Drop in orders pushes Hisense into massive layoffs
Hisense Europe's results for January and February were better than last year and the group expected EUR 1.1 million in profit for the first quarter. However, the pandemic slashed orders and the group incurred a loss of EUR 20 million in the January-March period. A loss of another EUR 14 million is expected in April and May, Hisense International chairman and CEO of Slovenia's Gorenja Lan Lin said in a video message.
Hisense Europe thus decided to cut the workforce to "save the company", but once the crisis is over, it wants to further develop, he said.
Although this does not mean doing business the old way, the group has not abandoned the plan to build a new television factory in Velenje, Gorenje's production base.
"We'll launch the project this year," said Lan, but slightly later than July or August as initially planned due to the Covid-19 crisis, after which Lan said the company would like to create "more and better jobs".
Although Gorenje will benefit from the government coronavirus state aid scheme, this will not be enough to offset the major loss of income, which will severely affect the company's bottomline, Gorenje's management said earlier in the day in a press release.
Consequently, around 700 production jobs will be slashed at Gorenje in Velenje and another 300 other jobs at Hisense Gorenje Europe in Ljubljana with soft methods, such as retirement as well as disinvestment.
Lan said in the video address speaking from the US that managers across the Hisense group would have their pay cut by 20-50% and would not be immune to layoffs.
He announced the group would focus on efforts to increase sales, speed up e-operations and other measures to adapt to the new situation resulting from the pandemic.
The announcement of layoffs has severely upset trade unions, as well as the workers' representative on the management board Drago Bahun.
Bahun told the press that since the Gorenje group had come under China's Hisense wing in summer 2018, 1,760 jobs had already been slashed.
Urging preserving as many jobs as possible, he wondered why the management did not introduce a shorter working week or send workers on furlough.
He finds cutting 2,200 jobs completely unacceptable, announcing workers would resist it with all means available.
He also expects the government to take a stance, so he invited the economy and labour ministers to visit the town of Velenje, Gorenje's production base.
Bahun is worried how the layoffs will affect Gorenje's development. "We won't survive by working at 50% of our capacities."
"Coronavirus is a big problem, but it's obvious that Gorenje also has other problems," he said.
Similarly, Deputy Mayor Peter Dermol and Gorenje in-house unionist Žan Zeba are worried about the impact of the layoffs for their region.
Dermol told the STA the layoffs were unacceptable, because they presented "a true social bomb for Velenje".
Lidija Jerkič, head of the ZSSS trade union association, demands the management explain how it arrived at such a massive figure.
Just like last year the management had presented a layoff plan just before May Day, she said noting "the figures are getting higher" and "the answers are getting worse or there aren't any".
Two opposition parties have already responded to the development urging the government to act immediately to find a way with the local community and the company to protect the workers.
SocDems leader Dejan Židan said 1,000 workers was 6% of jobs in Velenje. He recalled that when Gorenje was being sold, everyone - the government, Gorenje and the new owners - had talked about new jobs and further development.
Luka Mesec of the Left stressed that a pledge not to lay off workers should be set as a condition to receive coronavirus state aid. "The companies which receive aid must not lay off or pay out dividends," he wrote.
Chief economist at Triglav Skladi Roman Zidarn meanwhile warns that such massive layoffs could have a domino effect, prompting layoffs at many companies doing business with Gorenje.
He told the STA that the new Gorenje owners had responded to the global economic shock in the same way as the majority of other companies - with various forms of adjustment and optimisation.
While Gorenje is one of the biggest Slovenian companies it has always had a relatively low added value. "And in such companies labour costs are the first to come under fire in times such as the current coronavirus pandemic."
Gorenje is part of Hisense Europe, which employs over 9,300 workers, almost 5,600 in Slovenia.
The Gorenje group also has production plants in the Czech Republic and Serbia, as well as development and competence centres, and shops around Europe.
Its management estimated last December the group would finish 2019 with EUR 40 million in loss but the plan for 2020 was EUR 30 million in profit.
At the time the management said the group must become more efficient, so it launched restructuring this year.
The coronavirus made Hisense Europe close all of its production plants on 23 March, but production was partly resumed last week, with 420 Gorenje employees still on furlough.