Perwaja to close plants for a month
(AFP) Ailing Perwaja Steel today shut down its two manufacturing plants for a month to restructure its business, officials said.
An official with the state-owned company told AFP the plants in Kemaman in Terengganu and in Gurun, Kedah have been closed but declined to give further details.
The News Straits Times said Perwaja chief executive Abu Talib Mohamad announced the closure of the plants at a briefing Wednesday for more than 1,600 workers in Kemaman.
Abu Talib told the workers that the company had no choice but to offer a voluntary retirement scheme as it faced a major challenge and had to restructure the organisation.
In a memorandum on the scheme, he said the company had tried its best to restore its performance by cutting costs but reduced demand and high operating costs had made it impossible to continue production.
Perwaja Steel was planned as a centrepiece of Malaysia's industrialisation drive of the early 1980s but became one of its most spectacular corporate disasters.
The company, which has accumulated losses and liabilities estimated by industry officials at RM10.7 billion, has been under investigation for alleged abuse of funds since 1996.
Prime Minister Dr Mahathir Mohamad last year said the government hoped to revive Perwaja and was considering privatising the company.
Retrenchment exercise
The Business Times last October reported that Maju Holdings, which holds a majority stake in the company, had planned to trim Perwaja's 2,300-strong workforce pending government approval.
It quoted a source as saying that Perwaja needed only about 1,000 workers as it was operating at half its total capacity of 1.2 million tonnes.
Perwaja has two direct reduction iron reactors and five furnaces at its Kemaman plant but is operating only one reactor and three furnaces.
The Kemaman plant can produce 100,000 tonnes of billets, beam blanks and bloom monthly but output had fallen to about 50,000 tonnes, the Business Times said.
Most of this was transported to the second plant in Gurun, costing the company an additional RM50 a tonne in transportation costs.
At Gurun, monthly production of steel bars is restricted to 15,000 tonnes due to domestic quotas. It produces 8,000 tonnes of wire rods and between 10,000 and 15,000 tonnes of structural steel, the daily said.
Maju Holdings has proposed to the finance ministry to export the billets from Kemaman to neighbouring countries and source billets from manufacturers in the northern region for the Gurun plant to cut transport costs, it added.
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