The administration at STMicroelectronics yesterday would not comment on the company's potential plans to relocate its plant in Malta as the government awaited a response to its financial and restructuring offer.

The Sunday Times reported this week that the company, which is Malta's largest private employer, with some 2,200 workers, has asked the government for a financial support package running into tens of millions of dollars.

The government made a counter offer last week but Finance Ministry sources said yesterday there had so far been no response from the company.

When contacted, the company's administration refused to comment on the situation, saying it was "not authorised" by the mother company to do so.

In the meantime, the government and the General Workers Union, which represents employees at STMicroelectronics, have agreed to meet later this week to discuss the situation. The minister would not be drawn into commenting on the amounts 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.

The Kirkop plant is said to be facing losses that could reach €58 million (Lm24.9m) a year, primarily as a result of labour cost and exchange rate pressures. The latter, in particular, has been exacerbated by the growing 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.

In a nutshell, the gap between the two currencies means that the company's costs, in euros, are inflated with respect to the company's revenue, in dollars, an industry observer explained.

Mr Zarb said, when contacted yesterday, that the union would be speaking to the company after they meet the minister this week.

In a letter dated April 18, sent to the union, the management 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.

Mr Zarb, however, said that while, on the one hand, the company was saying that it wanted to downsize the present workforce and revise the collective agreement, on the other hand, it wanted to lay down different conditions for new employees. "They're either going to downsize or they're going to employ new staff," he said.

Most of all, however, he complained about the fact that the management was making a labour cost comparison with Asian markets. The cost per unit in Malta is about $16 while that in Asia is just $2, he said, adding that Maltese workers could not be expected to compete on such terms.

STMicroelectronics has already decided to shut down operations that were deemed to be unproductive in Morocco and America.