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INVESTMENT ADDS JOBS, THOUGH MOTIVES CRITICISED BY REGIONAL LABOUR OFFICE

Sony investing in Slovak expansion

A world leader in the electronics industry and famous for its televisions, stereos and video games, the Japanese-based Sony corporation established itself in Slovakia in 1995 by setting up a television manufacturing plant in Trnava, 50 kilometres north-east of Bratislava. Since its inception in Slovakia, the company's presence has transcended that of fun and games, as evidenced by its serious growth through the years in production and investment (see chart, page 7).
Sony's latest influx of direct investment to expand operations (its largest investment into the country ever) is slated for late summer promising to create jobs and curb the high rate of unemployment in the Trnava region.

A world leader in the electronics industry and famous for its televisions, stereos and video games, the Japanese-based Sony corporation established itself in Slovakia in 1995 by setting up a television manufacturing plant in Trnava, 50 kilometres north-east of Bratislava. Since its inception in Slovakia, the company's presence has transcended that of fun and games, as evidenced by its serious growth through the years in production and investment (see chart, page 7).

Sony's latest influx of direct investment to expand operations (its largest investment into the country ever) is slated for late summer promising to create jobs and curb the high rate of unemployment in the Trnava region. However, critics in the Trnava labour office said that they were worried the electronics giant was only concerned with profits and was insensitive to the region's employment needs. Sony refuted the criticism stating that the well-being of its employees was important to them.

At the Trnava plant, Sony focuses on the manufacturing of colour television sets and television components such as electron guns, printed circuit boards and deflective coils. The latest expansion project will augment existing operations, and is projected to increase the workforce from 769 employees to approximately 950, representing an investment of 185 million Slovak crowns ($4.3 million). In the next two to three years, the number of regular employees is anticipated to grow to more than 1,000.

The current rate of unemployment in Trnava currently stands at more than 13.6%, or 9,475 people. Director of the Trnava Labour Office, Daniela Urbanovská, said that Sony's operations did assist in helping the problem, but didn't agree with the company's business philosophy, which she felt to be more profit-driven, ignoring the betterment of the area.

"The development of the region is not a high priority for them," said Urbanovská. "They are more concerned with competing against international companies with the products they are producing and are looking for the highest profits. They do help with the unemployment situation, but I believe the main reason they came here was for the cheap labour force." She added that the average pay of other major Trnava companies was much better than that of Sony. If it were cheaper for Sony to operate in another country such as Ukraine, she said, they would move there.

The general director of Sony Slovakia, Mitsuyoshi Yamada, disagreed. "This (statement) is wrong. Sony itself is not below the average wage when you take into account the total benefits in the daily operations, such as opportunities for raises and advancement, and a better work environment. It is important to us that our workers are happy."

Martin Barto, head analyst for Slovenská Sporiteľňa, said that any project like Sony's positively effected the region. In the larger picture, he said, FDI by companies such as Sony all played a major role in strengthening Slovakia's economy.

Yamada said Slovakia's accessibility to Japanese and European clients was a key factor in the company's desire to establish itself here, and attributed that to its present success. But, setting up shop in Slovakia had not been without its difficulties, he explained, as the government had reneged on a land deal in Nitra when Sony first looked at the area.

"The government promised us to give us that location, but a week later, they informed us that Volkswagen had taken it. We were really surprised and very angry. In the end, we are happy now here, so it is not a problem," Yamada said, adding that the government then assisted them in finding their present location in Trnava.

Due to peak demand for televisions taking place during the Christmas season, Sony's labour force fluctuated throughout the year (mainly in manual-labour and operation positions), with the autumn and winter months seeing the greatest number of people hired. This situation created a problem in the region's employment, as workers laid off each spring were the same workers rehired each fall, annually showing up at the Trnava labour office in search of benefits during their down-time.

Urbanovská said that although Sony's workforce was one of the largest in the region, other smaller companies in the Trnava region had a more positive influence.

"The most important factor affecting unemployment here are those companies that have a steady workforce instead of relying more upon seasonal workers," she said. "Companies like Sachs and Spartan are foreign companies that use workers year round and are the big employers and very important to the region," she said. The German automotive parts supplier Sachs presently puts 560 people to work, and employment at the Swedish furniture manufacturer Spartan (a major supplier for Ikea in Slovakia) now totals approximately 450 employees.

However, Sony and other businesses in the Trnava region are currently working together to find a solution to seasonal work. One idea currently in the works is to co-operate with other area employers such as paint manufacturer Chemolak, ice cream company IC Orient, and regional agricultural companies whose need for workers peak during the summer months. Ideally, the workers would simply move from their wintertime position with Sony to a summertime position with another company, thus avoiding the hassles and costs of downtime and claiming unemployment benefits.

"Last year we started on this programme only using a few employees, and we are now contacting them (other Trnava companies) to make a deal this year," said Sony's Yamada. "I believe the first experience worked out well for both parties. We are happy and they are happy."

Having first established itself in 1995, Sony's 1996 production totalled approximately 150 million crowns ($3.5 million). In the last five years, the company has invested more than 400 million crowns ($9.3 million), and at the end of 1999, its output reached a level of 2.5 billion crowns ($58.1 million) while it employed more than 750 people. More than 95% of Sony Slovakia's products are exported to Sony sales companies and manufacturers located throughout Europe including the United Kingdom, Hungary, Germany, Turkey, the Czech Republic and Russia.

Sony's expansion represented the latest flow of FDI into Slovakia since the beginning of the year, with other projects including expansion by Volkswagen, Pepsi and Swedwood. Analyst Barto said the present popularity of Slovakia was rooted in the anticipation of a bright future for the country. He believed that many foreign companies anticipated that Slovakia would become a part of international organisations like the OECD, NATO and the EU, and wanted to establish themselves here to get a jump-start on the competition while investment costs were relatively cheap.

Additional reporting by
Zuzana Habšudová

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