ST plans to axe 60% of its workers

STMicroelectronics has plans to lay off some 1,200 workers in the next few years, just over 60 per cent of its current workforce at the Kirkop plant, The Sunday Times has learnt.

The Franco-Italian microchip maker giant has been planning such downsizing for the past couple of years while engaged in negotiations with the government, industry sources confirmed. But the international financial crisis has now precipitated the momentum for the layoffs.

Both the government and the management of the local plant are in the dark over this year's layoff plans, but in a presentation to investors earlier this week, ST's chief financial officer Carlo Ferro confirmed there will be "substantial downsizing of the assembly operation in Malta" in 2009.

His statement came after the group announced fourth quarter losses of $366 million on Tuesday, which led to a commitment to cut 4,500 jobs worldwide this year.

However, the company had first suggested to government that it planned to downsize its workforce at Kirkop from the current 1,900 workers to a maximum of 700 two years ago. The Finance Ministry, which has been leading the negotiations with the company, was trying to get the company to commit to an investment programme over six years or so, to be able to manage the downsizing gradually.

The deal would have come in exchange for a subsidy package, but the company never showed any real interest, possibly because the money the government put on the table was considered paltry, sources said.

Just last May, negotiations plunged into crisis after the company asked for a financial support package running into tens of millions of dollars.

The Finance Minister had made a counter offer with a yet undisclosed sum of money, but the company never replied.

The international financial crisis has now precipitated the plans and a decision was taken at the chipmaker's headquarters in Rome in the past weeks to go for immediate layoffs.

The company has been hit hard by declining demand for micro chips from its main markets in the automotive, computer and mobile telephone manufacturing industries.

However, according to international analysts, the crisis has exposed structural weaknesses in the multinational's operations.

The government even asked for the assistance of Italian Prime Minister Silvio Berlusconi. Finance Minister Tonio Fenech met with top management officials in Rome and Italian undersecretary Enzo Scotti, who came specifically for talks on the subject a few weeks ago. However, there seems to have been no change to the plans.

When asked for details on the statements made internationally by the company, the group's human resources manager Tonio Portuguese, who is based at the Kirkop plant, simply said: "We have nothing to add to what the corporate company said. We have no indication as to the number of lay-offs yet."

Sources close to the Kirkop plant said the local management is really in the dark.

Similarly, last Wednesday, Mr Fenech told The Times the government was not aware of any plans for mass redundancies. On Thursday, he reiterated that he had "not been informed of any plans by ST, other than those already reported in the media".

The Franco-Italian group is one of the world's largest microchip makers, with global revenue of some $10 billion. The local plant accounts for about half of Malta's total domestic exports.

The Kirkop plant has been 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.

mmicallef@timesofmalta.com