Dell ponders second European manufacturing site

9 Dec 2004

Computer giant Dell, which is growing at 30pc a year in Europe, is understood to be planning a second European manufacturing plant. However, it is unlikely the project will go to Ireland, where the company has had its European manufacturing base since 1989.

Instead it is tipped to be located in France, bringing the company closer to its mainland Europe customer base and cutting costs on such factors as distribution and freight.

It emerged yesterday afternoon that Dell is looking to open a second European production plant in order to shore up competition against rival Hewlett-Packard (HP). Europe is one of the few big markets where HP outpaces Dell in sales. At the Oracle World event in San Francisco earlier this week, Dell founder and chairman Michael Dell confirmed that the company is looking to look beyond its manufacturing plant in Limerick (pictured) to feed European demand that is growing at around 30pc per annum.

While Michael Dell didn’t specify in which country the plant would be located, news wire Reuters yesterday referred to sources familiar with the plan who said the company is considering a location in France. Adding a second plant in Europe also distinguishes Dell from its competitors which mostly produce their PCs through contract manufacturers.

A spokesperson for Dell in Ireland told that Limerick will remain as the strategic manufacturing location for the European region for the foreseeable future. “The reality is that demand in EMEA is continuing to grow and additional manufacturing facilities may be required.

“However, no location or time frame for such an operation has been decided at this stage,” the spokesperson said.

Dell has been manufacturing in Limerick since 1989 and the plant there has been lauded as one of the company’s most productive in the world and has been used as a template for new manufacturing locations such as Malaysia.

Strategically, the emergence of a second manufacturing base could be a disaster for Ireland due to concerns about the rising costs of doing business here, the length of time it takes to get products to the European market and the cost of employing workers. In an interview with last year, Dell’s vice-president for manufacturing in EMEA, Nicky Hartery, claimed that the computer maker’s European production facility in Limerick can retain its cost advantage over rival Dell plants. He warned, however, that as soon as the facility ceased to be competitive its future would be threatened.

Last year, reports emerged in the Irish media that Dell was concerned about the peripheral location of Ireland in Europe and the impact it had on the time taken to get products into customers hands on mainland Europe. At the time, Dell goods took a torturous route from Ireland to Holyhead/Liverpool, down the length of the UK and across the Channel before finally reaching distribution hubs in France and Holland – taking up to three days.

In recent weeks, however, Dell appeared, if anything, to be consolidating its presence in Ireland with the news that it was to create some 420 new jobs in Cherrywood, Dublin, consolidating all of its Dublin and Wicklow operations at a single campus. The 420 new jobs will be in place by 2007. In total, the consolidated Dell operation at Cherrywood will house a total staff body of 1,650. The single campus facility has an additional capacity for a further 350 employees, the company said.

Dell is one of Ireland’s foremost employers, with more than 4,000 existing employees spread between Limerick, Dublin and Wicklow. According to figures unearthed by this time last year and compiled by Goodbody Economic Consultants, exports by Dell in Ireland during 2002 amounted to approximately 7.8pc of Irish exports and revenues generated by the local operation was equivalent to 5.8pc of local GDP in 2002 at US$6.8bn.

In terms of productivity growth within Dell between 1997 and 2002, productivity levels more than doubled between 1999 and 2002 and volumes manufactured increased 247pc between 1997 and 2002. Dell recorded annual productivity increases of 22.9pc, compared with a national average of approximately 10pc.

A spokesman for IDA Ireland declined to comment on whether or not the agency was competing for such a project as it is not its policy to do so. Acknowledging that Dell’s business is in considerable expansion mode – with the addition of a new manufacturing facility in the US – the spokesman cited Dell as the industrial agency’s best client with consistent expansion of its Limerick manufacturing operations.

On the subject of the decimation of the Irish electronics manufacturing sector since 2000, the spokesman said the company is no longer pitching for “low value-added labour intensive activities”, but is instead focused on higher value-add operations by such players as Intel, Wyeth, Pfizer, Guidant and Johnson & Johnson, which would engage in such activities as R&D as well as technical support and financial services.

Pointing to the changing face of manufacturing by computer giants in Ireland, the IDA spokesman cited Apple in Cork. “Apple has more people than ever in Cork but does most of its manufacturing in Asia.

“Cost is an element of competitiveness and we are competing intensively against Germany, Scandinavia and lately the US itself for industrial projects,” the spokesman said.

By John Kennedy