Sunday, 11th May 2008
ST asks for tens of millions to stay
Minister keen to ensure ST has future in Malta
ST Microelectronics has asked the government for a financial support package running into tens of millions of dollars as it contemplates pulling the plug on its Malta plant.
Malta's largest private employer, with some 2,200 workers, has called on the government to provide it with financial support amid rising labour costs, Finance Minister Tonio Fenech told The Sunday Times.
The minister would not be drawn into commenting on the amount involved, though it is understood that there is still a gulf between the figure requested and that being offered, even though the government offer runs into millions of dollars.
It is understood that the government is still formally waiting for a reaction to the latest financial and restructuring package offered to ST.
Sources said STMicroelectronics was looking for government and trade union support to re-negotiate the current collective agreement and also a phased reduction in the number of employees.
Mr Fenech made it clear there was a limit to what the government could be expected to offer in terms of direct financial aid.
"While we have been very generous in terms of investment aid - since it makes sense from a national, social and economic perspective to support a viable restructuring process - the government cannot be expected simply to subsidise a wage differential which equals practically the full wages being paid to the present employees... especially if we are simply told a few years down the line that the company is still moving away. It simply does not make economic or social sense.
"We are very concerned and keen to ensure the company has a future in Malta. (But) since on an economic level there are job growth prospects, we believe ST's employees can be redeployed in other industries over a short but phased number of years, though, of course, there is the personal and human aspect of potential job losses and movement," he said.
Mr Fenech explained that the government would like ST to further invest in Malta on lines where Asia today cannot compete. In fact, the government's support is linked to a comprehensive restructuring plan to make ST operations in Malta viable in the longer term.
"ST is looking for financial support, which the government is offering in the form of investment aid. We want them to restructure. We are still hopeful that ST will retain a number of lines in Malta... And if they have the intention to reduce staff, then we would like to see it done gradually."
In fact, sources said that if STMicroelectronics decided to abandon its Malta plans, it would take some four years for the Kirkop plant to wind down its operation.
The Malta plant's fate could depend on an upcoming annual general meeting, which is expected to confirm or replace the current management. Politics has also been brought into the equation, with the ST issue reportedly discussed during Prime Minister Lawrence Gonzi's meeting with his French counterpart François Fillon last Thursday.
Mr Fenech has in the meantime also brought the matter to the attention of the Italian Ambassador, since the Italian government also holds a number of shares in ST.
Despite the doubts surrounding the future of the plant, Mr Fenech said the ST plant in Malta was actually the world's most efficient. The issue boiled down to the difference in labour cost between Malta and Asian alternatives.
According to observers, the Kirkop plant is facing losses that could reach €58 million (Lm24.9m) a year. ST Microelectronics has already taken a number of remedial measures, including the closure of its plant in Morocco and the American operations.
In a letter dated April 18 sent to Andrew Mizzi, secretary of the technology, electronics and communications section of the General Workers' Union, the company expressed its grave concern regarding the losses incurred at the Malta plant, and asked for a reconsideration of rises and bonuses provided for in the collective agreement.
The plant, which began operations in 1981, is an assembly and test facility for the ST products that use the most advanced chip packages.
Does the government have a contingency plan?
"The government cannot singlehandedly stop the globalisation process, and therefore we need to continue working harder to offer new job opportunities to compensate for any job losses and manage such a transition in the most humane manner possible," Mr Fenech said.
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Comments
First of all do not blame the employees, professional, technical, supervisors and operators. I can assure you they are some of the most disciplined and hard-working workers in Malta. The work involved in ST is stressful, demanding and of high responsibility.
I would blame the management in ST, with the cushy job for doing absolutely nothing in the past years in order to restructure the company. They offered great resistance to the introduction of high-tech research and development, leaving ST Malta to do only packaging and testing, which although essential, they are jobs which are better done in low-cost countries such as Asia or North Africa.
Shoudl the management at ST taken the initiative, St Malta would have become comparable with ST in Grenoble or Catania and involved in high-end design work with an extremely high value for money.
Now let us hope that the management at ST will shoulder their responsibility towards the workers and the Maltese nation. Bad managment ...a pity... ST could have really been our "SMART" company.
It would be a disaster if the government starts financing private companies even more if it has little say in who runs the company and how.
You addressed you comments to Effie Carbonaro and the MLP that they just critise. However you like the PN have a problem to listen carefuly to criticism. The nationalists attacked the MLP because it critised the government for rushing to adopt the Euro - "......only fools rush in". The PN's attacks on the MLP's critisism were based on the fact that the Euro would attract investment and secure jobs but it seems to be the other way. Now when it's to late and the country "qieghed fis-sqaq", the tax payers have to make good to support these unfortunate workers from "dull and gloom" the MLP warned them about and the PN led them towards. The writing was on the wall....the dollar has been weakening for a number of years now and the government was unable to see this or worse the government saw it coming and did noting for the sake of popularity. There is a good article about the Euro and currency as an economic tool by Joe Vella Bonnici in today's times...i suggest you read it.
What else.....one of the reasons for hikes in oil prices are also related to the weakness of the dollar. Oil companies know that their turnovers (they mainly transact in dollars) are worth lesser and lesser the more the dollar weakens, thus they in turn increase their prices. However here again we witness the political dishonesty of the government because we hear a lot of doom and gloom because of the increase in the price of oil in dollars but we hear nothing about the fact that we buy more Dollars with the Euro....why???? Because it is convenient for the PN government to say so in order to withdraw from the promises Gonzipn made prior to the election.
I would also wish to address the issue cost of living vs devaluation. As with all matters under consideration every matter has its' prons and cons and this is no exception. Yes, a devaluation will increase cost of living and thus erode our purchaing power but in return it boosts our competitiveness in all sectors including our most important industry - tourism. In return companies will sell more make more profits and eventually be in position to pay higher wages newtralising the devaluation effect and hopefuly better. However the same cannot be said about the increases in taxes and possible new taxes which the government will introduce to make good for it's new costs arising from additional assistance to industry which needs to be forkered out. These will also erode our purchasing power without attaining any benefit.....we would have paid to remain uncompetitive or become even worse.
Those are the stark facts of the situation and it is Gonzipn who is responsible for all this and more to come. History has always repeated itself. Just look at the finaces of the Malta at the end of previous PN governments - 1970 and 1996 speak for themselves.
I was at UOM when the BSc course consisted of four years. I don't agree with this government's decision to reduce it to three years and its obsession with graduate numbers. Malta needs highly skilled IT workers, and not a flock of "jack of all trades" who know a little bit of everything. If we don't offer quality and specialised services, foreign investors will be scared away from this island. They come to Malta to buy these services and not to train personell. They can find average skill levels at cheaper salaries in newly joining EU countries, ex- USSR countries and india of course. Malta needs to produce more highly skilled IT workers, because our salaries are far higher than these countries I mentioned.
As for Mr. Joe Cardona, weren't 380 million liri enough to sink in the Malta drydocks?
If it is the currency, then all exporters within the eurozone are faced with the same problem and within a few short years they will all migrate to Asia!
Hindsight is 20-20 and when ST was welcomed here twenty seven years ago, this situation could have been foreseen, but circumstances change, some for the better and some for worse. No industry will come to Malta if permanency and job guarantees become a basic requirement. There are always other countries which would be willing to take a chance.
Yesterday General Motors announced that it will close the Windsor Ontario transmission plant throwing out 1400 employees by 2010. They will join others who lost their automotive jobs from all over Ontario plus thousands more from their US plants. Surely the American and Canadian dollars are not to blame. The US and Canadian governments do not like what is happening but they can only assist so much, yet, no one is blaming either government. In the US and Canada the Unions are negotiating the reduction of benefits and wages with auto makers in an effort to save the remaining jobs. What are the Unions doing in similar circumstances in Malta? Incidentally, Ontario's unemployment rate (considered good) stands at 6.1%.
I suppose the same criticism will be levelled at the end of the year when the future of the Shipyards will be determined keeping in mind that almost half the national debt was incurred by paying wages for little or no production.
With regards to the level of education in IT criticized by Messrs. Said and Bailey, I can only comment that it beats not having MCAST at all! I also disagree with their assessment of the graduates' abilities since upon graduation several were classified as 'tops in their field', and not by Maltese assessors either.
Plants will open and plants will close. One would be more objective if the overall employment figures are commented on rather than the eventual closing of a plant. It is how fast the ones losing their job can find new employment that really counts. Gone are the days when one started a career and retired with the same employer. This has been happening for many years all over developed countries. Malta is just catching up.
So why should the government help ST. ? what makes it different from us.? and if the government does financially help them i guess it is from our taxes..
As regards IT, and I work in IT, ministers talk about numbers only. Thats what they understand! For them having lets say 1000 students in IT means that 1000 students will fill in the vacant IT posts. In reality very few will eventually make it into the IT industry.
Also some local IT companies are already employing people from Portugal / Spain / Romania / Bulgaria - taking out jobs...why? The excuse right now is that skilled Maltese IT people are difficult to find. What they are not saying is that these people are cheaper to employ, and sometimes better skilled than the Maltese since they have better education system in their country.
So basically, with all the boom in IT right now, the worse is soon to come like all the other industries, where maybe in case of IT, foreigners will be preferred over the Maltese. Let's not forget that countries like Ukraine / Romania have cheaper rates than the Maltese companies thus these are more competitive in the industry. Who said that the Maltese companies will not open a branch in Romania / Ukraine - just to be more competitive or just to increase profits?
SMART city is going to be a joke since not enough skilled Maltese people will be able to fill the posts. Thus the foreigners will fly over here and take the jobs.
MCAST is simply an ETC buffer and is drastically failing to train people adequately for the demanding IT industry. Most students obtain the certificates however it must be noted that it is very difficult to fail!!!!!! No idiot on earth can fail 3 resists with the answers just in front of his eyes! Remember ministers want numbers and this is what they are getting so everyone is happy. For the IT companies...are they worried? not much they are getting people from other countries at a cheaper cost! Who will eventually suffer? - THE MALTESE...lets wait and see in few years time...
Barely 2 months after the election the tune has totally changed, and now workers are realise what a JOKE the management is, and what a ride they have been taken! This is sheer utter irresponsibility from Management. 2200 Workers, families having bank loans, and commitments to meet at the end of the month, that were taken for a ride, so that a group of people could look good for some more time.
Well done management! Well done for selling the workers out!
Mr Marco Cremona has pointed out important factors relative to the last mentioned problems. It is a question of sustainability. Water, followed by energy, are the two most important factors which would determine whether there would be a Maltese people in 50 or a hundred years time. Sustainability in local agriculture, fisheries and food production for the inhabitants of these Islands is a non starter. Water, Mr Cremona's pet subject, is still being considered a cheap resource. As long as salinity and nitrates keep increasing in ground water and its level keeps falling, there is absolutely no scope for politicians to talk of sustainability in anything, whether it is on economic development and growth in population and tourism.
I have followed Mr Cremona's appeals in the press for greater awareness in the need to do much more in water management. The Authorities should take note of Mr Cremona's massage and not get someone to rubbish him with an unsigned article in The Times trying to discredit him. The author of that article was easily identifiable as the writing style resembled that of a frequent contributer to the media and who would have some connection to the water services.
While I applaud the work done by the PN government in the IT sector, there have been a number of short-sighted decisions and initiatives taken that will cost us dearly in the future. We need to invest more in tertiary education and R&D if we want to keep the IT market booming.
Below, I read about people prefering to vote PN because they prefer the way the PN handles things when things are going bad. I also read that if ST is making losses we should fire it, same as the shipyards. Is this the general solution that the government is offering to those people working there?
Now let's see what - according to Gonzi - our healthy economy can do to help. Even though we are in the EU, the EU regulations provide for a relative time, to help and even loan funds to Companies that are in trouble, which could be seasonal financial constraints. How about providing FREE energy to Companies that are in trouble?
Come on, where is the overflowing chest of cash that we have?
The Government finances are in very good shape yes?
Why does one have the impression that Austin Gatt did not see this coming as well, or is one going to bet that all HT Companies will shortly be gone as well?
At the expected rate of Company closures we are going to solve the problem of lack of land to build more houses!
The Euro is going to exacerbate our economic problems especially exports.
Globilisation is a hard fact of life and business will move were it can produce most efficiently with less resources. A simple fact of economic production. That leaves Malta out of the picture in terms of cost of wages so our focus should be in the topmost level of the knowledge economy which is research and development. Unfortunately, our ex-education minister did not see the writing on the wall and was more interested in spending millions in building more schools and impressing the voters who were getting "free" education than investing in upgrading the quality of the education system at the top most level with serious funds going into Masters and research and development. I will only mention as an example the panic of 2 years ago to absorb all students into IT training into private institutions and MCAST irrespective of qualifications only to fill the lower level job opportunities which will temporarily arise at the Smartcity project.
With the advent of IT, there was quite rightly a rush to place Malta firmly in this knowledge economy and ministers were rushing about trying to achive this. Regrettably, they went after numbers and not quality and were more interested in how many jobs they will create in IT rather than the level. In fact for Minister Gatt, SmartCity was all about numbers !
Malta must seriously review its business plan to find its place in the global IT industry and focus on establishing Malta as a base for research and development, where the Global IT industry can establish their R & D bases and use local talent. If we continue going after numbers at lower levels of the production chain, then we will simply have a rerun of the textile industry.
Instead of giving ST millions we should invest those millions in re-training and bringing over a more services oriented multi-national.
Better that than have another Bochum incident.
http://www.spiegel.de/international/business/0,1518,540699,00.html
The Main point of this issue....Should the Gov help ST? In what ways?
In my Opinion the Gov should only help to safeguard the Maltese and their jobs not to safeguard the company. This is a difficult scenario and a toughie for Tonio Fenech but i am quite confident that he will take the right decisions
My point is that as a country we should try to work out solutions to our problems without 'just' complaining.... I am not an economist but from the bit I know about economics, devaluating our currency would have meant paying more on imports, thus a further increase in prices of things purchased from overseas. What effect would that have on the cost of living? Feel free to correct me if I am wrong. Also, I do not work for ST and do not have family who work there, but I feel very sorry for these employees - all I am asking is for people to have more respect for these people and not try to gain political leverage out of the situation. It is bad enough that politicians do so - lets not all start doing so too...
You are making losses amounting to the total of yearly salaries, although you are receiving subsidies by the Maltese government? You are fired!!!
And, by the way, moving to Asia or Africa will not do the trick. Lots of European companies, which traveled East and South in the past, are returning to Europe, because the low quality of work out there is costing them more than the higher salaries over here.
Funny of you to say so but one of the main problems at ST is actually currency related. It is due to a strong Euro and a weak Dollar. ST sales are transacted in dollars and when these are converted to Euros to effectt loacl and possibly european payments, their dollars are eroded by the value of the Euro.
Can the government do something about that? I think he has a duty to do something....that is why it got elected. Action needs to be taken. Is our government staring the problem in the face and will eventually come up with the excuse that we are expensive? Are our low wages so expensive? This might have been the excuse for the textile industry..........hey i recently bought a pair of tousers made in Scandinavia...i believe their work conditions and wages are by far better than ours.....oh they have a textile industry. Sorry that was out of point or was it?
Now lets go back to the ST issue. Aren't ST products considered as having a high value added, which i think means that the cost of wages when compared to the price of the product is very low........aren't these the type of companies we have to attract in the first place.
Who is responsible? Who got us here?
Sure, there's 2,200 workers directly affected, and whatever ancillary work-force indirectly affected, but come on. You are putting the burden on those people who make a real profit to support this company.
Inefficient companies should close, not become charities.
My point is that you, like the MLP, only criticise and never offer solutions. If you ask me whether the nationalist government is flawless I will obviously say no, if you ask me whether I believe that they lied to get more votes, I will obviously tell you YES. The thing is that, unfortunately, till now we had a choice between a party who never offer any solutions and a party who delivers. Lets hope that the new MLP leader can really start to offer solutions, rather than complain, nag, and cry about everything - as has been in these past many years.
The government should work hand in hand with STMicroelectronics as if the reform starts and they are set today to leave it will be difficult to reverse or replanish it.
I do not know what arrangements there are between GM and ST but I know that in the past there were agreements between ST and its employees to ensure better productivity and improve profits overall. Where there is a will there is a way so do not blame the GM if it decides to fork out (or rather not gain) so much from ST in order to save it and its contribution to Maltese economy and productivity.
But I would ask why he doesn't have for Malta Shipyards? Is there any difference for One Worker to another?
If the country had to charge the full cost of these utilities (as it is being forced to do by the EU) , the manufacturing industry (and other 'motors' of the economy such as the tourism sector) in Malta will make a fast disappearing act.
Unions and representatives of industry and tourism should stop whining and face the stark reality that they have been pampered by our governments for far too long. Some industrial sectors only exist because of subsidies I mentioned above. Policians should stop make sweeping statements about the 'quality of the Maltese worker', the resiliance of our manufacturing (and tourism) product and the inflated importance of the construction sector and face to the stark realities of a globalised world, and that we are/were living beyond our means.
And any serious discussion on the matter can only start through the presentation of the facts as they are, and not the political garbage that we are continually being fed.
Mr Grima calculated an additional cost due to wage increases of Euro 500,000 but this article states that the financial support package run into tens of millions.
So dear J Vasallo, your allegations about the GWU and the workes are totally unfounded. What about government induced costs?............or aren't there any?...... what do you suggest...a wage freeze?????
According to the article the losses at ST are in the region of Euro 58 million annually. I do not know what the wages at ST are, but I belive that losses even exceed the total wage.
Can you explain what another government would have done to prevent this? Maybe devaluate the currency (Lira) or better a wage freeze?
I would appreciate if you would be as quick to enlighten us on solutions as you were to criticise. I don't think that you will be able to answer my questions as you, like many others, love to criticise anything and everthing without EVER offering solutions...
I did see the black clouds before the election, and I preferred to trust Gonzi than Sant to try and solve them.
it is ridiculous to blame the government about this situation...it is a global problem directly linked to labour costs. We want higher european wages, so it is obvious that ST will look for cheaper labour pools, like in Asia or Africa. There is very little one can do about that...higher wages will mean higher production costs, and if those costs are not offset by other economic advantages that the location can offer, than there is little option for the company but move elsewhere. Unfortunately that is how the global economy works, companies are not social centres, and no Bidu Gdid is going to solve that...
ST employs 2200 people.
Let the gross pay of all of them be an average €25000 a year. I am pretty sure it could be less from feedback I have from friends working there.
Then the total salary cost of ST is € 55 million.
Are these guys really making such losses that every employee is not contributing to his salary after all the costs have been summed up ?
In a healthy production line or service industry the employee should be at least recovering his own salary with the work he or she is doing. Doubling it would be ideal, any more is a bonus for the employer.
I do not think GWU is to blame for these losses since they fight for employees rights and raises which are only a small percentage of the problem ST is facing now.
It could be that Malta , and its peoples, were driven to thinking they reached a point where `Money is not a problem` while its been the problem all along and will be the problem in future.
We will all need to set back ( and back means backwards ) our targets and standards of living in order to compete with a world which now knows no boundaries.
Then next in line will be the shipyards and the bad practices there are totally supported by the GWU.