Donegal textile firm Unifi Textured Yarns (Europe) Ltd announced yesterday it was shedding 120 jobs.
The announcement prompted renewed calls for further decentralisation of Government Departments to the north-west.
Unifi Textured Yarns (Europe) Ltd is to shut its polymer and spinning operations at its older plant in Letterkenny, and says it will consolidate its texturing operations in its more modern plant in the town.
It is also closing its dyed yarns facility in Manchester with the loss of 100 jobs.
Letterkenny mayor Cllr Victor Fisher last night described the news as a major blow to the town.
He said that as a gateway town there was now more need than ever to ensure renewed efforts were made to attract new jobs.
His call for more decentralisation of Government Departments was echoed by the president of the town's Chamber of Commerce and Industry, Mr Eamonn Stevenson.
Increased competition from competitors in lower cost economies, and high fixed costs in terms of energy, equipment and local authority charges are understood to have been factors in the decision by Unifi to scale down the Letterkenny plant.
The decision was made following a two-week review of operations fuelled by disappointing financial results in the last quarter.
Last April, the American multi-national, which is the biggest manufacturing employer in Letterkenny, announced that it was reducing its workforce from 700 to 420.
The latest cuts will reduce the workforce to about 300.
The president of Unifi Europe, Mr Fintan McGrath, pointed out that the polymer spinning operation in Letterkenny was "not at a size or scope to be cost competitive" in the world market.
But by sourcing it externally and reducing fixed overheads, he said the company was confident that "it can regain its competitiveness and secure the long-term future of its European operations". It will now concentrate on its "revenue-generating" texturing business in Letterkenny.
Donegal's high dependency on the vulnerable textiles sector has been exposed in recent years with over 4,000 job losses since 1997 in such companies as Fruit of the Loom, Nena Models, Herdman's and Comer Yarns as well as Unifi.
Unifi is one of the world's leading producers of textured yarns.
These are found in home furnishings, apparel and industrial fabrics, automotive upholstery, hosiery, and sewing thread.