JAS Bardejov, one of Slovakia's largest shoe-manufacturers, will layoff at least half of its 4,080 employees on November 1 unless the firm, which lost 500 million Sk ($14.4m) in the first five months of this year, is relieved by a bank loan or rescued by the government, a high-ranking company official told The Slovak Spectator.
"We are planning to lay off some 2,000 employees," said Jozef Štalmach, the vice-president of JAS Bardejov's board of directors. "On August 1, we sent a letter informing them that in three months they will be done with work here." The layoff will be unpaid and indefinite, Štalmach added.
JAS has been hit hard by the tidal wave of shoe imports that has engulfed the Slovak market. Out of 13 million pairs of shoes sold domestically in 1996, 9 million were imports. This has cut drastically into JAS's position on the market. In the first five months of 1997, the company sold 400,000 pairs of shoes in Slovakia, an 8.4 percent market share.
"Shoe imports into Slovakia grew 20 percent over the last two years, and that is terrifying for us," Štalmach said. "We think that the biggest problem here is liberalization. Even the WTO [World Trade Organization] allows countries to impose restrictions when there are excessive imports. We have suggested to the government that imports should not exceed 6 or 7 million pairs of shoes. We'll see if the government agrees with this."
Mainly due to the decline in domestic sales, JAS's sales totalled 440 million Sk in the first five months of 1997, 5 percent less than in the same period in 1996.
Capital search
Faced with slicing the workforce to cut costs, JAS Bardejov has initiated a two-pronged approach to drum up capital. The company is negotiating for credit with several Slovak and foreign banks, Štalmach said, but he refused to name who they were and what amount the company is seeking. He hinted, though, that the loan will come from a foreign source, since the interest rates would be at least half the 20-25 percent rate being levied by Slovak banks.
However, he sounded optimistic the strategy would succeed. "I believe that JAS will be able to get some help, and then we will not have to layoff so many people," Štalmach said, adding that the company expects to get answers from the banks by mid-September.
JAS is hoping to convince its creditors that other products it's developing will pay off. "We are starting some new structures," Štalmach said. "For example, we started producing cables for [the German electrical energy firm] Siemens, and we have 300 people working there now."
JAS will also apply for inclusion into the government's corporate revitalization program, supposed to allocate funds to companies deemed most in need, operating in areas with high unemployment and guaranteeing employment in the region where it is located. In that case, JAS would seem to be good fit. It is the largest company in the Bardejov region of northeastern Slovakia, according to Štalmach. "JAS's stability is very important, because it affects most of the families in the region," he said.
While their shoe sales have slumped in Slovakia, Štalmach said JAS is stepping up its shoe exports to Western markets. In 1996, the company exported 860,000 pairs to Western markets, and this year expects to sell 1.35 million pairs, Štalmach said.
Another development that could help the company is the 7-percent import surcharge that the Slovak cabinet imposed recently on nearly 80 percent of country's imports. "We think our share on the Slovak market may grow with the import surcharge, but it's really hard to forecast," Štalmach said.
Special Reporting by Andrea Lörinczová
