The chief executive of the US clothing multinational Fruit of the Loom, Mr Bill Farley, has stepped down from the post, though he will remain chairman.

In Chicago, Mr Farley said production and customer service difficulties would negatively affect Fruit of the Loom's performance until the end of the year, causing results to fall "significantly below analysts' expectations".

The company made "substantial progress" in the past 18 months in merchandising, new product development and product quality, Mr Farley said in a statement. This had been overshadowed by production and customer service difficulties, he said.

Mr Dennis Bookshester, a director, will become acting chief executive of the company, which will begin immediately to search for a permanent chief executive. Mr Farley said the management changes would enable the company to focus on its challenges "as it completed its transition from a domestic manufacturing concern [in the US] to a global marketing and manufacturing company".

Fruit of the Loom employs about 30,000 workers in more than 60 locations throughout the world. Last December, the company said it was closing its plants in Buncrana, Milford and Raphoe in Co Donegal with the loss of 770 jobs.

The company is moving its T-shirt production operation to Morocco, where wage levels are significantly below those in Europe. In a new business plan approved by the IDA, the company committed itself to retaining 700 sewing jobs this year and said 600 other jobs at its fabric production plants in Donegal would be safe until at least 2006.

A spokeswoman for Fruit of the Loom in Donegal was unavailable for comment yesterday.

Mr Sean Reilly, SIPTU's branch secretary for Co Donegal, said he had not been told of the development by the company.