Chris

Alan Slattery said...

Hi Chris,
I just discovered your blog, but I'll be back regularly - your analysis was spot on in my opinion.
I'll be very interested in reading your follow up on core skills. I've always felt that relying on tax incentives to keep large corporations here was a race to the bottom, Ireland needs to offer something more!
Best of luck,
Alan

cheap computers said...

The answers of course include both new innovations and more efficiently produced current products and services.