Dell to close its Winston-Salem plant
Dell’s decision Wednesday to close its Forsyth County plant left 905 employees, business leaders and a community confounded by a reality that simply did not compute.
Losing one of the Triad’s corporate prides and joy shocked and surprised those who had embraced the plant as a bright sign for a new economic future.
Dell opened its desktop computer assembly factory just four years ago. North Carolina and Triad counties waged a pitched six-month battle among themselves to woo a corporate treasure.
In return, Dell was offered its own treasure: nearly $280 million in state and local incentives. More than
$37 million of that was promised from Forsyth County and Winston-Salem.
The company quickly pledged to abide by its contracts and repay much of the money it had received. In a news release, Winston-Salem said that Kip Thompson, a vice president for Dell, met with Mayor Allen Joines on Wednesday to say the company would repay $15.56 million the city had provided since Dell agreed to build a plant.
That pledge won’t lessen the sting of massive layoffs hitting area counties during this harsh recession.
“This couldn’t come at a worse time,” said Don Jud, professor emeritus at UNCG’s Bryan School of Business and Economics. “This exacerbates our problem for a continuing recovery.”
An eight-county Piedmont area has lost 30,000 jobs in the past year, including 11,000 in manufacturing, Jud said.
Dell is trying to mitigate the layoffs with an employee severance package that includes pay and health insurance, as well as partial bonuses, according to David Frink, a company spokesman. The pay package includes two months’ salary plus one week of pay for each full year of service at the plant, in addition to two months of paid health insurance and partial bonuses.
Frink said the company’s fight to keep a lid on costs and boost productivity, as well as a changing market, brought Dell to its decision. More consumers want laptop computers, and the Winston-Salem plant churned out desktop computers for businesses.
Because of the deep recession, corporate spending on technology has been down dramatically.
Gayle Anderson, president of the Winston-Salem Chamber of Commerce, had followed the industry’s challenges, but that didn’t blunt the effect of Wednesday’s announcement for her.
“Obviously, the computer business has been changing and we had seen Dell downsizing over the last year or so, but this was a complete surprise,” she said.
She said Dell’s employment figures fluctuated between highs of 1,200 and 1,500. Some of those were contract employees. She said recent layoffs included about 300 Dell employees and 300 contract workers.
Dell chose North Carolina after the state and local governments pledged incentives that required Dell to meet certain hiring goals and invest at least $100 million in the plant and equipment.
Dell has received far less than the $10 million to $20 million per year in tax credits the company could have pulled down had it met its projections.
The state departments of revenue and commerce supervised the state’s programs.
“We’re still trying to make sure we have that information ... we’re still pulling it together,” said Kathy Neal, an assistant secretary and spokeswoman for the commerce department. She also noted that all the performance-based incentives granted by the state have “clawback” provisions that would allow North Carolina to recoup its investment.
Opponents of the massive incentives pledge did not gloat over the loss of Dell.
Robert F. Orr, a former N.C. Supreme Court justice and executive director of the N.C. Institute for Constitutional Law expressed the center’s concern for Winston-Salem. Orr sued the state to overturn the incentives but ultimately lost.
“No matter how big the incentive package, operational decisions by businesses headquartered out-of-state will be driven by corporate financial considerations and not by any sense of loyalty to the community being left behind,” he said in a statement.
U.S. Sen. Kay Hagan, a Democrat from Greensboro, helped lead the effort in the General Assembly to grant Dell state incentives in 2004.
She expressed her disappointment Wednesday and said she expects the company to make reimbursements.
“Today’s announcement is a stark reminder of the economic and human impacts of this recession,” she said.
Dan Gerlach, now president of the Golden Leaf Foundation, was a senior adviser to then-Gov. Mike Easley and one of the state’s leading negotiators on the deal.
At the time, luring Dell was seen as a way to bring in a high-tech manufacturer who could replace job losses in industries such as textiles and furniture.
“This is not a buggy whip manufacturer,” Gerlach said at the time. “Computers will still be needed for a long time.”
Gerlach said Wednesday he was most worried about the workers who lost their jobs.
“I am surprised because I thought it had a lot of potential,” Gerlach said. “But five years ago, I didn’t imagine the depths of the current economic recession. … At the time, it had the potential to help a lot of people.”
In Guilford County, Dan Lynch, president of the Greensboro Economic Development Alliance, said, “it is safe to say we all celebrated that victory together and we will grieve in unison as well.”
During its brief history, the Dell plant drew controversy over its reputation for secrecy, especially about layoffs.
Earlier this year, the Winston-Salem City Council summoned Dell officials to explain the details of rumored layoffs at the plant.
Now, with 905 workers soon to be losing their jobs, individual dreams are broken along with the region’s hopes that the plant would become the hub for a blooming sector of clean, high-tech industry.
But one key business recruiter, Bob Leak Jr., president of Winston-Salem Business Inc., doesn’t regret the effort.
“We went after it at a time when the region needed a boost,” Leak said.
“This was a company that was going to create a very large number of jobs. At the time it was a great boost to the community and the region,” he said. “I don’t regret that we went after the project as hard as we did at all. I suspect we would do it again given the chance.”
Staff writers Mark Binker, Donald W. Patterson, Gerald Witt and Amanda Lehmert, and news researcher Diane Lamb contributed to this report.
Contact Richard M. Barron at 373-7371 or richard.barron@news-record.com
Votes
The General Assembly met during a special session in November of 2004 to create the incentives used to lure Dell to North Carolina. Here are how lawmakers from Guilford County voted at the time.
In the Senate: All four members who represented parts of Guilford County voted for the measure. They were Republicans Stan Bingham and Phil Berger and Democrats Katie Dorsett and Kay Hagan.
In the House: Republican John Blust and Democrats Alma Adams, Maggie Jeffus and Earl Jones voted for the measure. Then-Rep. Steve Wood, a Republican, had an excused absence for the session. Then-Rep. Joannie Bowie was recorded as "not voting."
Incentives
The Dell campus in the Triad sparked a bidding war of incentives among municipalities, which offered various packages in 2004 to lure the desktop computer manufacturing center.
Here’s what they offered:
Greensboro: $5.3 million
Guilford County: $7.1 million
Winston-Salem: $18.9 million
Forsyth County: $14.8 million
Davidson County: $23.1 million
Winston-Salem won the war, and with Forsyth County's offer and a land deal, the total package rose to $37.2 million, which Dell took along with incentives from the state.
In return, the company was expected to create at least 1,500 jobs and invest $100 million over five years. Dell never took offers from Greensboro or Guilford and Davidson counties.
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