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Nelson Kepley

Photo Caption:The Dell plant in Winston-Salem.

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Just the name — Dell — seemed to promise the Triad and North Carolina a future economy driven by clean, high-tech industry.

Local industrial recruiters could practically print it on their business cards, Dell’s halo effect was so strong.

By January, however, the company will be gone, leaving behind 905 jobless workers and an empty building that “will essentially be an empty ghost,” one company official said.

Just five years ago, the prospect of Dell and the $500 million FedEx hub at Piedmont Triad International Airport were transformational. What once had been an old-world regional economy of smokestack manufacturing was to become a thriving whoosh of companies that build, pack and ship with the speed and precision of modern technology.

Now Dell is on its way out, and the FedEx hub, though newly opened, is not operating at nearly the projected level of flights or employment.

But business experts are taking heart in the regional strengths that recruited those companies. Those strengths, they say, are undiminished.

Even now, economic recruiters say, major companies are scouting the Triad for possible locations. In the past six months, 10 companies have announced expansions adding up to several hundred jobs.

That’s not enough to absorb the sting of Dell, but it is enough to prove that our economy has a hearty pulse, said Penny Whiteheart, executive vice president of the Piedmont Triad Partnership, a regional economic development group.

“We thought Dell was a home run,” she said. “And we’ll just have to continue to hit some singles and doubles to regain those thousand jobs.”

‘The sweet spot’

Dell and FedEx, many say, remain strong proof that the Triad is succeeding in building a stronger economy despite the strains of a worldwide financial crisis.

It all comes down to:

• A solid work force that has necessary skills and access to quality training.
• A highway network that has capacity for the tremendous amount of over-the-road freight needed to supply the Eastern seaboard.
• The FedEx hub, which has become a key piece of the region’s infrastructure, said John Kasarda, director of the Kenan Institute of Private Enterprise and the Kenan Distinguished Professor of Strategy and Entrepreneurship at UNC-CH.

“You have to remember that Dell’s decision (to locate here) was made primarily because they needed an East Coast location, because they needed overnight shipping for their customer base,” Kasarda said. “Triad first, Winston-Salem second because of road accessibility. That road accessibility was also a factor in FedEx’s decision. …

“The Triad is in the sweet spot.”

High-tech in name only

Although the Triad liked to think of Dell as a high-tech employer, the actual work — and wages — inside the plant were more akin to historical manufacturing jobs.

“We looked at the Dell project with rose-colored glasses,” said Rob Bencini, a private economic developer who once oversaw economic development for Guilford County.

“We saw Dell as a high-tech operation,” he said. “They were dealing with high-tech components, but the actual jobs being performed were not terribly technical in nature.”

Those jobs paid about $12 to $15 an hour for workers with basic manufacturing skills. They were jobs meant for the same types of workers displaced from the furniture or textile jobs lost in the past two decades.

Essentially snapping pre-formed computer components together, the jobs weren’t high-tech in any scientific sense, Kasarda said.

He tells a story about giving a speech in South America when a member of his audience challenged Kasarda to remember that it’s not the industry that makes good jobs.

“’It seems to me you have it wrong,’” Kasarda quoted the man as saying. “’It’s not the industry but it’s the occupation that’s important.’

“ ‘We could be producing computer parts, but what’s the difference in producing shoes?’ ” the man said.

Kasarda said Dell’s jobs were good only for a work force in transition from traditional manufacturing to an economy where training and education create far more advanced workers.

Working at Dell offered a certain prestige, but “it just shows the fact that any economy that’s in transition, it’s those at the bottom of the economic ladder that suffer most,” he said.

The speed of change

Dell’s departure also demonstrates the blinding pace of change in business today, Bencini said.

“It’s unfortunate it ended so quickly,” he said. “If it had been a 10- to 15-year run, in technology you can’t be surprised by that. But four years is quick.”

Kasarda blames the national recession for Dell’s departure. Companies looking to cut costs dramatically have virtually halted spending on new technology. That hit computer makers such as Dell hard.

Dell can teach the Triad lessons about the pace of global change, said Dan Lynch, president of the Greensboro Economic Development Alliance.

Just four years ago, Dell was confident enough in its desktop computer products to invest $130 million in the Forsyth County plant — with a little help from $280 million in promised state and local incentives.

Now sales of desktop computers — those made in Forsyth County — are dropping and laptop sales are rising. These days, the profit is in services, not hardware.

“Everything seems to be much more compressed now,” Lynch said. “The life span of industry may just be getting shorter.”

It wasn’t always like that. The Triad’s mainstay manufacturing base — tobacco, textiles and furniture — served it well for decades. A person could come out of high school, get a job at a plant and earn a good living over time.

But that way of life began falling apart nearly 20 years ago. Tens of thousands of jobs disappeared as companies either folded or moved work to cheaper labor forces overseas.

Then, in 1998, FedEx entered the picture, and the Triad’s economic future changed forever.

Never the same again

FedEx needed a package-sorting hub to service the East Coast. It looked up and down the Eastern U.S. and liked what it saw at Piedmont Triad International Airport and the greater region.

To capitalize on that — and dig out of the old economy’s wreckage — local economic developers charted new strategies.

They wanted to target certain industries, educate workers for specific careers and form aggressive partnerships with governments to pay big incentive packages.

Interstates 40 and 85 were expanded, a southern loop was built in Greensboro, and PTI got a new network of swift access roads.

The promise of FedEx’s arrival drew worldwide attention and has already attracted a Polo Ralph Lauren distribution center in High Point and the air-conditioning division of Rheem Manufacturing Co. in Randleman, whose parts distribution center will depend on express shipping.

The global recession these past two years has dampened other growth at the FedEx hub, Lynch said, and gains in productivity will reduce the company’s projected peak work force of 1,600.

“The fact that the delay at PTI occurred has nothing to do with PTI or the interest in the Piedmont Triad region,” Kasarda said.

Kasarda and Henry Isaacson, chairman of the Piedmont Triad Airport Authority, agree that FedEx is highly unlikely to abandon or keep its hub on slowdown for long.

FedEx will become the kind of magnet for other businesses that its backers have promoted for more than a decade, Isaacson said.

“I’m very, very sure,” Isaac son said. “We went to see two new businesses last week and we talk about FedEx, we talk about the new runway (at PTI). … They’re there, they’re up and running, and there’s no reason to believe that they’re not the magnet we have always believed that they would be.”

Lynch said he has always cautioned against over-selling the merits of any one business. Instead, he advocates a careful strategy that involves targeting areas such as health care, aerospace and advanced manufacturing/logistics.

“I was always guarded with FedEx because there was a little too much hype,” he said. “It was never, ever going to be a silver bullet.”

Staying focused

In the past decade, Lynch’s group and Winston-Salem Business, that city’s economic development group, have worked together to coordinate recruitment of some companies. They will work with the High Point Economic Development Corp. to help market the half-million-square-foot building Dell leaves behind.

Even now, Bob Leak Jr., the president of Winston-Salem Business, intends to use Dell’s name as he markets the city. He is proud that Winston-Salem had what it takes to draw such a company.

Bencini said no strategy should rely heavily on the logistics business as the next big thing. Such companies thrive on good road networks and warehouse and distribution space. He believes the jobs will not be as plentiful or well-paying as many expect.

Greensboro and the Triad are on the right track by channeling education money into health fields and aerospace, Bencini said.

And regional leaders, he said, should make sure workers learn about innovation. That, after all, led to RF Micro Devices — a homegrown microchip company that, despite bad times, is succeeding with sophisticated wireless components and employs 1,400 locally.

To be safe, Lynch said, it’s important to prepare Greensboro to recruit companies in advanced manufacturing and logistics in tandem. Each can support the other, he said, and blunt deficiencies.

Lynch plans to keep tweaking his recruitment strategy. But like a football coach rebuilding after losing a key player, he doesn’t plan to let Dell’s departure rattle him.

“You keep focused on what’s going on globally,” he said. “You change when needed, but you don’t get sidetracked by short-term market fluctuations.”

Contact Richard M. Barron at 373-7371 or richard.barron@news-record.com