WINSTON-SALEM — Almost four years to the day after Dell opened its highly touted desktop computer production plant in Winston-Salem, the company said Wednesday it will close the factory and lay off its 905 workers.
In doing so, the computer maker is forgoing most of the nearly $280 million in state and local incentives that were offered to lure the project to the Tar Heel state.
Dell will close the plant in January, dealing a setback for Forsyth County, where the August unemployment rate was 9.8 percent. About 600 of those layoffs will happen next month.
State officials will work with Dell to help laid-off workers find other jobs or training opportunities. The company plans to provide severance and other financial assistance.
"As a state, we will continue to aggressively pursue new business and job opportunities," Gov. Beverly Perdue said in a statement. "This state has been hit hard, but North Carolinians are resilient, and we know how to adapt and overcome challenges."
Perdue is scheduled to attend a news conference this afternoon about new "green jobs" at Cree, a Durham high-tech company.
Drawing the Dell plant to North Carolina was a high-publicity, high-controversy affair. The General Assembly convened a special session to approve the incentives, and the deal prompted a lawsuit over using taxpayer money to entice a corporation.
Still, once the incentives were passed and the plant opened, it bolstered confidence in the hurting state economy and was viewed as an optimistic sign of a new, high-tech manufacturing future.
Now, after investing roughly $140 million to $150 million in the 750,000-square-foot facility, Dell is ready to walk away.
The decision to close the plant was part of Dell's ongoing effort to streamline its operations and a byproduct of the fact that fewer people are buying desktop computers, spokesman David Frink said. In the past two years, Dell has closed another plant in the company's home state of Texas and a remanufacturing facility in Tennessee.
"It's a truly difficult decision," Frink said. "But this is a desktop computer manufacturing facility, and there's been a distinct transition away from desktop computers."
Options were evaluated
Converting the plant to another type of production facility was not feasible, Frink said. Except for final assembly, all of Dell's notebook production is done overseas, he said.
"We did review a number of scenarios, but we determined it was in the company's best interest to continue manufacturing those products in their current locations," he said.
Dell's desktop production will be shared by other Dell factories, which are located around the world. The Winston-Salem plant, located about 95 miles west of Raleigh, is the company's only North Carolina facility.
Dell will meet with state and local officials to determine how the company's departure will affect its incentive agreements and whether the company will owe any money back to the state or local governments, Frink said. However, he would not comment on when those meetings might happen or whether any money will be owed.
Under certain circumstances, companies that receive incentive money are required to return that money to the state, Department of Commerce spokeswoman Kathy Neal said. "Closing down would be one of them," she said.
However, it is too early to say specifically whether Dell will be required to return any or all of the funds it has received.
As of September 2008, Dell had received more than $8 million.
In May, Dell officials told Winston-Salem leaders that they had cut 260 workers from the plant in two rounds of layoffs, reducing the total workforce to 1,140. Incentives the city of Winston-Salem offered were contingent upon the plant employing at least 1,700 people by October 2010.
Frink said Dell does not know yet what will happen to the plant after it closes in January.
For those who opposed the plant and the incentives granted to Dell, news of the plant's closing was bittersweet.
Grow, don't subsidize
"You just don't want to see this happen," said Bob Orr, executive director of the N.C. Institute for Constitutional Law, which spearheaded the 2005 lawsuit opposing the incentives. "But this shows the stark and painful folly of the incentives game that state and local governments are playing. No matter how much money you give these large international and national corporations who are headquartered out of state, if it's financially more feasible for them to shut down the operation in North Carolina, they'll do it and never look back."
Orr said the entire incentives system ought to be examined. His Raleigh-based institute also sued over incentives offered to the Johnson & Wales culinary school and to Google, the California tech giant.
"You want to grow the next Google, not subsidize the Palo Alto Google," he said.
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