STMicroelectronics (STM) yesterday confirmed it had no immediate plans to close down its Maltese operations, but that it will be scrapping two factories in the United States and another in Morocco.
The company, however, added a warning that the Malta plant would have to pull its socks up and begin performing along the lines of other EU-based facilities.
Presenting the company’s third quarter financial results yesterday, STM chief operating officer Alain Dutheil commented, “We had planned a number of different closures of plants where we have costs. We have decided to discontinue two facilities in the United States and another in Morocco. These are our plans.”
Underscoring the company’s decision not to close the Malta plant, Mr Dutheil, however, warned that the Malta facility will have to move toward the production of higher added value products and that “the Malta factory will have to contribute like all the other European factories.”
Speculation has been rife over recent weeks that the Malta factory could cease operations, after Dutch bank ABN Amro suggested STM could close down some of its European facilities, including the Maltese operations, as it struggles with the effects of an ever-weakening US dollar.
A decision to close the Maltese operations would have proved disastrous for Malta, given the fact that STM, Malta’s largest factory, employs in the region of 2,500 Maltese workers, makes a considerable contribution to Malta’s gross domestic product, supplies lucrative tax revenue to the government and also accounts for a large part of Malta’s import and export activity.
While STM’s third quarter results were generally welcomed, it warned that it was hard hit by the unstable US dollar in that a mere one per cent fluctuation in the dollar’s value effectively deletes USD40 million from its annual operating profit.
In response, the group is aiming to “accelerate” its already underway restructuring programme so as to concentrate on high-end, high-margin operations.
The company, however, gave no indications it would be closing any factories in Europe.
Nor did it indicate whether it intended restructuring any of the Maltese operations, such as trimming down its workforce or closing any of its more cost intensive or lower added value production lines.
Chief executive officer Carlo Bozotti said yesterday the company would be “less tolerant with some of the product families that are more impacted by the dollar rate”.
He remarked that the de-consolidation of the flash memory business, spun off into a joint venture with Intel, has made the group “a less capital intensive company”.
He added, “We want to also be very aggressive in potentially pruning those (product) families that due to the dollar rate are not performing well.”