Dell Departure Could Ravage Limerick

It's only 11:30 a.m., but it looks like John Gilligan won't have much to do for the rest of the day.

Limerick's mayor comes around to the front of his desk. "Unfortunately, I don't have a keg of Guinness in my city hall office," he says. "Would canned Guinness be okay?"

Gilligan points out the door toward his balcony, which juts out over the Shannon, Ireland's longest river. More than a thousand years ago, the mayor explains, local inhabitants defeated some Vikings who had settled here. And it was only after the Vikings had promised to pay an annual tribute of 365 barrels of wine that they were left in peace. "No wonder the boys here had a lot of parties," he adds.

Last June, when he was elected mayor, Gilligan must have been looking forward to similarly light-hearted times. But then came what Gilligan calls an "absolute, gigantic disaster:" Dell (DELL), the American computer manufacturer, decided to close its Limerick-based manufacturing plant and move its production facilities to Poland.

Limerick is Ireland's fourth largest city. When the country's economy started showing annual growth rates of over 10 percent, earning Ireland the nickname the "Celtic Tiger," Limerick became a showpiece for the green economic miracle. Here, Dell could enjoy all of Ireland's advantages at once: the low corporate tax rate of 12.5 percent, government subsidies and one of the lowest wage levels in the EU. The whole city was completely transformed, and even the hometown rugby team, the "Munsters," was suddenly top class.

'Come to the New Ireland!'

The boom led to skyrocketing real estate prices, living costs and salaries, and it also made people start to believe that things could only get better and better. But, above all, everything got more expensive—too expensive, apparently, for Dell. The company went looking for a cheaper location. It found one in Lodz, Poland's third largest city. Baseline wages in Poland are only one-fifth of what they are in Ireland. There are already even billboards there soliciting companies to "Come to the new Ireland!"

Starting in April, up to 10,000 jobs could be lost in Limerick and its environs. But the effects will be felt well beyond the region; all of Ireland will feel the impact of Dell's move. The global economic downturn has hit Ireland harder than any other EU country, and the government has been forced to raise taxes and reduce budget expenditures to fight off national bankruptcy.

Under such straits, Dell's departure is the last thing Ireland needs. When Dell was still the country's second largest foreign employer, it generated around 5 percent of its gross domestic product.

'We Need Work'

In his office, Gilligan paces back and forth. On the wall hangs a picture of a large yacht—Limerick's contribution to the 2005 Sydney Hobart Yacht Race—sailing off the coast of Australia.

Gilligan can't imagine Limerick without Dell. As he sees it, the company is the heart of the region's industry, and if Dell shuts down operations at the beginning of 2010, Limerick might have to face a 25 percent unemployment rate. As it is, there are already areas of the city where shops sell cigarettes and teabags individually. And people who have no reason to get dressed can be seen walking around in their pajamas in the afternoon.

Gilligan has asked the government for help, and it has responded by forming a special commission to come up with a plan for Limerick. "But we don't require new statements," says Gilligan. "We need jobs." His cell phone rings—the ring tone sounds like a powerful organ—but he waves it off. He says it's probably just another person wanting to meet up with him over drinks.

As Gilligan sees it, Limerick's inhabitants are not prepared for an economic downturn. Young people are used to double-glazed windows, central heating and flat-screen TVs, and many of them have gotten used to doing their Christmas shopping in New York or Boston. "In the future, they'll have to be happy to have a roof over their heads," Gilligan says. And he prophesizes that they just might devote themselves to TV and alcohol because "there won't be much else left to do here."

Plan B?

The mayor steps onto his balcony. The banks of the brownish river are lined with glass-and-steel buildings. "Those are all new hotels," Gilligan explains. "Two Clarions, a Strand, a Jurys, a George, a Marriott. And there's nobody in them." Unless a miracle happens, the mayor suggests, asylum seekers from Nigeria might soon be moving into these four-star structures.

When asked about Limerick's plans for the future, Gilligan glances up for a moment. He looks helpless, like a non-swimmer without a lifejacket sinking into deep water.

"There is no Plan B," he says. "Bring on the revolution."

Before it's here, it's on the Bloomberg Terminal.