UDARAS na Gaeltachta was close to concluding a lease for its new £3.5 million Dungloe factory with Fruit of the Loom when the company announced its retrenchment programme.

The company was expected to start paying rent on the plant from July 1st and to move in shortly afterwards as 80 employees arc working in temporary accommodation.

Those 80 are on a three day week, like the rest of the company's 3,300 Irish workers, and plans to expand the workforce at Dungloe to 500 are on indefinite hold.

A spokesman for Udaras said the decision by Fruit of the Loom to defer a leasing agreement for Dungloe was "understandable and prudent", given the difficulties it was facing.

Neither side is writing off the Dungloe plant. In a worst case scenario, Udaras said, the town now has a state of the art textile plant which can accommodate an alternative tenant, if necessary.

Meanwhile, the Donegal district secretary of SIPTU, Mr George Hunter, who represents the bulk of the workforce, said he was glad to be informed by the company that its long term future in Ireland was secure.

The union would be concentrating on minimising the effects of the short time working on its members and securing the long term future of their jobs", he said.

It would not shirk whatever action was necessary.

The managing director of Fruit of the Loom's Irish operation, Mr Willie McCarter, said. "The current situation is in no shape or form the fault of the Irish workforce which has continued to provide the highest levels of quality and commitment.

However, this has not dispelled fears that the US company is following the example of other transnational textile giants in moving "offshore" to low wage economies. It has a plant in Morocco operating under the Irish management, where 300 people are employed.

The company has not indicated what rates are paid in Morocco, but industry sources say wages there are around 75p an hour. This is almost double the industry rate in Morocco of 40p, but still four times cheaper than the lowest rates paid in the company's Irish plants.

It is workers on the lowest rates, doing the least skilled jobs, whose jobs are most at risk in Ireland. Industry sources estimate these could account for perhaps 500 out of the 3,300 strong workforce.

To date, Fruit of the Loom has not engaged in massive transfers of work to low wage, low skill economies. Although it has plants in 19 countries, its main workforce of 33,000 is in the US.