With its Kirkop plant facing losses that could reach $58 million a year, STMicroelectronics is known to have informed the government about its "potential disengagement plans", industry sources said this week.
In the latter part of 2007, the Dutch commercial and investment bank ABN Amro issued a position report regarding the status of corporate company STMicroelectronics, which has a substantial investment in its Malta plant at Kirkop and currently employs 2,200 persons. This makes it Malta's largest private employer and a considerable contributor to the country's GDP and a major player in the export-import trade. The Kirkop plant, which began operations in 1981, is an assembly and test facility for the ST products that use the most advanced chip packages.
ABN Amro, which specialises in shareholder investment opportunities and also profiles corporate companies as investment prospects, reported that the ever-weakening American dollar was hitting ST worldwide and suggested remedial measures that the large corporate company could take. These included the close-down of some of the corporation's European operations and specifically singled out the Malta plant.
STMicroelectronics has already taken several remedial measures. These included the closure of their plant in Casablanca, Morocco, and American operations in Carrolton and Phoenix.
The closure of one of its Morocco plants was additional bad news for the Malta operation in that this company was assembling and testing microelectronic devices of a similar type that are produced in Malta. The reason for the Casablanca closure was the uncompetitive structural cost of labour as compared to similar manufacture in the Far East and China.
Contrary to what has been reported in the media, official ETC labour records show that over the past 16 months the Kirkop ST operation has reduced its work force by about 400 persons.
Some ST Malta employees have spoken to the press, expressing grave concern over the security of their jobs.
In a letter, dated April 18, 2008, sent to Andrew Mizzi, secretary of the technology, electronics and communications section of the General Workers' Union, the company expressed its very grave concern regarding losses incurred at its Malta plant operations and which are being attributed to labour costs and waning competitiveness. This letter was distributed to many employees by the union itself, the sources added.
The losses were quoted by the company to be running at $55 million a year and the sources said this seemed to have been the reason why STMicroelectronics had asked for a re-consideration of rises and bonuses provided for in the collective agreement as these could only add to the labour cost. It is understood that, in the face of pressure by the GWU, the company had no option but to approve such payments even if these will further push the deficit to between $57 million and $58 million a year.
"These highly-perturbing figures are further aggravated by the continued appreciation of the dollar vis-à-vis the euro when taking into account the fact that the Malta plant is facing the challenges of Far East competitors, including China and Malaysia and, probably, soon Indonesia and The Philippines too, where the cost of labour is estimated to be nine times lower than that of the Malta plant," a financial observer noted.
"It would, therefore, appear that although there are a number of detractors to maintaining the Malta plant's operations and workforce as they currently stand, by far the main detractor that is causing concern about the whole future of the plant is the labour cost," the observer added.
The observer wondered whether enough thought has been given to what, to him at least, appears to be a worrying case of the company's agreement to sanction payments on April 1 in the face of GWU pressure being no more than short-term gain for industrial employees who may, eventually realise that such a move only served to jeopardise future operations and, therefore, their jobs.
The April 18 letter also referred to measures being proposed by the company in its efforts to retain the major high-end production lines and mitigate the impact of costs on its labour force. The measures listed were the restructuring of labour-intensive activities, a freeze on any further wages increases, a thorough re-discussion aimed at reducing the labour cost structure and sick leave.
In the latter part of 2007, the Dutch commercial and investment bank ABN Amro issued a position report regarding the status of corporate company STMicroelectronics, which has a substantial investment in its Malta plant at Kirkop and currently employs 2,200 persons. This makes it Malta's largest private employer and a considerable contributor to the country's GDP and a major player in the export-import trade. The Kirkop plant, which began operations in 1981, is an assembly and test facility for the ST products that use the most advanced chip packages.
ABN Amro, which specialises in shareholder investment opportunities and also profiles corporate companies as investment prospects, reported that the ever-weakening American dollar was hitting ST worldwide and suggested remedial measures that the large corporate company could take. These included the close-down of some of the corporation's European operations and specifically singled out the Malta plant.
STMicroelectronics has already taken several remedial measures. These included the closure of their plant in Casablanca, Morocco, and American operations in Carrolton and Phoenix.
The closure of one of its Morocco plants was additional bad news for the Malta operation in that this company was assembling and testing microelectronic devices of a similar type that are produced in Malta. The reason for the Casablanca closure was the uncompetitive structural cost of labour as compared to similar manufacture in the Far East and China.
Contrary to what has been reported in the media, official ETC labour records show that over the past 16 months the Kirkop ST operation has reduced its work force by about 400 persons.
Some ST Malta employees have spoken to the press, expressing grave concern over the security of their jobs.
In a letter, dated April 18, 2008, sent to Andrew Mizzi, secretary of the technology, electronics and communications section of the General Workers' Union, the company expressed its very grave concern regarding losses incurred at its Malta plant operations and which are being attributed to labour costs and waning competitiveness. This letter was distributed to many employees by the union itself, the sources added.
The losses were quoted by the company to be running at $55 million a year and the sources said this seemed to have been the reason why STMicroelectronics had asked for a re-consideration of rises and bonuses provided for in the collective agreement as these could only add to the labour cost. It is understood that, in the face of pressure by the GWU, the company had no option but to approve such payments even if these will further push the deficit to between $57 million and $58 million a year.
"These highly-perturbing figures are further aggravated by the continued appreciation of the dollar vis-à-vis the euro when taking into account the fact that the Malta plant is facing the challenges of Far East competitors, including China and Malaysia and, probably, soon Indonesia and The Philippines too, where the cost of labour is estimated to be nine times lower than that of the Malta plant," a financial observer noted.
"It would, therefore, appear that although there are a number of detractors to maintaining the Malta plant's operations and workforce as they currently stand, by far the main detractor that is causing concern about the whole future of the plant is the labour cost," the observer added.
The observer wondered whether enough thought has been given to what, to him at least, appears to be a worrying case of the company's agreement to sanction payments on April 1 in the face of GWU pressure being no more than short-term gain for industrial employees who may, eventually realise that such a move only served to jeopardise future operations and, therefore, their jobs.
The April 18 letter also referred to measures being proposed by the company in its efforts to retain the major high-end production lines and mitigate the impact of costs on its labour force. The measures listed were the restructuring of labour-intensive activities, a freeze on any further wages increases, a thorough re-discussion aimed at reducing the labour cost structure and sick leave.