Western Digital Deal With Polish Firm Collapses : Trade: A tentative $5-million agreement to sell production equipment to the state-owned computer company is vetoed by its workers council.

Western Digital Corp., a computer components manufacturer, said Thursday that its groundbreaking deal to sell an aging semiconductor fabrication line to a company in Poland has fallen apart.

Robert Blair, spokesman for Western Digital, said the tentative $5-million agreement to sell the production equipment to Elwro, a state-owned Polish computer manufacturer that employs 10,000 people, was vetoed by the Polish company’s workers council.

“The workers council made a decision not to pursue the deal,” Blair said. “They did not give us a reason.”

Upon learning of the proposed deal in November, trade officials said they knew of no other instance in which a U.S. company had agreed to ship an entire semiconductor production line to a manufacturer in Eastern Europe.

Michael Hayder, president of Unitronex Inc., an Illinois trade firm that represented Elwro in the United States, said he did not know why the Polish workers vetoed the deal.

“The directors of the factory may have a vision,” he said. “But the workers don’t always have to follow. Nobody really knows what the long-term plan will be.”

Other sources noted that Poland held its national elections in early December, just after the workers’ vote took place. The campaign in which Lech Walesa, the longtime Solidarity union leader, emerged victorious could have disrupted the company’s plans, the sources said.

Western Digital initiated talks in February to sell the equipment from an old plant in Costa Mesa to Elwro. In November, the company confirmed that a tentative agreement had been reached with Elwro’s directors, but the deal would not be final until it was voted upon by Elwro employees.

As proposed, the Polish concern would have paid $4 million to Western Digital for the semiconductor manufacturing equipment. Elwro would pay an additional $1 million for dismantling, shipping and assembling the equipment in Poland as well as training Elwro workers to use it.

The fabrication equipment that was earmarked for Elwro is capable of producing 3.5-micron computer components, a technology outdated by U.S. standards. In Irvine, Western Digital’s newest plant is capable of producing circuitry of 1 micron or less. (A human hair is about 40 microns wide.)

Blair said the company would continue efforts to sell the equipment from the Costa Mesa plant.

The collapsed deal is another item in a string of bad news for Western Digital.

The company said last month that it would lay off 400 employees and take a $60-million to $70-million charge against earnings for its Dec. 31 quarter as a result of a plant closure in Puerto Rico.

Roger Johnson, chairman and chief executive of the company, said then that the company was experiencing a financial crunch because demand for its older board products was falling rapidly while new electronic components for notebook computers would not enter volume production until the spring.