STMicro bosses eye possible move

Top-level management at the mother company of microchip giant STMicroelectronics is actively considering shutting down the Kirkop plant, prompting the government to go into overdrive in negotiations to convince them to stay.

Industry sources say the local plant has long been working on a gradual downsizing plan but, recently, the top management at the level of the mother company is said to be actively looking into the option of shipping out the local production.

When asked to confirm this information a few weeks ago, the group's human resources development director Tonio Portughese said it was "the first time" he had heard anything of the sort.

However, well-placed sources said the company may be eyeing a transfer to Malaysia or even Romania as a European alternative to Malta.

Ironically, the setting up of a new plant in an east-European country, which joined the union with Malta in 2004, means it could qualify for EU subsidies as new foreign direct investment.

As things stand, the government here has far less room to manoeuvre in terms of incentives and cannot tap into such funds, seeing as the company has been based here for the past 28 years.

Still, discussions intensified in the past weeks and the government even asked for the assistance of Italian Prime Minister Silvio Berlusconi. Maltatoday also reported yesterday that Lawrence Gonzi has made a "last ditch" attempt to convince the company to stay.

When asked about it yesterday, the Prime Minister said discussions with STMicroelectronics have been ongoing for the past two years.

"The discussions did not start now. The first time we met was two years ago. We have been trying to find solutions.... Till now we've always managed to find a way forward. Hopefully this will continue in the future."

When asked about the involvement of the Italian Prime Minister, he did not go into specifics but said that, since some of the company's shares are owned by the Italian and French governments, the discussions were also on a political level.

"But it is a question of management and competition. We have to see how we can help the company remain competitive."

Just last May talks between the two sides had also fallen into crisis. The Sunday Times had reported that the company, which is Malta's largest private employer, with some 2,200 workers, had asked the government for a financial support package running into tens of millions of dollars.

The Finance Minister had made a counter offer but the company never responded. Then, in recent weeks, information reached the negotiating team on the Maltese side that the Kirkop plant was again under active review.

Industry sources said that in the circumstances it is not clear whether the company is preparing to move or simply wants more money from the government. However, 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 company has been officially silent all along about its plans.

However, last June, the group's CEO Carlo Bozotti was said by the Financial Times to be looking into saving about $150 million through downsizing or closing six factories.

The chipmaker's head of communication, Carlo Ottaviani, later pointed out that the specific reference to the closure of factories by Mr Bozotti was not aimed at European plants.

The Kirkop plant is said to be facing problems, primarily as a result of labour costs and exchange rate pressures. The latter, in particular, have been exacerbated by the gap between the dollar, the currency in which the company trades its semiconductors, and the euro, the currency in which the company pays its bills, including salaries, as Mr Bozotti had pointed out to FT.

The Franco-Italian group is one of the world's largest chipmakers with a global revenue of some $10 billion. The local plant is Malta's biggest exporter.