Dell to Shutter Its Largest American Assembly Plant

That didn’t last long — just four years, to be precise.

In 2005, Dell opened a desktop-computer assembly plant in Winston-Salem, North Carolina, after being promised more than $300 million in state and local incentives. The catch was that Dell had to commit to invest $100 million, create 1,700 jobs by September 2010, and maintain those positions for 10 years. If the terms weren’t met, Dell would be compelled to forfeit the incentive package.

Well, Dell hasn’t met the targets, and it says it will forfeit or otherwise pay restitution on the incentives it received.

That’s because Dell announced today it will close the 750,000-square-foot plant, laying off 905 employees in the process. About 600 plant workers will be laid off in November, and the remaining 305 employees will be cut on or before January 2010, when the plant will be shuttered.

The decision comes just two days after the $110-million plant, which had been Dell’s largest remaining manufacturing facility in North America, turned four years old. Dell has a plant in North Austin that assembles servers, and its Miami-based Alienware subsidiary makes specialized gaming rigs, but it no longer has desktop or notebook manufacturing or assembly operations in the United States.

In June, Dell sold its Lebanon, Tenn., remanufacturing plant to contract manufacturer Genco; and early this year, Dell announced that it would move European manufacturing operations from Ireland to Poland, triggering a controversy in the process. Irish politicians accused Dell of using “dubious” methods to close the Irish facility so that it could receive a multi-million-euro windfall for moving operations to Poland.

Dell said it is closing the North Carolina plant “as part of an ongoing initiative to enhance the long-term value it delivers to customers by simplifying operations and improving efficiency.” That’s “corporatese” for saying that Dell will save money by manufacturing the computers elsewhere.

I understand that Dell is under intense competitive pressure for market share and profit margins in its desktop and notebook PC businesses. I also understand that Dell must seek lower costs and greater efficiency from its manufacturing operations.

Dell will have to be careful, however, not to develop a reputation as a company that cuts and runs from agreements with governments. In that context, it is imperative for Dell to make good on its obligations to its erstwhile government partners in North Carolina.