Thailand

The maker of the La-Z-Boy recliner chair is closing down its manufacturing operations in this country with the loss of about 70 jobs.  Morgan Furniture is shutting its Auckland factory and moving production to Thailand and China from the start of next year.

Board chairman Graham Morgan said the move had been a gradual process, with the company having started manufacturing in Thailand a decade ago.  At one time the company had more than 300 manufacturing staff in this country and even three years ago the number was 230, Mr Morgan said.

Next year Morgan Furniture would be down to a New Zealand workforce of 30 administrative staff.  The company initially started manufacturing in Thailand after finding it was uncompetitive in leather furniture in the Australian market, which it entered about 15 years ago. 

New Zealand manufacturing was becoming increasingly less competitive, Mr Morgan said.  A high exchange rate had a major effect but essentially costs in this country kept escalating, including in areas such as ACC and holidays, he said.  He saw a gloomy outlook for volume manufacturers in this country, but thought niche suppliers would have a future.  Mr Morgan also expected the staff at Morgan Furniture losing their jobs would find alternative work quickly, although probably not in upholstery. 

The closure of Morgan's factory is part of a continuing shift of manufacturing jobs from this country to Asia.

Manufacturers and Exporters Association chief executive John Walley said the country's manufacturing base would be lost unless the Government reined in exchange rate fluctuations.  He told the Herald On Sunday that more businesses such as Morgan Furniture would desert this country in the near future.

But Employers and Manufacturers Association communications manager Gilbert Peterson said the challenges presented by countries such as Vietnam and China were big but not insurmountable.  "We have areas of expertise that other countries just can't match, including specialist skills, value-added products," he said.

About 100 Aucklanders at Fisher & Paykel - some who have been with the company for more than 20 years - will lose their jobs in the latest exodus of manufacturing production to South Asia.

The move, announced yesterday, has renewed calls for the Government to improve the current business climate or risk seeing the slow death of manufacturing in New Zealand.  Other brands - including Icebreaker - have already moved production offshore.

Fisher & Paykel said that 96 jobs would be lost in moving the manufacturing of electronic circuit boards to Rayong, Thailand.  The relocation, to be completed by the end of next year, was expected to cost $5 million but would save the company $6 million a year.  The new facility would be completed by the end of next year and be at the same site of the new washing machine production plant, which was announced in April at a cost of 350 Auckland jobs.  Fisher & Paykel managing director John Bongard said the company had exhausted all other options and had little choice.

"Some of the workers have been here in excess of 20 years and telling them is heartbreaking.  We are fiercely Kiwi and we try our best to retain workers but there comes a breaking point.  The Government and the Opposition are in favour of pursuing free trade deals with China, Thailand and India, and there are no worse countries as far as we're concerned.  But that's the hand we've been dealt."

The company has resolved to re-employ as many workers as they can in other parts of the business, and help the rest find new jobs.

The Green Party and the Engineering, Print and Manufacturing Union said the decision was disappointing.  "We're now seeing a very serious and very desperate situation in manufacturing that will have flow-on effects for our economy and our society for years to come," said EPMU national secretary Andrew Little.  He joined the Employers' and Manufacturers' Association in calling on the Government to pursue policies to nurture local manufacturers.  "A quarter of a million Kiwi workers and their families are relying on it," Mr Little said.

"After the washing machines announcement it was not unpredictable that other parts of the business would follow, disappointing as that is."  Mr Bongard could not rule out further moves offshore.  The volatile and consistently high New Zealand dollar and interest rates had played a role in the decision, he said.

Association chief executive Alasdair Thompson said Fisher & Paykel had little choice but to make the shift after its main competitor in Australia moved its production overseas.  He said many factors - including compulsory employer contributions to KiwiSaver, four weeks' paid leave and a tight labour market - made for a business climate in New Zealand that struggled to compete with overseas opportunities.

On the move

• Fisher & Paykel are moving the manufacturing of electronic circuit boards to Thailand; 96 Auckland jobs will be lost.
• In April the company announced it would shift its washing machine production to Thailand, which would cost 350 Auckland jobs.
• Other N Z brands like Icebreaker have also moved production offshore.
• Unions and businesses have renewed calls for the Government to encourage and nurture local manufacturing.

Fisher & Paykel Appliances Holdings Limited
FPA Stock Exchange Release ASX/NZX 15 August 2007

Electronics Factory Relocation to Thailand for Fisher & Paykel Appliances

Fisher & Paykel Appliances (FPA) today announced plans to relocate its Auckland based Electronics factory operation to Thailand.  Production facilities for the manufacture of electronic circuit boards for use in Fisher & Paykel built appliances would be located in Rayong, Thailand on the same site as the proposed new Laundry plant.

After consultation with the Engineering, Printing & Manufacturing Union, the relocation of the facility will be completed by December 2008. Additional inventory will be manufactured in order to cover the lead times for the transfer and re-commissioning of the plant. This will amount to an additional temporary working capital value of between $2 and $3 million. Required capital expenditure is estimated at $3 million.

Once the line is fully operational, the expected financial benefits are in the vicinity of $6 million per annum, at a one-off cost in the order of $5 million, both at a pre-tax level. From the initial indications regarding the sourcing of local components for the Laundry factory, additional cost savings are also expected to arise from the sourcing of electronic components from local vendors in Thailand.

"In recent times it has become obvious that the future of Electronics lay with being located close to its major customer, Laundry" said John Bongard, Chief Executive Officer and Managing Director. "With the experience we have gained in the short time we have been in Thailand we are confident that these ongoing savings will be quickly realised."

The relocation will lead to an estimated reduction in the Auckland based work force of approximately 96 positions. As is the case with the Laundry announcement, the Company will endeavour to relocate as many staff as possible to other areas of the existing business as vacancies arise over the next 16 months.  Plant and equipment is expected to be shifted during the 2008 calendar year and will be housed in an 1800 sq metre air-conditioned building adjacent to the office complex on the Rayong site. Progress on the Thailand Laundry facility was celebrated with a ground turning ceremony last week and currently plans are on track for production to commence in March 2008.

Contacts:
John Bongard or Paul Brockett
Fisher & Paykel Appliances Holdings Limited
Phone +64 9 273 0600

The Engineering, Printing and Manufacturing Union says it will spearhead discussions to find ways of keeping local manufacturers in New Zealand.

It follows Fisher & Paykel's announcement on Thursday that it will shift its laundry factory to Thailand to save an estimated $10 million a year, with the loss of 350 jobs in Auckland.

Sleepyhead, the country's biggest bed manufacturer, is also considering moving its operations to China next year. It employs about 500 people in New Zealand. About 250 jobs are expected to be lost.

The union's national secretary, Andrew Little, says an urgent review of manufacturing policies is needed to prevent a mass exodus overseas.

Mr Little says he plans to assemble representatives from the business community, other unions and the Government to discuss incentives for manufacturers to stay in New Zealand.

Sleepyhead managing director Graeme Turner says high interest rates and a huge array of costs have led it to look at China as a manufacturing site He says the only things that would keep Sleepyhead in New Zealand are a drop in interest rates and a change in government policy.

The Canterbury Manufacturers Association says it is the same situation for many manufacturers and warns that more will either leave or go under. Spokesman John Walley says manufacturers are being abandoned.

The Employers and Manufacturers Association says it makes sense for companies to move overseas because the business environment in New Zealand is not good.

Chief executive Alasdair Thompson says it is a mess for exporters trying to operate in the face of high taxes and other costs.

He says countries such as Thailand and China are offering manufacturers tax cuts and cheap land to help them to get started.

Manukau mayor Barry Curtis believes workers set to lose their jobs at Fisher & Paykel's east Tamaki plant will easily find work elsewhere.

He says "hundreds of jobs" are going spare in the district each month and it is unlikely that his constituents will be unemployed for long.

The Government says it acknowledges the pain many exporters are feeling but says it has an economic strategy to help.

Prime Minister Helen Clark says there is still a place for manufacturing in New Zealand, despite some companies shifting their production overseas She says what is happening in New Zealand is typical of many developed countries where manufacturers are moving their operations to low-cost countries.

Miss Clark acknowledges the high value of the dollar is causing problems for exporters, but points out that the Australian and British currencies are also at 25-year highs against the US dollar.

Minister of Economic Development Trevor Mallard says it is unfortunate some manufacturers feel they are being forced overseas, but the sector is changing. It is difficult to compete against other countries that supply cheap labour and land.

He says options apart from capital gains tax and mortgage levies need to be explored to try to help businesses that are struggling.

Mr Mallard says New Zealand must focus on high-end manufacturing that come from local research and design initiatives. Any wide-ranging change to monetary policy would need to have the support of all the main political parties.

The National Party says the Government should be doing what it can to help struggling businesses.

National finance spokesperson Bill English says the Government needs to stop charging record amounts of tax and change the business environment. He says the Government also needs to rein in its own spending, which would take pressure off interest rates and the dollar.