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. Last Updated: 07/27/2016

Region Threatens to Bankrupt TV Factory

The Voronezh regional government has threatened to force a local television component factory owned by Dutch electronics giant Philips into bankruptcy.

According to the Voronezh administration, Philips owes 47 million rubles ($7.8 million) in taxes for VELT, a picture tube factory acquired by the multinational in 1993. Production at the plant halted over a year ago and the 3,500 workers have not received wages in months, it said.

The main problem, however, appears to be the halt in production rather than taxes.

Vadim Sukhoverkhov, deputy governor of Voronezh region in central Russia, said his administration is doing its best to come to an agreement with Philips because a total of 9,000 jobs, including those at neighboring television factories, hinge on the plant.

Speaking by telephone from Voronezh, Sukhoverkhov said Philips had failed to carry out its promise to invest $63 million in the plant.

"All that was just talk," Sukhoverkhov said, adding that according to his calculations the multinational had spent just $18 million, mainly on upkeep and paying salaries the first two years.

"The main motive behind buying up a plant and then keeping it at a standstill can only be to get rid of competition for their imported television sets," Sukhoverkhov said.

Philips owns a 90 percent stake in the plant, once one of the leading producers of television picture tubes in the Soviet Union. It bought shares from workers starting in 1992 and then acquired 15 percent from privatization authorities when the plant was put up for sale in 1993.

Philips holds 10 percent of the imported television market, according to studies. It had hoped to steal a march on its competitors by cutting the cost of its televisions, supplying the cheaper Russian-made tubes to Philips television factories in Spain and Austria. The rest was to go to Russian television manufacturers.

The region is hoping to persuade Philips to restart production or sell part of its stake to other investors. Authorities dismissed speculation that they wanted to renationalize the plant.

"Our main interest is to restart production," Sukhoverkhov said.

A factory representative said workers will wait for the outcome of talks before staging a protest. Philips spokesman Vladimir Patyaka said the company leadership is "negotiating" with the regional government but would not elaborate. The problem will be solved by February-end, he said.