Four years ago, Winston-Salem Mayor Allen Joines called Dell’s decision to build a factory in Forsyth County a “special Christmas present” — one that the city, county and state promised to pay more than $300 million to get. Now it appears that Santa may take it back or at least let someone else play with it. The Wall Street Journal reported in early September that Dell, in a cost-cutting move, is considering selling its factories around the world to contract computer manufacturers and closing the ones it can’t sell. The Round Rock, Texas-based computer maker won’t confirm the report but admits that it is “evaluating its manufacturing and distribution network.” The reason: The company’s profit dipped 17% to $616 million in the quarter ended Aug. 1, compared with the same period of 2007.
Joines isn’t worried yet. Company executives often cite the Forsyth County plant, which employs about 1,150 and makes desktop computers, as one of Dell’s most efficient. It likely would continue production under new management. “The folks at the Dell factory here say they’re continuing to add staff,” he says. A spokeswoman for the Winston-Salem plant wouldn’t confirm that, however.
And incentives used to get the plant could also help Winston-Salem keep it, Joines says. “If that facility is sold, then all of our money would be due to be repaid. There are some disincentives to that particular action.” Dell has collected more than $6.5 million from the city and about $1.2 million from the county so far. “I’ve done about 50 economic-development projects over the years. We’ve only had two where we had to use the clawbacks, but it’s good to have them.”
The state, which promised about $268 million over 15 years in tax breaks and grants, also has some safeguards. Deborah Barnes, a spokeswoman for the Department of Commerce, says the state has paid Dell about $1.5 million of a possible $14.1 million Job Development Investment Grant. That state money is dependent on the company reaching and maintaining employment and salary levels in each of the next 12 years, counting this year. It could be transferred to the new owners with the approval of a five-member state panel that oversees the grant.
Regardless, Joines says he’s glad the deal was made. “We’ve received very positive press regarding the fact that Dell was coming. That has not been diminished at all. The deal demonstrated our ability to put together a competitive package. It got the attention of other companies.”
Talk about your degrees of separation. That’s the problem Winston-Salem officials have now that Charlotte-based Wachovia is being sold. In 2001, Ken Thompson, CEO of what was then First Union, won support for his bank’s acquisition of Wachovia — it also took its name — by promising to keep 3,000 jobs in the Twin City. That promise grew shaky after Thompson’s replacement earlier this year by Bob Steel. But with San Francisco-based Wells Fargo & Co. poised to buy Wachovia, that vow will be buried behind another layer of management — one that will be under pressure to make the acquisition work, presumably by cutting expenses. Winston-Salem Mayor Allen Joines says only that he’ll speak with the bank’s new owners at the “appropriate” time and that he’ll pitch the lower cost of operating in his city. Wells Fargo has made some promises, but they’ve been to Charlotte, where Wachovia has about 20,000 jobs. Queen City leaders might want to talk to their peers in Winston-Salem to see how much those promises mean.