ST has no plans for more factory closures

The chief operating officer of STMicroelectronics, Alain Dutheil, told the business and financial news service Forves.com the giant microchip maker had no plans to close down any more factories following the closure of three plants in the US and Morocco last year.

This should be good news for the STM factory in Kirkop which is facing rising labour costs and a tough euro-dollar exchange challenge.

Industry analysts said that however reassuring Mr Dutheil's statement may be, the Malta operations had no option but to control the cost of labour and cushion the euro-dollar rate as much as possible.

The analysts warned that, unless the high level of production was maintained at Kirkop, the plant could still face problems. Much of this, they added, depended on the morale of workers and the management's ability to keep the workforce motivated and as confident about their future as possible.

The management, the government, the workers and their representatives had to closely heed the statements made by the company executives and act accordingly, the analysts said. Even though the going would still be tough, adopting such an attitude could show light at the end of the tunnel, they added.

STMicroelectronics chairman Carlo Bozotti was reported by Forbes.com as telling the company's annual shareholder meeting in London that ST can do better than the market in 2008 despite the impact of the euro-dollar exchange rate.

The semiconductor market is expected to grow by 4.7 per cent this year, Forbes.com said.

According to Mr Bozotti, STM intends to dispose of its "worst performing" businesses and to make "selective acquisitions", such as its recent tie-up with Dutch competitor NXP in wireless technologies.

"We need to do more pruning. We have taken many measures in the past year but the euro-dollar exchange rate is a real challenge," he told the Financial Times late last month. While the company's sales were in dollars, 40 per cent of manufacturing costs and two-thirds of the research and development spend are in euros.

STM has asked the government for a financial support package running into tens of millions of dollars in order to stay, complaining of the decreasing competitiveness of the Kirkop plant.

The government made a counter offer but there has been no response so far. The new leader of the Labour Party, Joseph Muscat, said on Sunday he would work with the Prime Minister to do their utmost so that STM would remain in Malta.