Less than three years after it opened, a Dell computer plant that was supposed to redefine the Triad faces an uncertain future.
The Wall Street Journal on Friday, citing unnamed people familiar with Dell's strategy, reported that the manufacturer is trying to sell “most and possibly all” of its factories in the next 18 months. One of the company's plants is in Winston-Salem.
State and local leaders promised a record $280 million in grants and tax breaks to attract the company to Forsyth County. They intended to put the region on new footing after it lost thousands of jobs in textile and other traditional industries.
At the time, Dell was the world's largest computer maker, but critics argued the state shouldn't give incentives to a company in a fiercely competitive industry that could suffer amid fluctuations in the global economy.
Since then, Dell has, indeed, contended with shrinking margins and is now No. 2 behind Hewlett Packard. Founder Michael Dell is altering the company's strategy – introducing glitzier products and selling computers in stores, for example – in an effort to boost profitability.
Those changes have prompted Dell to rethink the way it manufactures.
Unlike many other electronics companies, Dell kept most production in-house because it fit better with its model of selling directly to consumers, especially desktop computers.
As demand has shifted toward laptop computers, though, that approach has shown holes. Dell, based in Round Rock, Texas, is now working more with outside contractors on manufacturing. It's talking with such companies about buying its plants.
Dell spokeswoman Donna Oldham, who works at the Winston-Salem plant, declined comment on the newspaper report. But she added: “We're always going to do what's in the best interest of our customers. We're also going to make sure we do what's in the best interest of our employees.”
The Winston-Salem plant employs 1,150 people and makes a variety of desktop computer systems. The plant so far has exceeded expectations for hiring and salaries. Jobs at the factory pay average annual wages of $36,523, above the $28,000 target, according to data from the N.C. Department of Commerce.
Bob Leak Jr., president of Winston-Salem Business Inc., an economic development group that helped court Dell, said he's not heard anything from Dell about the plant's future being in question. And he's not going to spend much time worrying unless Dell announces changes.
“The uncertainty certainly is something to have a little bit of concern about,” he said. “At the same time, there's uncertainty with every business we work with. ... I'll react if and when something happens.”
The Winston-Salem plant has an advantage, if Dell should try to sell it. The facility is among the company's newest, with the latest technology and features to improve efficiency. That could entice a buyer and help ensure it stays in operation.
At the same time, it has a potential pitfall: It's in the United States. Much of the world's electronics production is in Asia, where labor costs are lower.
If the factory is sold, the bulk of the incentives that Dell received likely would transfer to the new owner – provided it meets hiring and other benchmarks. So far, Dell has received at least $8 million in state and local incentives for which it qualified.
Bob Orr, executive director of the N.C. Institute for Constitutional Law, unsuccessfully sued to block the incentives awarded Dell. To his way of thinking, questions about its future validate his argument against such agreements.
“It certainly points to the fragility of these commitments from companies that operate on an international basis,” said Orr, adding that he hoped Dell would continue to operate the Winston-Salem plant.
“We know their commitment is to the bottom line, not to the community and not to the state.”