The covers and editorials from leading weeklies of the Left and Right for the work-week ending Friday, 20 December

Mladina: Chinese-owned Gorenje seen as threat by Germany

STA, 20 December - The left-wing weekly Mladina is concerned about whether the Slovenian government is aware of the geostrategic interests involved in Gorenje becoming a Chinese company, predicting that Germany will make an all-out effort to prevent Hisense from making a foray into the European market through Slovenia.

In the latest editorial, headlined Angela Merkel Watching Gorenje, editor-in-chief Grega Repovž writes that Hisense has been unsuccessfully trying to get into the German market for almost two decades as all its attempts have been blocked by Germany and its industry, in particular the Bosch - Siemens group.

He says that this complicates the situation for the Slovenian household appliance company, because the moment it was acquired by Hisense, Gorenje became the company that the European industry and countries, in particular Germany, will do everything to stop in its expansion efforts.

"This is a big game that is not necessarily bad. Wise countries, especially small ones play at several sides, cooperate with various global superpowers thus establishing its power internationally.

"The German government does not feel any true sympathy for Slovenia, we are part of its interest but not its friends. To them, Hisense Slovenija is in fact a more important player than Slovenia," writes Repovž.

He goes on to say that China cares equally little about Slovenia, except when its geostrategic interests are concerned, wondering whether the Chinese government is extorting Slovenia over Gorenje into adopting Huawei's 5G technology, which he infers from Chinese Foreign Minister Wang Yi's visit.

He wonders whether the Slovenian government and intelligence services think ahead far enough, including how Slovenia's position in the eyes of the German government has changed and what will the consequences be for Gorenje.

"It is intriguing that Slovenia is getting involved in these big geostrategic games, but the fundamental question is whether it is fit to play. We are a country without long-term alliances, we do not have an ally of our own like the Croatians, who have Germany, or the Serbs France (and Russia)."

Repovž also notes the geostrategic interests related to retailer Mercator, where it says Slovenia has become vulnerable against Russia, which controls Mercator.

Or Ljubljana airport, where Lufthansa, one of the shareholders of the German operator of the airport, has now taken over most of the air traffic to and from Slovenia. "There was no coincidence in Adria Airways's collapse, only a clear business plan on the part of the competition."

Reporter: Poor governance at state-owned companies

STA, 16 December 2019 - The right-wing weekly Reporter writes about corporate governance at Slovenian state-owned companies in the latest editorial, finding that the executives affiliated with former President Milan Kučan are on their way out.

"Members of Kučan's table on the front page of the latest issue of Reporter (...) are the part of the deep state that is on its way out, their businesses are being taken by a new guard, rift apart into several networks that fight each other ruthlessly for control of the (para)state sector," writes editor-in-chief Silvester Šurla.

He writes that, 20 years ago, three close "adjutants of Kučan ruled" in the energy company Petrol, which "has always been and will continue to be a political company, as long as the state has a major say there. A big sack of money that many of the chosen ones feed from (...)

"Two months ago Petrol saw a showdown between 'red' networks, the losing side being the Borut Jamnik clan, an important member of which was Tomaž Berločnik, who rose to the post [of Petrol CEO] eight years ago with the help of politics and will now likely leave the same way."

Šurla offers Petrol as well as retailer Mercator and household appliances maker Gorenje as examples of how deep in the doldrums Slovenian corporate governance at state-owned companies is.

He says that Mercator and Gorenje were driven to such a poor state by domestic owners and managers that they are now being salvaged by foreigners.

"These days it is priceless to hear and watch how representatives of Russian Sberbank and Chinese Hisense are trying to drive home to the Slovenian public that socialism is over."

Šurla goes on to say that a person from China, the cradle of Communism, had to come to Velenje to spell it out that socialism is over once and for all, that there will be no future for Gorenje without a profit.

Under the headline Thin Red Line, the editor concludes that Mercator and Gorenje are "paying the toll of the notorious 'national interest'. Other 'flagship' state-owned companies are bound to face a similar fate in the future. Once they have turned into a heap of rust and politics is forced to sell them."

All our posts in this series are here

STA, 29 November 2019 - The Velenje-based household appliances maker Gorenje, owned by the Chinese conglomerate Hisense, will finish 2019 in the red but hopes to return to profit next year. According to chief executive Lan Lin, this will require a change of mindset, and it will determine whether a TV production facility will be built in Velenje.

Gorenje last year posted a group net loss of EUR 37.7 million, and chief managing director Lin, who is also the chairman of Hisense International, expects it to be in the red at the end of this year as well.

While refusing to reveal any figures, he said Gorenje's business was worst at the beginning of the year but was improving recently due to measures to improve efficiency.

"The first quarter was very bad. In March, things started changing, and a turnaround occurred in May, then July and August were worse because of collective leave, and we were profitable again in September and October," he said.

According to Lin, Gorenje is doing well in Eastern Europe, while in western Europe, especially in Germany, it is considered a low-end brand. "We wish to change that next year. We must raise quality, and our key goal is to raise the prices Gorenje is getting on the market by at least 10%."

Revenue is expected to rise by 5.5% this year and by at least 10% next year.

Western Europe will be crucial, and Gorenje will also start selling in its network Hisense's products such as TV sets, smartphones, air conditioning and refrigerators on European markets and the Commonwealth of Independent States.

Meanwhile, Hisense will start marketing Gorenje and its Asko brand in the Hisense's sales network across Europe and overseas.

A major boost to the group's revenue is expected to be provided by the Chinese market, where Gorenje and Asko are well received. The premium brands Asko and Atag are on sale in more than 200 partner stores.

Lin expects the group to return to profit next year. "We are counting on some EUR 15 million in profit," he said, adding that the group's problems had been detected and would be tackled "step by step".

One of the measures will be to rejig the workforce, with Lin noting that "every 100 production workers support 40 people in sales, marketing, legal and finance ... while the average in our industry is 20."

According to Lin, Gorenje's profitability is crucial for all future investments. Next year some EUR 45 million should be invested in the development of new products, tools and production lines. "If we don't do that, our products will no longer be competitive in five or ten years."

The group's efficiency is also to be boosted through the separation of production in Velenje from administration, which is to relocate to Ljubljana as Hisense Gorenje Europe. "We must become leaner and integrate into Hisense."

Lin thinks Ljubljana will be a better location for attracting talent from all over Europe and is also more appropriate for meetings.

Gorenje also to plans to build a new TV manufacturing plant in Velenje that would employ 1,000 workers but this will depend on the business results, Lin warned.

The plans for the factory are ready but shareholders have put the project on hold because they want efficiency improvements first, he explained. "If all goes according to plan we will definitely realise this project."

Lin thinks the government will provide a financial incentive for the project but said it would not be substantial and noted that companies should not rely too much on government support.

He also revealed that through Asko, talks were under way for the takeover of German TV manufacturer Loewe and that the outcome of the talks should be known in the next few days.

If the takeover is carried out, the TVs would be produced in Velenje.

Asked why Gorenje is reducing its labour force if a new factory is planned, Lin said they were laying off people whom they did not need at the moment.

He would like the work for 100 people to be conducted by 80 people in the future, and they would receive extra pay for the extra workload, while the rest would work at the TV factory.

The Gorenje management is also in regular contact with trade unions, he said, adding that it had proposed a new round of talks only a few days ago. The open issues include a pay raise and the payment of a Christmas bonus.

The group plans to continue selling non-core assets, including some profitable companies, he said.

Hisense remains one of the main UEFA sponsors and next year Gorenje will be promoted at the European Football Championship in what will be its first promotion at such a level, Lin said.

All our stories on Gorenje are here

STA, 12 November 2019 - The mayor of Velenje has appealed to Prime Minister Marjan Šarec to prevent the head office of the household appliances maker Gorenje being moved to Ljubljana as planned by its new Chinese owners.

Mayor Bojan Kontič sees the plans, announced by Gorenje in late October, as yet another step to centralisation, which he says is one of Slovenia's key problems.

A press release from the Velenje city said that the mayor's letter of protest had been forwarded to Chinese Ambassador to Slovenia Wang Shunqing, Economy Minister Zdravko Počivalšek, Chamber of Commerce and Industry chairman Boštjan Gorjup and the media.

The reaction comes after Gorenje announced it would split up into two companies as part of its integration a year after it was taken over by Hisense.

The management and administration was to move to Hisense Europe, headquartered in Ljubljana, which was to provide corporate support services for all Hisense companies in Europe.

Production was to remain based in Velenje, now Slovenia's sixth largest city where Gorenje has been operating since its inception in 1950.

The release from the city administration expressed concern over the latest activities and plans in what has been the pillar of the local economy for seven decades and one of Slovenia's largest exporters.

"The current situation at the company, the new management's plans and the mood among the employees are far from the promises and commitments the new owners made upon the takeover," reads the release.

The local government met Gorenje chief managing director Chao Liu and representatives of the staff and their trade union in recent days over what it described in today's release as a critical situation.

The employees are worried and scared because of conflicting information about the company's plans and future, which they do not get until after they have become facts, say the city authorities.

"Due to substantial pressure on stepping up the work tempo, sickness absences are getting longer, increasingly many qualified staff is leaving, employees, including those with disabilities are being made redundant, and discontent among the employees is growing by the day."

Arguing that moving highly-qualified staff to Ljubljana does not augur well, the city authorities say they believe the Gorenje management can run the company as well as it stays in Velenje.

The local authorities are also concerned about Gorenje's plan to move its call centre to Serbia, saying it suggests the management was planning to keep only production at minimum possible costs in Velenje.

In response to the mayor's letter, Gorenje said that calls on the prime minister to interfere in business decisions of a fully privately-owned company were unjustified and illegitimate.

The company is planning to accept the invitation to join the December session of the city council in order to present Hisense's plans in detail.

Gorenje expressed understanding for the local community's concerns, while it also said that it fund the local community's support and cooperation exceptionally important.

The company said that Slovenia would gain from the creation of Hisense management hub for the whole Europe in Ljubljana.

The owner is organising the company in such a way as to integrate it into the Hisense corporation's business environment, while also restructuring operations in order to preserve the company and to allow it to grow in the long run, Gorenje said.

It added that this should be in the interest of the municipality in which Gorenje with more than 4,000 employees was becoming Hisense's central production location for the entire Europe.

STA, 16 August 2019 - Home appliances maker Gorenje, which terminated the contracts of 60 workers as part of reorganisation last month, has told the STA it was looking for about 100 new workers in production to meet increased demand.

Gorenje representative Denis Oštir said that the new workers would start already in September, would get fixed-term contracts and were needed in all of the company's production facilities in Velenje, mostly in the production of washing machines and driers.

Gorenje, which was taken over by China's Hisense last year, initially expected 270 workers would be made redundant at its parent company in Velenje, but ended up terminating a total of 60 contracts of employees working in back office jobs tied to production, such as storers and quality controllers.

Oštir told the STA that all had been offered employment in production, but only some of them accepted.

As part of reorganisational changes, which have been under way for some time, Gorenje has offered new contracts to a total of 1,393 back office employees, preserving existing wages and other rights.

Gorenje, which employs over 4,000 workers in Slovenia and abroad, recently announced that restructuring would not only be limited to the parent company and would also affect all subsidiaries and business units abroad.

The company has also announced it will build a new TV manufacturing plant that will employ 1,000 workers.

Keep up on business in Slovenia here

STA, 6 June 2019 - Home appliances producer Gorenje will lay off 104 workers, which is fewer than the initially presented figure of 270, the in-house trade union said on Thursday.

Of the 1,481 workers planned to be laid off, 1,377 will be offered a new contract and the rest will be sacked, SKEI Gorenje said as it received the lay-off plan from the management.

Gorenje employs over 4,200 workers in Slovenia and abroad, and is amid reorganisation following last year's takeover by China's Hisense and EUR 37 million in net loss.

The union fears this is just the first step towards more lay-offs, which is in contradiction with Hisense's announcements about production expansion and new hirings.

It also insists that the former Gorenje management should be held responsible for the wrong decisions which had caused the group to sink into the red.

The union said social dialogue in the company was worrying; the management set the amount of the annual holiday allowance unilaterally, even if this is not in line with the collective bargaining agreement, noting the allowance was lower than in 2017.

The union blames such moves on the Slovenian advisers to the Chinese owners, which however risk falling out of favour with the employees.

Some trade unionists have according to SKEI Gorenje already received anonymous threats to be careful what they tell the media.

SKEI Gorenje thus announced it would fight for workers' rights with all means.

The management, on the other hand, said the new contracts had been checked by the trade union and some of its remarks taken into account.

The workers will start getting new contracts on Monday, a process planned to be completed by the end of June.

Earlier this year, Gorneje announced the majority of the planned redundancies would not affect production workers but cleaners, security staff and warehouse workers.

Meant to provide for Gorenje's sustainable growth and development, the reorganisation was said to apply to the entire group not the just the parent company in Velenje.

Gorenje generated almost EUR 1.2 billion in sales revenue last year, a 1.7% drop compared to 2017, finishing the year in the red.

STA, 25 April 2019 - Household appliances maker Gorenje expects to lay off 270 people as the group undergoes reorganisation following a recent change in ownership. The newspaper Večer meanwhile learnt from the in-house trade union that 1,720 people would be sacked, of which 1,450 would be offered new contracts.

The company, which employs a total of just over 4,200 people, and has recently been taken over by Chinese Hisense, said in a statement following the report by Večer that reduction staff in support services would be achieved through attrition.

Nonetheless, layoffs will not be avoided if the company will determine that there is no more need for a certain position.

The trade union meanwhile said it was willing to use any measure to fight layoffs and has called a press conference for tomorrow. It also refused to take part in talks about redundancy criteria, scheduled for today.

Nevertheless, Gorenje expects a new organisation scheme to be adopted in the first half of May. The next step will be to finalise the redundancies list and adopt a plan of action.

The trade union strongly opposes any moves toward redundancies since it believes the employees are not responsible for the company's poor business results.

It wants the company's management to take responsibility for the poor performance by initiating a procedure investigating liability of individual top managers.

Gorenje generated almost EUR 1.2bn in sales revenue last year, a 1.7% decrease compared to 2017. In 2018 the company sustained some EUR 37m in net loss, while it brought in a profit the previous year.

STA, 24 April 2019 - Economy Minister Zdravko Počivalšek visited the headquarters of Hisense, the owner of household appliances maker Gorenje, on Wednesday, the second day of his visit to China. He said Hisense would get the government's support in simplifying procedures and having its investments approved in Slovenia.

Počivalšek was received by Hisense group vice president Tang Yeguo and the delegation visited the manufacturing plant for cooling devices and the showroom, the company said in a press release.

Počivalšek's five day trip to China aims at boosting business ties. He is scheduled to meet the representatives of Liaoning Shenyang, where automotive maker TPV is to launch a new facility.

Slovenia has improved its visibility in China over the past five years, which is reflected in the continuous growth of trade between the countries, the Economy Ministry said in a press release.

China is Slovenia's most important trade partner in Asia and 13th overall, ranking before Russia and the US.

Nearly 12,600 Slovenian companies imported from China last year, while 475 exported to China, generating EUR 1.3bn, 11.8% more than the year before.

All our stories on Slovenia and China are here

STA, 25 March 2019 - Household appliance maker Gorenje, which was taken over by China's Hisense last year, reported EUR 1.184bn in group sales revenue for 2018, a 1.7% decrease. After ending 2017 in the black, Gorenje recorded a EUR 37.3m net loss in 2018, or EUR 111.2m when factoring in one-off and extraordinary events.

Earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 53.5% to EUR 29.6m. Earnings before interest and taxes (EBIT) were EUR 28.2m in the negative after a EUR 12.1m plus had still been recorded in 2017.

"In the first half of the year, performance was consistent with the budgeted dynamics; in the second half, however, it was adversely affected by uncertainty among our partners with regard to the outcome of the strategic process, and it worsened as a result," Gorenje wrote, referring to the sale to Hisense.

The largest decline was seen in industrial (OEM) deals, "as customers trod very warily when doing business with Gorenje, for reasons referred to above".

Without the decline of OEM deals, revenue in Gorenje's core activity would have grown relative to the year before, said the company which employs slightly over 11,000 people.

As to the different net loss figures, Gorenje pointed out that assumptions and methodologies of accounting estimates changed considerably, with the "adjustment upon integration into Hisense having had many one-off and extraordinary effects on Gorenje results".

Gorenje generated 91% of its revenue in its core activity of domestic appliances. It primarily grew in eastern Europe, in particular in Hungary, Ukraine, Bulgaria, and the Czech Republic where it is marketing products under the Asko brand.

Revenue on the other hand decreased in western Europe, where the company felt the effect of strong competition and labour cost pressures.

"As sales decreased, results from operations were negatively impacted by the unchanged amount of fixed costs that were impossible to adjust to the lower-than-planned sales in such a short period of time," Gorenje wrote.

The company said it continued to invest in development, earmarking 2.5% of total revenue or EUR 30m for this purpose. The same amount was invested last year into marketing.

The core company increased sales revenue by 2.2% to EUR 819.3m but recorded a EUR 126.8m net loss after being EUR 470,000 in the black in 2017.

All our stories on Gorenje can be found here

STA, 1 February 2019 - Gorenje, the Velenje-based household appliances group which was taken over by China's Hisense last year, is cutting 325 temporary-basis jobs, according to information from the in-house trade union.

Gorenje confirmed that fixed-term contracts of 190 workers had elapsed, but the head of the in-house trade union Žan Zeba insisted that 325 jobs were being slashed, including agency workers.

Speaking with the STA, the head of the in-house trade union Žan Zeba said the news came as a negative surprise after the company's plans about expansion of production and extra hiring.

Zeba said the Gorenje management had promised the workers who are now being laid off full time jobs. He also said that it would be hard to meet the output goals given the current labour dynamics.

"After the very good test results of our new generation appliances we definitely expect production to increase and the capacities to be filled; we will welcome all new investments once they happen."

Zeba also hopes that the employees' wishes be taken into consideration in the company's reorganisation.

He said the management was planning to launch a new dishwasher production line in mid-year, but the trade union did not have any information about it.

Production of build-in freezers and fridges is to be moved to the subsidiary in Valjevo in Serbia in the coming months.

Denis Oštir, director of corporate communication at Gorenje, told the STA that the mentioned workers were on temporary job contracts. "These contracts have now run out."

"Gorenje denies in the strongest terms the information that we will lay off 325 workers. We will not give notice to a single worker employed on fixed or non-fixed terms," Oštir said.

After receiving official information from the staffing department, Oštir also denied that employment contracts of 325 workers had run out, saying the correct figure was 190 workers.

He added though that it "is true that the fixed-term contracts of a number of workers have elapsed at this time. This is a matter of seasonal change, which is common in a company's operations".

Oštir said the company was adapting to the clients' demands and seasonal trends in demand. At the end of 2018, demand for labour force in production was bigger because the company created stocks because of the move to Valjevo.

Asked about the plans for a new TV plant announced by the Chinese owners, Oštir said the project was in the phase of acquiring the necessary documents.

The plant is to be built by the existing warehouse in Velenje and is to create 300 to 400 jobs.

Gorenje is currently being transformed from a joint stock company into a limited responsibility company. The company delisted from the Ljubljana Stock Exchange last year.

STA, 22 September 2018 - Gorenje chairman Franjo Bobinac has told the newspaper Večer that after the takeover by China's Hisense, the household appliance maker remains a Slovenian company with headquarters in Velenje. He said that Hisense had great plans about growth of Gorenje, which meant a bigger production capacity and more jobs.