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.