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Dell told to repay millions in state aid

Dell told to repay millions in state aid

Dell could owe millions if the North Carolina government gets its way following the closure of the company's Forsyth County plant.

Dell has found itself faced with the prospect of paying back millions of dollars worth of monetary aid and tax concessions after it closed a plant which was part of a government-backed project.

As reported over on Fudzilla, the box-shifter faces paying back up to $318 million (£201 million) it was offered as an incentive to open a plant in Forsyth County, North Carolina after opting to close its doors.

North Carolina Governor Beverly Perdue believes that Dell's decision to close the plant - without, she claims, meeting its obligations under job and investment performance standards written up as part of the deal - broke the terms of the deal the company had agreed with the state legislature, and is seeking to force the company to repay "every red cent" that it received in both cash handouts and tax concessions.

The closure of the manufacturing plant, which saw 900 people in the state lose their jobs, was a response by Dell to the slowing global market for PCs and most other consumer goods. Although the closure of the plant will have saved the company a not inconsiderable amount of money in terms of running costs, this could well be wiped out if it is forced to repay the money given to it as part of the deal with the North Carolina legislature - potentially leading to the closure of more plants elsewhere in order to cover its debt to the state.

So far Dell has not commented on the affair, but it will certainly be fighting its corner should the matter reach the courts.

Do you believe that Dell should repay the money given to it by the state, or did the company fulfill its end of the bargain when it opened the plant - no matter if it then closed it again? Share your thoughts over in the forums.

9 Comments

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Unknownsock 12th October 2009, 11:37 Quote
If Dell could'nt actually afford to keep the factory open, who gives a dam?

Now if that isn't fully true, fine them into the ground!
xaser04 12th October 2009, 13:01 Quote
I would hazard a guess that the people in control at Dell would be aware of this problem and wouldn't have closed a factory knowing they would end up with a wacking great 'fine' for doing so.

Of course based on my experience with people in control, I know that common sense is greatly lacking...
B3CK 12th October 2009, 15:29 Quote
Closing a plant in NC, that had 900 people; sounds like it was a pretty big plant. But in the wake of other companies laying off 10,000+ people, this doesn't sound like huge workforce displacement for a state like NC.
leexgx 12th October 2009, 16:55 Quote
if they do get fined all that happen they close 1-2 other plants to save the money that the reds take
Horizon 12th October 2009, 17:01 Quote
Quote:
Originally Posted by leexgx
if they do get fined all that happen they close 1-2 other plants to save the money that the reds take

They probably won't care as long the plants they close as a result aren't in the state of NC.
HourBeforeDawn 12th October 2009, 20:03 Quote
wait they still have plants in the US huh I figured it was all coming out of china

well in general I hate Dell so if they get fined I say take it to the max then.
LordPyrinc 13th October 2009, 01:35 Quote
The loss of 900 jobs equals $318 million???? Okay, if the plant were to employ all 900 employees for 10 years, the workers would average around $35,000 per employee.

What idiot(s) in the state government thought that a $318 million investment was worth employing 900 people?
Mystic Pixel 13th October 2009, 05:52 Quote
Quote:
Originally Posted by LordPyrinc

What idiot(s) in the state government thought that a $318 million investment was worth employing 900 people?

you're failing to account for the secondary effects of a large plant like that. Having that plant there required more shipping capabilities in the region (so more jobs at DHL/FedEx/whoever), housing for those employees, stores and other support infrastructure (so more jobs...) etc. So the math's just not that simple.

I grew up in Forsyth County (haven't lived there in 10+ years) but I remember it was a big deal when it opened. The state government has an interest in doing things like this because they often serve as an incentive for further growth in the region... like a "seed nucleus" of sorts. They want businesses to operate in their state because they get to tax them (and all the employees/other business they bring in.) Don't you remember SimCity? You always set the commercial/industrial tax really low at first (to encourage growth) and then raise it once your blue/yellow zones get a bit more established -- the ole' bait 'n' switch. The state was giving them tax breaks for X years with the intention that after that time was up, the plant would have expanded, and then the state would have a larger tax base, and be able to collect more money down the line. By closing it up, Dell's screwed up that little plan, and the state is upset that their investment didn't pay off. I can't speak as to the legal/contractual aspects of it (and how it would shake up should it go to court) but that's about it.

Also, re: the comment about China: the _parts_ come from China, but the actual PCs are assembled in the US, most of the time. Think about it: it's much, much easier to import 100,000 identical motherboards/videocards/hard drives/etc and put them together here, than it would be to coordinate all the custom assembly, software loads, accessories, etc. overseas, and make sure they didn't get mixed up/damaged in shipping, and they got to the right places, etc. (I'm fairly confident in saying that anyone who's ever dealt with electronics manufacturing and/or overseas outsourcing would agree.)
greywood 13th October 2009, 20:25 Quote
Dell is a multi-national corporation with an annual budget very likely larger than that of the state of North Carolina.
As such, Dell had to know exactly what they were doing when they signed the agreement with NC. Now that things
haven't panned out quite they way Dell anticipated, they want to shut down their NC plant and be "let off the hook"?
I would hope "not bloody likely". They *should* have to pay back "every red cent" they got, for failing to fulfill the
terms of that agreement. Just because its Dell and NC should have no bearing on anything.
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