High NZ dollar blamed for closure of Christchurch factory

By NZPA

Wednesday 4th April 2007

Plastic goods manufacturer Click Clack blames the high value of the New Zealand dollar for its decision today to close its Christchurch plant at the end of June, with the loss of 70 jobs.

Chief executive John Heng slammed the Government for failing to give the Reserve Bank tools other than the blunt instrument of interest rates to control monetary conditions.

He called for New Zealand to drop the kiwi dollar in favour of the US dollar.

The company plans to move production to its Levin factory, but some industrial lines made in Levin would go to China.

Heng could not rule out moving further manufacturing offshore if the New Zealand dollar and interest rates remained at high levels.

Up to 20 of the Christchurch workers would be offered the chance to transfer to Levin.

The company has already cut 80 jobs through attrition over three years as it moved some production to offshore suppliers to remain viable.

The company, famous locally for its popular lunch boxes, produces a range of brushware and beverageware. It exports 85% of its production to more than 60 countries from its Palmerston North base.

Heng said Click Clack had struggled "long and hard" to combat the effects of the exchange rate for over three years.

"A year ago in January, when we moved supplier contracts worth more than $3 million offshore, we warned that we couldn't go on forever with a New Zealand dollar that's so ridiculously over-valued," Heng said.

"We've made many changes to the way we do business and cut our costs to the bone, with the result that we are a lean, finely honed operation."

He said despite best efforts, the Christchurch operation had become less profitable by the day due to the currency.
Sales and production had grown consistently over the last 10 years.

"We make and sell more product than we did four years ago and earn less. Our exports are currently worth about $30 million compared to $40 million four years ago when the exchange rate was US55 cents versus the US70-plus cents it is today."

He said a continual appreciation of the kiwi dollar could do monumental damage to exporters' margins. If that coincided with downward demand -- and there's every evidence as the global economy slows that this could readily occur -- an exporter could suffer a mortal blow.

Click Clack was supported by the Manufacturing and Construction Workers Union whose Wellington regional secretary George Larkins said the company and union had worked hard to try and improve production.

"The Government and the Reserve Bank appeared to be disregarding New Zealand workers in not addressing issues in the economy that have and will continue to result in job losses," Larkins said.

"We believe that Click Clack, unlike many other employers that have taken the easy option by moving all manufacturing offshore, is genuine in its commitment to provide jobs for Kiwi workers.
"However, ... the company can't go on forever without something giving."

Heng said the Reserve Bank was between a rock and a hard place without anything other than interest rates to control monetary conditions.

"We need a major paradigm shift in ideology to look at some of the problems that this small South Pacific country of four million people has got."

New Zealand needed to decide if it had an external view of being an export-driven country or "an internal view of being a real estate operator that looks after service industries".

It was impractical for New Zealand to have a separate currency.

"I really believe that currency union should be top of the agenda, and not (union) with Australia."

The US dollar was the strongest and best currency for trade, and New Zealand should join China and much of South America in adopting the greenback.

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