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Electronics Production | June 22, 2010

Tiki to shut down water heater plant in Ljubljana

Gorenje Tiki, d.o.o., is starting the procedure to shut down the company. The main reasons for such a decision were the losses which have been increasing since last year.
In spite of the various measures taken to improve business performance, this negative trend has shown no sign of improvement whatsoever. Hence, the decision was made to prepare the winding down procedure in a timely manner, so to prevent further business losses or the risk of insolvency.

Water heaters are the core business of Tiki, and after the global economic crisis and a substantial drop in sales, the water heater market has yet to recover. Orders have not met production plans; sales in the first five months of this year have fallen by an additional 10% compared to the same period last year; and, income in 2009 was 27% lower than the previous year. Despite reducing logistics costs, the cost of purchase and of managing poor-quality, optimizing the products and cutting overhead costs along with increasing productivity, we were not able to compensate for the negative effects of the drop in sales.

Last year, the reduction in labour costs did not reach the value of the reduction in income (-16%); while this year, labour costs have even been increasing following the rise of the minimum wage. The high cost of wages, salaries, and operational costs (one of the highest on a worldwide level) is yet another factor affecting the business performance and competitiveness of the company. Therefore, the production of water heaters at the Ljubljana plant is no longer economically viable.

The plant will be shut down by the end of November. All workers currently employed in Tiki (270 of them) will receive their wages and all related allowances (including holiday allowances). After shutting down, the company will reimburse the employees with a complete severance pay package according to the law, and will continue to assist them in finding new jobs or jobs within the Gorenje Group.

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