Mon, Jul 09, 2001 page24

• Cigarette makerclings to old way

  • By Achmad Sukarsono / REUTERS
  • • 
    • 
    • 

  Juniarsih has been hand-rolling tobacco for the last 17 years at a big factory run by Gudang Garam, Indonesia's largest cigarette maker, but with little hope things will change.

  The mother of two toddlers leaves her family before dawn six days a week and pedals her battered bicycle for more than an hour past paddy fields in East Java to get to the plant.

  "I think I'll be doing this until I become an old granny," the bony 34-year-old said while putting saturated tobacco blend on small white paper that left brown splotches on her fingers. "I can't think of any other job. I don't know how to change."

  Like its workers, Gudang, the world's number one maker of pungent clove cigarettes, popularly known as kreteks, also appears to be struggling with change.

  Product diversification is slow, some work practices are age-old and management is only just starting to open up to employees, workers and union leaders said during a rare factory visit permitted by the notoriously media-shy company.

  Juniarsih and 37,000 other female workers who roll, cut, pack and glue for nine hours a day without a break are the backbone of Gudang Garam's trademark hand-rolled kreteks.

  But some analysts say Gudang Garam's desire to cling to past successful practices has become an obstacle to taking the company into the 21st century.

  Management is still controlled by the family of late founder Surjo Wonowidjojo, who was a conservative and cautious operator.

  Analysts point to speculation of internal rifts as younger family members grow impatient with the management's preference to hang on to old business methods.

  This has stunted creativity, analysts say, and explains why the firm appeared to only half-heartedly jump into the growing mild kretek and white -- or non-kretek -- cigarette markets.

  As a result, Gudang Garam's domestic market share fell to about 36 percent by the end of 2000 from 48 percent in 1997, mainly on a slide in sales of its main machine-rolled cigarettes.

  "Gudang Garam is just too conservative. The second generation seems to be afraid of making the wrong move which could ruin the efforts of their predecessors," said one analyst from a foreign securities brokerage who declined to be identified. "But I have heard one key family member is seeking progress."

  The firm actually sees conservatism as the key to success. Underscoring that view, no executives wanted to speak for the record during a factory tour.

  "The family is very conservative. But the proof is we survive due to this conservatism when others fall," a senior executive in Jakarta, who declined to be identified, said recently.

  "(The family's) not breaking up. One wants diversification, the others dare not to," he said, without elaborating.

  Despite declining market share, Gudang Garam expects sales to grow nearly 24 percent this year over 2000, to 18.5 trillion rupiah (US$1.64 billion). Estimates for 2001 net profit were not available, but the bottom line last year was static at 2.24 trillion rupiah from 1999.

  Another issue that has refused to go away has been strikes at Gudang Garam's base in Kediri, 600km east of Jakarta, where commerce hinges on the cigarette giant's activities and its 50,000 workers.

  "Communication between workers and management has often failed in the past. But they're recently beginning to hear us," union leader Imam Mustofa said.

  Gudang Garam officials blamed trade unions for the strikes.

  "We have not violated any (labor) law. But now there are so many unions with so many wants," said a company official.

  Analysts said trade unions were usually ineffective against Gudang Garam, which, besides being a key source of labor in East Java, is one of the cash-strapped country's top corporate tax payers and the second largest stock, in terms of market capitalization, on the Jakarta stock exchange.

  "They control the price of labor," said business researcher Kresnayana Yahya, who has consulted for Gudang Garam, in the East Java capital Surabaya.

  "To some extent ... it's a monopolistic practice."

  Gudang Garam pays most of its hand-rolled cigarette workers by the number of cigarettes they produce. At maximum speed, a roller can bag some 200,000 rupiah a week, not a bad salary in poverty-stricken Indonesia. But the conditions are hard.

  Female guards frisk those passing through the entrances to huge warehouses that accommodate around 5,000 workers each.

  Inside, the dizzying smell of clove and other spices blends with the blare of pop music.

  Workers sit on dilapidated wooden benches without back-rests. They chat and joke while their hands work mechanically but company officials called monitors, who are watching over production, reprimand those with loose tongues.
• Most Popular

  • 1

    Palmeiras hopes for club cup win

  • 2

    Magnitude 6.4 earthquake hits Hualien County

  • 3

    Taiwan to see nine extended holidays in 2026

  • 4

    Hegseth outlines Chinese threat

  • 5

    Pegatron ranks last in Greenpeace report