Workers, angry at losing their employees-of-the-state status, have torpedoed the successful takeover of their factory by a private firm, putting the entire workforce of nearly 1,500 on the streets. The Workers Daily yesterday reported the case of a rubber-goods factory in the northeastern city of Maanshan, which is being closely watched across China as an example of the pitfalls for a private company acquiring a state enterprise. The Maanshan Rubber Plant was set up in 1961, with annual production of 3.5 million car tyres and four million pairs of rubber shoes. Ageing products and antiquated equipment drove it into debt so that by 1996 its nominal assets were 85.29 million yuan (about HK$79.89 million), debts were 100.47 million yuan and it had accumulated losses of 34.2 million yuan. In October 1996 the city's Intermediate Court declared it bankrupt. This left the city government to pay five million yuan a year in minimum living allowances to its workers. The government urgently searched for a white knight and decided on a private firm, the Haitian group of Anhui province, a national producer of rubber products. Haitian had extensive talks with the management and workers of the plant who agreed at a mass meeting to the takeover. Under a sales contract, signed on September 26, 1998, the city sold the plant for 16.2 million yuan and agreed to take over its non-production facilities, in exchange for Haitian agreeing to accept all 1,416 workers as employees of the plant or giving them a minimum living allowance. Towards the end of 1998, the factory started production again, and by April 1999 had produced 1.2 million bicycle, motorcycle and farm truck tyres which Haitian sold through its nation-wide network. Haitian employed 730 of the workers in the plant, 39 elsewhere in its operations, while 370 retired, leaving about 300 who refused to work. Haitian offered them all a new contract but, up to now, not a single worker has signed a contract, fearing they would lose their status as state workers and become contract workers for a private firm. Trouble began in September 1999, when Haitian refused to pay allowances to the 300 who were not working, causing fights between employees and managers, the closure of the plant and protests to the city government. In April last year, under pressure from the workers, the city government asked a local court to nullify the sale contract and order Haitian to withdraw from the plant and pay compensation. The court accepted the petition, but Haitian contested it. Last May the judge ordered a one-year recess while the two parties mediate the dispute. After a second hearing last month the two sides are continuing negotiations. Meanwhile, the factory has remained closed since September 1999 and all the workers have been laid off for a second time.