Big difficulties force businesses cut down production and labor force

Planning the production and labor force cut is the thing that many enterprises now think about in order to overcome the current difficulties.

All Vietnamese enterprises are facing big difficulties, when the input costs (material prices, electricity and water prices, transport fee and labor cost) keep rising, the bank loan interest rates remain overly high, and producers dare not raise the sale prices of their finished products.

Some enterprises say that in 2011, they are “only brave” enough to strive to have the same business plan as the previous year. Other businesses say they dare not set up the profit targets for 2011.

Cao Tien Vi, General Director of the Saigon Paper Company, who is also Chair of the HCM City Young Entrepreneurs, said that the input cost increases have made the production costs increase by 20 percent, while producers only dare to raise the sale prices by 10 percent at maximum. Even the modest sale price increase of 10 percent makes enterprises worried, because they are not sure if consumers would accept the new prices. If the answer is “no”, this means that the products would be unsalable and manufacturers would incur losses.

Scaling down production is the thing Le Minh Ngoc, Director of a food company in Hanoi is thinking about. Earlier this year, Ngoc was confident enough to set up the target of obtaining 400 billion dong in turnover this year. However, realizing the big difficulties the company is facing, Ngoc has to lower the targeted turnover to 350 billion dong.

Choosing a production scale suitable to the current circumstances, narrowing the production scale, not employing new workers and organizing two working shifts per days instead of three are the methods Ngoc has chosen to survive the current difficulties.

Pham Hong Viet, Director of the Hanoi Rubber Company, which specializes in making canvas shoes, rubber boots, beach slippers for export to the EU market, complained that the company is meeting too difficulties when most of the partners who supply materials to the company are planning to scale down the production.

“It is really difficult for us to seek the suppliers who can provide materials for a long term and at stable prices to ensure the reasonable input costs,” he said, explaining that most of the input materials need to be imported.

The Long Vien Company in HCM City has reported that since the beginning of the year, the monthly sales decreased by 20 percent at minimum, while the input costs have been increasing steadily. The company plans to raise the sale prices by 10 percent in order to offset the input cost increases. However, the company still has not made final decision, because it fears that the price increases would not be accepted by consumers.

The board of management of the Rang Dong Light Source & Vacuum Flask also thinks that though the input material prices have been increasing sharply. It would be not easy to raise the sale prices of finished products. An executive of Rang Dong also said that many companies are considering scaling down production and laying off workers because of the loss.

The Vinh Cat Service and Trade Company said that in order to cut down expenses, the company does not plan to recruit more workers, even though it still needs more. Other enterprises have also said they have increased wages for workers and required more working hours, so that they cannot employ more workers at this moment.

Viet from the rubber company also said his company is applying necessary measures to cut down expenses. He has decided that the company has to save 15 percent of water and electricity per product and reduce the material loss ratio by 20 percent. As for the workforce, the company is planning to reorganize the administration apparatus by laying off workers.

Other enterprises now reportedly do not employ staff for medium positions, while they only seek the people for most important positions, or ask officers to undertake more works. It is clear that paying higher wages to working officers is cheaper than paying to recruit new officers.- TBKTVN

Tags: doing business in Vietnam, Vietnam business