Iconic F&P brand soon to have little manufacturing left in NZ

By NZPA

Thursday 17th April 2008

The iconic Fisher & Paykel brand, whose machines washed most of our nappies plus those of our parents, will soon have little manufacturing left in New Zealand.

An announcement today 430 jobs are set to go at Fisher & Paykel Appliances' Dunedin factory, virtually spells the end of the line for whiteware production in this country.

F&P is following the lead of New Zealand garment manufacturer Icebreaker which does design and research in New Zealand but manufactures in low-cost China.

F&P washing machines are as iconic as the Buzzy Bee with almost every couple purchasing one the moment they knew a family was on the way.

Chief executive John Bongard said today the company's new global manufacturing strategy would see three manufacturing facilities moved from New Zealand, Australia and the US to Thailand, Italy and Mexico.

ABN Amro analyst Dennis Lee said F&P was simply following the world trend set by global companies such as Sweden's Electrolux.
"They are moving their production to low-cost countries. It's a world-wide trend.

"The indication is quite clear. They have to find the place that can provide them with the lowest cost production," Lee said.

Today's move has been part of an ongoing trend for F&P since 1984 when the then Labour government moved to open the economy up to the outside world in what was known as Rogernomics.

Bongard said the writing was on the wall as soon as New Zealand opened its borders to manufacturers that paid workers Third World wages.

He said there were almost no imported whiteware products in this country not made in China, Thailand and India.

F&P took anti-dumping cases against Korean and Chinese companies but despite winning battles it was losing the war.

Lee did not believe the FTA with China was the straw that broke the camel's back. He said there were a myriad of cost factors but the main factor was manufacturers had to have low labour costs close to where they sold their products.

The company has already moved much of its manufacturing offshore, not just to low cost regions, but to the United States where it increasingly sells its washing machines and dishwashers.

After the closures announced today, the company will have just two manufacturing plants in New Zealand with 350 staff making fridges in Auckland and 70 making production machinery also in Auckland.

Last year, the company closed two operations in this country with the loss of nearly 450 jobs.

Today's announcement affected the Range & DishDrawer Dunedin plant, as well as the refrigerator plant in Brisbane, where 310 staff will be laid off, and a cookware factory in California, where another 330 will lose their jobs.

Bongard said all would be relocated over the next 12 to 18 months, with pre-tax financial benefits expected to be about $50 million a year at a one-off cost of $50 million.

Capital expenditure was estimated at about $100 million.
Remaining production facilities in Auckland, Ohio, and Italy, along with their respective engineering and design teams, would continue operations.

Bongard said it was an emotional day for the company.
"We have been a substantial manufacturer in New Zealand for almost 70 years and a producer in Australia for nearly 20 years.

"Everyone at Fisher & Paykel prides themselves on the culture the company has developed and we operate within very close family values."

Bongard cited manufacturing cost escalations, particularly in Australasia, as the main reason for relocating production.
He said high interest and exchange rates had been "unhelpful" while the recently completed Free Trade Agreement with China, much trumpeted by the Government, also created a playing field that the company couldn't compete on.

In November, Bongard said the company's supply philosophy was to have small, efficient, manufacturing plants, in, or close to, the markets it participates in.

Last August, the company announced it was relocating its electronics factory from Auckland to Thailand with the loss of 96 jobs. That followed an announcement in April that 350 jobs were to go in Auckland with a decision to move the company's laundry plant, also to Thailand.

Earlier this year, 28 staff were laid off from Mosgiel due to the slack housing market both here and abroad.

In December 2005, the company cut 65 jobs when it moved production of its SmartLoad Dryers from Auckland to the United States.

F&P Appliances has prided itself on having small, efficient, highly-automated plants where labour content was lower than for some of its larger competitors. But with more and more of its sales originating overseas, that strategy may no longer be applicable.

Bongard said two years ago ultimate location decisions would be driven by freight and storage costs.

Dunedin City has helped fund F&P's expansion of manufacturing in Dunedin. It lent $4.2m from its "industrial loan fund" to encourage F&P to locate manufacturing in Dunedin and then later put in another $2m-$3m when the Dishdrawer plant was expanded.

Bongard said it was not a hand-out but a "genuine lease-back arrangement at commercial rates".

Shareholders celebrated today's move by lifting F&P's share price 11%.

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