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Friday, July 31, 1998 Published at 13:18 GMT 14:18 UK


Shock at Siemens jobs loss

The factory was opened by the Queen in May last year

The German electronics group Siemens has said 1,100 people at its factory in Tyneside will lose their jobs by the end of the year unless a buyer can be found for the plant.

The company blames a collapse in worldwide demand for computer chips and a growth in production by South-East Asian countries.

BBC Business Correspondent Peter Morgan reports on the microchip industry in the North-East
The Trade and Industry Secretary, Peter Mandelson, said the decision was a savage blow for local people and that the government's priority was to find a buyer.

The opposition spokesman John Redwood blamed the government for the closure, saying the strength of sterling meant Siemens would shut the UK factory rather than the another European plant.

North-east trades union representatives have said the closure is a tragedy for the region.

Bottom drops out of chip market

The President and Chief Executive of Siemens Semi-Conductor Group, Dr Ulrich Schumacher, broke the news to 500 workers on Friday morning.

BBC North of England Correspondent Mike McKay: Shock, astonishment and little hope
Other workers are being consulted and the plant will stop operations next year.

The factory was opened by the Queen in May 1997 and was heralded as proof of the industrial development in the region.

But Siemens experienced losses of 340m last year in its global semiconductor business and warned last month that earning would not outpace sales.

[ image: Siemens has completed a review of its output after losses]
Siemens has completed a review of its output after losses
Siemens spokesman Alastair MacDonald said: "The company has had to review its five semiconductor plants and today's announcement is the result of this review.

"We have had to come up with a solution to reduce capacity as there is an oversupply in memory chips.

"Prices have fallen so significantly that we are making a loss on every chip we produce."

Mandelson to look at reclaiming sweeteners

The Secretary of State for Trade and Industry, Peter Mandelson, told the BBC he had met with Siemens managers on Friday to discuss future options for the factory.

Trade & Industry Secretary Peter Mandelson: "We will try and sell this world-class plant"
Pressed on whether he would try to recoup the millions of pounds the government gave to the German group as an inducement to invest in the area, Mr Mandelson said he would be "looking at that very carefully indeed".

But he said his priority was to find a buyer for the plant.

He told the One O'Clock News: "Although Siemens are leaving Tyneside, this plant is not."

Mr Mandelson added: "This is a very savage blow. I feel very strongly for the workforce and their families.

"This is nothing to do with local conditions, the quality of the plant, the quality of the workforce or any UK or domestic consideration."

Opposition blame government

The Conservative opposition was quick to seize on Siemens' decision as an example of government mismanagement.

Shadow Trade Secretary John Redwood said: "Siemens' announcement today is another example of the terrible damage this government's economic policies are inflicting on exporters' and manufacturers' confidence and on jobs.

"We have been warning for months that the government must change its economic policy to give manufacturers a chance.

"I challenge the new secretary of state for trade and industry today to go immediately to the chancellor armed with this latest example of manufacturers' distress.

"He must insist on a different approach to public spending, to the promotion of savings and to welfare reform, to take the pressure off the pound and interest rates, otherwise a lot more manufacturers will go under. Labour is bad for business."

Unions hope for 'something from the ashes'

[ image: Bob Howard:
Bob Howard: "It's a tragedy"
Bob Howard, the regional secretary of the Trades Union Congress, said the closure is a "tragedy for everyone in the region".

"A lot of effort and time and infrastructure has been placed in this investment. It is a very important flagship company. We are very disappointed with the situation.

"No-one in this region anticipated this decision. I would call on Peter Mandelson, even at this late stage, to plead with the company not to change the status quo but to pursue the investment.

"I only hope we can gather something positive from the ashes of this situation."

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