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Orion-Hanel to follow Sony-Vietronics out of the market
After Sony-Vietronics announced the end of the joint venture, a second electronics producer, Orion-Hanel, which makes TV tubes, plans to leave Vietnam’s market as it has been suffering heavy losses.
The anticipated dissolution
Orion-Hanel is the first joint venture among the subsidiaries and associated companies between Hanoi Electronics Company (Hanel) and Orion, the South Korean partner.
Under the licence granted by the Hanoi Investment and Planning Department in February 1993, the joint venture has the investment capital of over $178mil, in which Vietnam contributes 30% of capital and the South Korean partner 70%. The joint venture was licenced to make TV tubes and tube spare parts for TVs and computers, and have the operation duration of 50 years.
According to Tran Quang Hung, Secretary General of the Vietnam Electronics Enterprises’ Association (VEEA), the 90s was the golden age of colour tubes made with CRT technology. Orion-Hanel provided tubes and accessories to nearly all domestic TV assembling enterprises, gaining the turnover of $200mil a year (domestic consumption and exports).
However, the decay of CRT technology has come with the appearance and dominance of LCD and Plasma TVs on the market.
In the latest document sent to the Hanoi People’s Committee, Nguyen Quoc Binh, General Director of Hanel, the parent company of the Vietnamese partner in the joint venture, urgently asked the local authorities to lend $10mil to the company with the capital sourced from the city’s budget, or a venture investment fund. Binh said that if the joint venture cannot find capital, it will have to declare bankruptcy.
To date, the total debts Orion-Hanel has incurred have reached nearly $41mil. The company still has not paid social insurance to its 1,700 staffs for the last seven months. Workers of the company have not been paid for seven months.
In fact, the company had to halt production for three months to settle difficulties until Hanel pumped $100,000 in to help pay salaries and import accessories to make products to fulfill signed contracts. However, the sum of money has not helped settle the current difficulties of Orion-Hanel. It has only helped the company to resume one production line since January 17, 2008.
Nevertheless, the Hanoi People’s Committee replied that it cannot rescue the company as requested, because the city does not have a venture fund, while there is no legal foundation to give state budget money to the joint venture.
Preparation needed for withdrawals
In fact, it is quite a normal thing for a business in a market economy to shut down or shift to other business fields, especially in electronics production, where new technology comes out everyday.
Prior to that, Sony-Vietronics also announced the shutting of its assembling workshop. However, it seems that Sony Vietronics will have a happier ending than Orion-Hanel.
Sony-Vietronics can take full advantage of the policy on protecting local production, with which the import tax rate of electronics products is as high as 50%. Sony-Vietronics has enough time to prepare to shift to other business fields as it realises that the import tax rates of 0-5% will not help it make profit any longer.
Hung from VEEA said that Sony-Vietronics has well prepared for the withdrawal. Owners and workers of the company have reached an agreement about the unemployment allowance rate.
Meanwhile, a lot of problems still exist in Orion-Hanel, though its death, like the death of Sony-Vietronics, was anticipated.
Several strikes took place in November 2007 as workers had not received salaries. 1,700 workers have been facing a lot of difficulties in their lives because of no pay and no social insurance.
To date, Orion-Hanel has not made any statement about the fate of the company, which makes workers fear that they will not have as happy an ending as Sony-Vietronics’ workers. Meanwhile, the number of workers who will lose jobs at Orion-Hanel is 8.5 times higher than Sony-Vietronics.
According to Hung, what’s behind the stories of Sony-Vietronics and Orion-Hanel is a lesson in corporate governance. Orion-Hanel should have understood that 14 years would be a long enough time for an enterprise to make tubes. Leaders of the company should have thought of preparing for the withdrawal.
Hung said that even though Orion-Hanel has $10mil now, it will not be able to reverse the situation. In order to shift to make LCD or Plasma TVs, the sum of money is just 1/3 of the capital needed, while other TV makers have been dominating the market, offering very attractive prices.
VNN
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