Will North Carolina have Nothing to Show for Its Dell Subsidies?

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Public officials in North Carolina and several other states are reeling from the revelation that Dell is considering the shutdown or sale of its assembly plants. The news that the computer maker is considering an exit from the manufacturing side of the business came in a front page story in the Wall Street Journal. Dell has not denied the report, which said the company might sell some of the plants to contract manufacturers and shutter the rest, but it has not provided specific details on its intentions.

Anxiety about Dell’s plans is especially intense in North Carolina, which went to great lengths in 2004 to put together a state and local subsidy package worth more than $250 million for an assembly plant in Winston-Salem. The deal was negotiated by the Department of Commerce and pushed through the state legislature in a special session with scant debate or analysis. The incentives package included a computer manufacturing tax credit, job investment grants, tobacco settlement fund grants, training incentives, transportation infrastructure grants, workforce development grants, sales tax refunds, waiver of property tax for 15 years and 200 acres of free land. In 2004, Governor Mike Easley estimated that the Dell plant would employ 8,000 people; so far, however, it has hired only about 1,150.

Along with the Winston-Salem plant, Dell owns 11 other manufacturing and distribution centers in Austin, Miami, Nashville, Brazil, Ireland, China and Poland.

Last March, however, Dell closed its facility in Round Rock, TX eliminating 900 jobs.

According to the Journal, Dell is in talks with manufacturers in Asia, who could either operate the plants on a contract basis or buy them outright. It is unclear whether those contractors would be willing or able to operate plants such as the one in Winston-Salem. A key complication would be the subsidies. There is no apparent precedent in North Carolina for transferring incentives to a new owner, which might not want to take on the job-creation provisions of the deal.

Dell spokesman David Frink has declined to comment on the report, instead stating, “we will continue to evaluate and optimize our global manufacturing and distribution network.” Bob Leak, president of Winston-Salem Business Inc., the local economic development agency, said he was not aware of any changes to Dell’s future in Winston-Salem.

In their negotiations of the Dell deal, North Carolina, Forsyth County and Winston-Salem bent over backwards for the company. They assumed that throwing subsidies, tax breaks and other incentives at a successful corporation was a smart economic development tool. Now they may regret putting so many of their eggs in one corporate basket.

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One Response to “Will North Carolina have Nothing to Show for Its Dell Subsidies?”

  1. Ward in North Carolina Says:

    I see that this was posted in September. I currently live in North Carolina, however I have a family member who will soon be re-locating down here. They have worked for Dell before and were considering searching out employment opportunities with them after the move. Does anyone have any information about whether this plant did in fact close, or if there are any other facilities owed and operated by Dell anywhere within North Carolina? Any information would be greatly appreciated, although I understand that I am getting to this post late. Thank you in advance!

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