ST to shed up to 450 jobs this year

STMicroelectronics will be shedding up to 450 employees in Malta this year in line with its plans to downsize its worldwide operations.

The news was announced by Finance Minister Tonio Fenech yesterday after holding two separate meetings with the company's top management and the General Workers' Union.

Mr Fenech said he was informed by ST that it intended to cut the number of workers by between 400 and 450 throughout 2009. With a payroll of 1,927, the redundancies account for 23 per cent of the workforce. The Sunday Times reported this week that the company is planning to reduce the workforce by as much as 60 per cent in the next few years.

Between 250 and 300 jobs are expected to be lost either through retirement or the non-renewal of temporary contract workers.

Mr Fenech said global demand for ST's products was expected to drop by between 30 per cent and 40 per cent this year, meaning that the company has to reduce its production capacity.

With the Kirkop plant being the only back-end manufacturing facility in Europe it was expected that the global downsizing would hit home.

Mr Fenech said the company's main cost concern was wages with Malta comparing unfavourably with China.

"What is positive in this situation is that management recognised that Malta is still technologically relevant to them and the company was trying to maintain its production levels despite the downsizing," Mr Fenech said.

He insisted the government will continue meeting with the management and the union to monitor the situation.

"We need to work together to sustain ST and make sure it continues its Malta operation," Mr Fenech said.

Meanwhile, in a letter to ST employees, which was also circulated to the media, group human resources manager Tonio Portughese said the company was relocating low value-added activities that would affect between 400 and 450 employees.

"This re-sizing will be mainly conducted through natural turnover and attrition, elimination of low performers and employees with high absenteeism rates and other measures that will be required to reach this re-sizing," Mr Portughese said.

He asked employees to maintain the "highest efficiency, quality and productivity" in these difficult months.

With ST being one of the major employers and the biggest exporter, the downsizing is expected to have an impact on the economy even if Mr Fenech downplayed the overall damage.

"There is no doubt that we have to generate new jobs to make up for the losses and this is no easy year. But, in terms of impact on GDP growth, we are not seeing any major effect if the company manages to keep within the current production levels as it intends to do," Mr Fenech said.

In terms of the indirect impact on other sectors of the economy, Mr Fenech said it was too early to assess the situation. "It all depends on whether they reduce their production rates and how they do it," he commented.

He said that he was meeting with other companies facing similar difficulties because of the international recession to see whether and how the government could help.

"We are ready to support factories that are still relevant to the country and I am meeting with the companies to see what their needs are," Mr Fenech said. When asked about introducing a moratorium on loan repayments for redundant employees, Mr Fenech said the ETC already had a mechanism of sorts.

"The ETC collects the information from the redundant employees and informs the respective banks of the situation. The banks have always granted moratoriums on loan repayments. This is a system that has been in place since the mass layoffs at VF and Lloyds," he said.

ksansone@timesofmalta.com