Home appliance maker Gorenje announced this week it would move a small share of its production to Serbia as part of a drive to cut costs. Although this has sparked fears among its workers of production cuts, the company maintains that jobs in Slovenia are safe.

In line with the plan, which the company said it would present to the press in more details in the second half of February (most probably together with the 2009 earnings report), Gorenje will move the production of low-end refrigerators to its plant in Valjevo, Serbia.

According to the company, this would amount to a total of 2 per cent of all of the home appliance maker's output. The plant in Velenje, Slovenia, will subsequently concentrate on high-end refrigerators and freezers. Gorenje said in a statement issued on Tuesday that this was part of "cost- and production-optimisation efforts".

Those working on products whose manufacturing is slated to be moved to Serbia will be transferred to production of higher value products in Slovenia. "These products can justify the labour costs in Slovenia," Gorenje said, adding that production in Slovenia will remain "the company's key lines in the future".

"Since we are continually expanding and developing the product line and have been increasing output in the first months of this year, there is no plan to reduce employee numbers as a result of the move."

Despite the reassurances from the company, the plans sparked fears of job cuts in Velenje. Indeed, news of the production move appeared first on a forum in Velenje, forcing the company to issue a statement before its planned announcement later this month.

The story has received wide attention in Slovenia's media. In a reaction, Maribor-based daily Vecer labels fears of job-losses in Velenje due to the planned move as misplaced in Thursday's commentary.

The paper points out that the company has invested tens of millions of euros in upgrading its plant in Velenje in recent years, which is why it would not make sense for it to abandon production in Slovenia. It says that even an increase in production costs brought on by last year's rise in salaries in Slovenia cannot bring this about.

The paper suggests that the rumours of a production shift might have been placed in the public by Gorenje management as part of its demands for better transport links.

Velenje lies outside of the motorway network and the 80 km drive from Ljubljana may take as much as one hour and a half due to congestion on the regional road leading to the Ljubljana-Maribor motorway.

Gorenje currently employs 10,860 people, including 7,700 in Slovenia. The company had previously planned to reduce staff numbers by 350 this year as part of an ongoing programme of "soft staff cuts", which are based on early retirement and restricted hirings.