An unexpectedly sharp rise in cheaper yarn imports from lower cost economies combined with rising costs in Ireland have been cited as the chief reasons for an American firm's decision to cease operations in Donegal with the loss of nearly 300 jobs.
Unifi Textured Yarns (Europe) Ltd, which manufactures polyester yarn, is due to wind up its operations in Letterkenny in October.
Yesterday the president of Unifi Europe, Mr Fintan McGrath, confirmed that the closure is due to "continuing losses", with no likelihood of returning to profitability.
The Donegal plant incurred its first loss in June 2000 and in the year ending June 2003 the company reported losses of €10 million, a substantial proportion of which was restructuring charges associated with previous redundancy packages.
Although the company was restructured in March, with 120 job losses, Mr McGrath revealed that the business plan for the firm's future viability was based on achieving production levels of 520 tonnes of yarn per week. However production levels have dropped by around 25 per cent to around 400 tonnes per week.
He pointed out that imports of polyester filament into the EU have risen to record levels with prices falling by 6 per cent. Raw materials have also risen in cost while the strength of the euro against the dollar had made Letterkenny "less competitive".
Furthermore, the firm has seen electricity costs rise by 20 per cent in the last three years.
Mr McGrath stated that while the balance sheet and working capital position is "fairly strong", it was felt it would be better to cease manufacturing in Europe now rather than being forced into involuntary liquidation later.
He said the company has announced a redundancy package well in excess of the norm with workers being offered 3.9 weeks pay per year of service plus an enhanced defined benefit pension.
Unifi will continue to supply the European market with yarn produced in the United States and through Unifi Asia.
The Tánaiste and Minister for Enterprise, Trade and Employment, Ms Harney, said all the relevant state agencies were working to attract more investment into the county and would offer retraining to those made redundant at the Unifi plant in Letterkenny.
She insisted the Government was doing all it could but acknowledged Donegal is particularly difficult.
The Tánaiste said she was shocked by the closure because the IDA and her Department had been working with the company on a restructuring project since it announced it was to shed 120 jobs in March.
Local TD and Minister of State at the Department of Transport, Dr Jim McDaid, said he was still convinced that Letterkenny remains "an excellent location for investment".
He would be asking the Tánaiste that the town be given "urgent priority status" in an attempts to attract new investors, he added.