Dell to close Austin plant, cutting more than 800 jobs | Statesman Business Blog
I'm angry. I try not to blog when I'm angry, so I'll try to watch my words carefully. Probably won't succeed.
This recent news hits home for me on many different levels. I was a Dell employee in 1999 and 2000, part of the support team that started up the “PN2” (later renamed “Topfer Manufacturing Center”) factory in north Austin. It was Dell's showcase facility for building desktop computers, it really was a marvel. As I've written before, it wasn't “Toyota Production System” lean, but it had great flow and very very low inventory. “Respect for people” was often missing and this story just further illustrates that.
I was there when the first computer was built. I remember the engineering manager running across the plant to get the one plastic casing part that wasn't there to get that computer built. Oops! Even though I left Dell, that factory (online “tour” here) was still pretty special to me and impactful on my career. Now, almost eight years later, the place is being junked.
So what happened?
- The knuckleheads running the place over-expanded their desktop PC manufacturing in an era when laptops are increasingly popular.
- Dell got huge tax breaks from the taxpayers in North Carolina to build a new factory.
- When capacity was not needed, they decide to close the factory in Austin, Michael Dell's hometown.
Poor planning, poor execution, now they're crapping on Austin and the people there. Where's the sense of responsibility? Where's the respect for people?
Would Toyota shut down their Toyota City plants to build cars in China? No way.
“But Dell is just doing what's right for the shareholders.” Bullshit. They obviously had no commitment to the people of Austin, or they would have planned better to protect those jobs. It's upper management's responsibility to lead the company in a way that doesn't end up screwing the employees. I hate to seem like I'm playing “class warfare” here, but Michael Dell is a billionaire thanks, in part, to the people of Austin.
Who is going to, Michael Moore-style, do a “Michael and Me” film?
I can't find a single quote where Michael Dell says “sorry” or “it's unfortunate” or anything like that. Just talk of aggressively going after productivity and efficiency, keeping the Wall St analysts happy (there's not-so-coincidentally an analyst meeting going on with Dell executives this week). These greedy morons who bought derivatives based on mortgages given to people with zero income verification are going to tell anyone how to run a company?
“Any additional cuts to its bloated cost structure would be well received,” wrote analyst Brent Bracelin with Pacific Crest Securities iin a recent report to investors. “Operating expenses are at an eight year high of 13.3 percent, which suggest that tighter cost-containment efforts are needed to restore investor confidence.”
When I get home I'm putting on my old “Dell Hell” t-shirt (made by some former employees after some 2001 layoffs, I had bought one online). How sad.
From the article:
Analyst Roger Kay with Endpoint Technologies Associate Inc. said such a move would repair Dell's tarnished image for manufacturing and logistical efficiency.
“They let things slip. They took their eye off the ball,” Kay said.
“They carved a real sweet deal in North Carolina, and they need to use a lot of the plant capacity there,” Kay said.
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Michael’s main quote:
“We believe we have a $3 billion opportunity to drive both productivity and efficiency,” CEO Michael Dell said. “We’ve analyzed the business and opportunity, so we know, without question, where our priorities should be. And as we’ve reignited growth in our business, we’re taking deliberate steps across the company to improve our competitive position.”
Heartwarming.
Dell’s stock price June 1999: $34
Price today: $20
Great job managing to keep Wall St happy the last 9 years.
I also hate it when analysts or reporters associate Dell with Toyota, such as this article:
“Dell, after all, is a build-to-order shop that practically invented the idea of lean manufacturing and, in the process, created what many viewed as a sustainable competitive advantage.“
It’s a shame.
Seems like the main focus of companies is still “pleasing the shareholders” forgetting that the stakeholders -including the workforce, community and of course customers- are a much more valuable fraction of the people being part of the situation.
Incentives like the tax reductions are still are very powerful driver for changes like that. What is really the WASTE that is left when they move out of Austin? Is this being accounted somewhere in the accounting sheets?
Probably not as this would be lean accounting!
Hope for the better, or better do something yourself.
Cheers,
Ralf
Mark,
Great post, and you kept your composure pretty well! :-)
Funny how those who really don’t understand lean equate it with a toolbox of techniques rather than embrace the entire system which includes culture.
Hopefully, the folks in NC have a heads up as to what could happen in a few years when Dell sees greener grass elsewhere.
Dana
Look out NC – all Dell production is likely to be outsourced and/or moved to Mexico. No “worker bee” job is safe anymore. Time to learn new skills and/or get entrepreneurial.
The whole move to another city based on tax incentives reminds me of the stranglehold sports teams hold over existing cities.
“Build us a new stadium or we will leave for another city that will” which holds the taxpayers hostage.
I am not sure if Dell made the same threats to Austin before they decided to uproot. Even if they did, it is still despicable and not lean at all!
You preach about respect for people, but call them “knuckleheads” and “greedy morons.” You sound like a marxist, grouping people into “classes,” some of which are worthy of respect, and others just arrogant condescension.
You’re right, I shouldn’t call names, but that doesn’t make me a Marxist. Bad, bad Mark.
I’m just wishing for some corporate responsibility, that’s all.
One other clarification I’ll make:
I was asked by an emailer if I was attacking all companies who had to layoff employees for the sake of survival.
Not at all.
My comments in this post are directed at Dell and that company only. They created this situation of overcapacity (as they point out they’re growing faster than the industry average).
Hey Anon 10:49, keep some perspective, man.
Don’t equate calling someone a “moron” with the devastation of laying off thousands of people. And it’s somehow “Marxist” to point out that we have classes in this country? I think all Mark was trying to say is that the rich (ie Michael Dell) have a “responsibility” to the employees who helped make them rich. A lot of other employees at Dell got rich, thanks to the company, but not those people toiling in the factory today.
Pet Peeve: People who confuse Marxism as an intellectual toolset with Communist – a means of societal/economic organization.
Mark, in point of fact, using marxism as an analytical tool to discuss power dynamics between classes (i.e. a large company destroying thousands of jobs to take advantage of a tax break, or a sports team holding individual tax payers hostage for a stadium) or superstructure to structure interactions is a perfectly reasonable, common, and powerful technique.
I mean, heck, take the Frankfurt School so popular with those kids today – straight outta Marx.
Interesting side point – the denial of the existence of classes, or the opinion that their existence is wrong, is *actually* a sign of a communist. :)
Ok, I’m wildly off topic, it’s just a huge pet peeve of mine that so many people say “marxist!” like it’s a bad thing. Sure, let’s reject one of the two major schools of thought of the last 200 years because of an associated, although mostly unreleated, applied technique of governance. Sounds good to me (I’m referring to Weber as my other, just for the curious).
By the way, I thought you kept your composure quite well. It’s good to be upset when something like that happens, it is wrong and ignoring it or pretending it’s ok just makes it worse.
Doesn’t surprise me a bit. Dell has no sympathy for it’s employees (I used to be one). They let everyone know they are always expendable, even top performers. They work you till you drop and then step on your neck. The people who get ahead are those that have that same mindset. As to stock holders, they treat them badly also – what, no dividend after all these years? Of course not, why would Michael want to share the profits of the company with shareholders. He claims stock appreciation is how the shareholder gets paid…..well, take a look at a 5 year chart and see where you would be today as an investor. But hey, if you want to work all the time, have no job security, and turn into a nervous wreck, it’s a great place to work.
Dell managed to get to 1999- and stopped there.
Boring products and late on the curve- that’s why I am an Apple person. Now that I think of it, does anyone ever call themselves a ‘Dell person’? Doubt it.
Michael *did* admit “screwing up” in 2001, the first time they resorted to layoffs.
“Michael Dell has admitted that his company’s recent job cuts are ‘an “admission that we screwed up” by overhiring’.”
LINK
Umm, the reality is that there is only one company called Toyota and to torch any org that doesn’t measure up is pollyanish especially for anyone that doesn’t sit in their boardroom.
What is the root cause that they decided to move? It wasn’t because they weren’t Toyotaish enough and if they stayed it wouldn’t have been because they were.
The answer might be that they didn’t contract out enough so when the biz flattened they had to hang their own employees out to dry rather than the contract employees like Toyota would and has done.
Or maybe they haven’t been at this long enough to learn everything they need. Remember Toyota had 30 or 40 years of operating in a protected market before anybody thought their products were much more than crap.
Another root cause might be how the CEOs in America can loot their own organizations while underperforming.
The bottom line is the fatheads at Dell made some bad decisions and their employees are having to pay for it.
My employer is hooked on their products but my next laptop won’t have a dell label on it.
Jackson
I don’t think it’s quite as bad internally as it looks from the outside. Some of it is also a matter of perspective. I recently learned from one of the very top executives at Dell that at some point in the future my facility will probably go away also (this is years and years away, but eventually). I don’t mind, I’ll pick up the skills and experience to make my way somewhere else. In the mean time beating HP is a great game.
Another thing that I think is interesting is that you never hear about Apple or HP closing down their manufacturing plants in the US because they don’t have any — all of their systems are outsourced. Dell is the only pc maker (that I know of) with domestic manufacturing (Actually I think Sun does some kitting work for servers in Oregon, can’t recall). The closing of TMC sucks, but a lot of us are continuing to do good work (even a lot of “lean toolset” stuff) to try to give the customer better service at lower cost. I won’t argue that Dell is TPS compliant ;) I’ve heard our design team has some cool stuff coming out — we’ll see on that count.
I’m inclined to agree with anon about the tendencies of American CEOs to lavish compensation on themselves while whining about the need to “cut costs” to “stay competitive.” The American megacorp CEO is all too often a parasite that destroys his or her (Carly) host.
Mark, I’ve been needing a new laptop for a while now. Just too much stuff on the hard drive and no 5S in ages, so I guess I’m not practicing what I preach. In any event, I began my explorations for a hot new machine over the long weekend. It came down to two solid choices.
Interestingly, the Hewlet-Packard (HP) had more features than the similarly-priced Dell. The HP had a more comprehensive warranty. The HP got significantly more positive user reviews than the Dell on CNET. And then I remembered your (this) post. No contest. I’ll be booting up my new HP tonight.
Maybe the people at Dell who work on features, pricing, quality, performance and warranties were part of the cost cutting in Austin?
Adam
“employee” comments from Dell people on the austin newspaper’s site:
LINK
One of them uses the same “respect” word. Sad that they aren’t getting any.
You worked there…are you really surprised? I worked there for about 1.5 years and watched them chew up and burn through employees left and right…..and these were high paying white collar jobs.
They are ruthlessly efficient and view their employees as as expense not an asset.
Heck, I was turned down on a request to buy me a pack of three hole ruled notebook paper…I had a 4 million dollar per quarter sales quota, I was forced to send key people from multi-million dollar accounts to sit in call queues for help from customer service bec Dell wouldnt staff customer service bec it was OpEx….and all this was 1999 when they were doing great.
I too feel feel working at Dell was a great experience, but a yr and a half was plenty, and I cant say that I’m a bit surprised to see them closing a factory if they think it will save a nickle a day.
[…] a former Dell employee (1999-2000), I was surprised and maybe a bit angry when they announced, earlier this year, that they were shutting down a factory I had helped open in […]