Ailing aircraft company to layoff 6,000 workers

Ailing aircraft company to layoff 6,000 workers

The Jakarta Post, Jakarta/Bandung

The government has finally decided to dismiss some 6,000
employees of state-owned aerospace company PT Dirgantara
Indonesia as part of a restructuring program designed to help
lift the ailing company out of years of financial difficulties.

The decision was made at a shareholders meeting on Tuesday.

The company's labor union, the Workers Communication Forum
(FKK), strongly protested the decision, and said that thousands
of workers would stage a massive demonstration on Wednesday in
Bandung, the home-base of the company.

Dirgantara president Edwin Soedarmo told reporters the company
would retain 3,673 workers, who would be selected through a fair
process to be conducted by independent human resources
consultants.

He said the restructuring of human resources would cost US$54
million including around $42.2 million for severance pay.

He said the fund to finance this program would be raised
through the sale of its assets, including land and stock of
products estimated to have a combined value of around $61
million.

He said the government would also help provide financing.

Dirgantara came to the attention of the public and the Cabinet
last month after the management suspended all of the company's
workers due to severe financial problems. But after a massive
protest and government intervention, the company reassigned 2,195
workers to complete ongoing projects, including component and
aircraft orders from overseas buyers.

Dirgantara, formerly known as PT Industri Pesawat Terbang
Nusantara, was established in the 1980s by B.J. Habibie, the
protege of the country's former authoritarian president Soeharto.
But the much-criticized project has endured years of turbulence
mainly due to weak sales performance, forcing the government to
step in to cover operating costs. Dirgantara's woes worsened
after the country plunged into the deep economic crisis of 1997.

Edwin said the employee retrenchment measure was unavoidable
if they wanted to salvage the company.

But Arief Minardi, chairman of FKK, protested the decision to
fire the workers, describing it as "very unjust".

He said that with efficiency measures in other areas, the
company could still survive without having to dismiss employees.

He added that the FKK would take legal recourse against the
decision, and that its members would take to the streets starting
Wednesday afternoon.

Meanwhile, Roes Ariawijaya, a deputy at the Office of the
State Minister of State Enterprises, said in addition to the
retrenchment measure, the company would also undertake a debt
restructuring measure, under which the Indonesian Bank
Restructuring Agency (a government body which took over bad loans
from banks in the late 1990s) would end up controlling 93 percent
of the company.

Dirgantara would also consolidate its operation and focus only
on four core businesses out of the current 28 business divisions.
The four core businesses are aircraft assembly, parts and
component manufacturing, maintenance operation and engineering
services.

Roes said Dirgantara would also need to secure another $39
million in fresh money as working capital to complete ongoing
projects with Pakistan Air Force, British Aerospace Engineering
and the Indonesian Air Force.