The dinosaurs vs the dynamos

After years of debate over whether manufacturing can survive at all in this country, the arguments appear to be settling into two distinct camps: the dinosaurs and the dynamos.

They aren't labels those involved would choose, of course. But to an outsider, it's how the two sides seem to characterise each other.

Central to the debate is a disagreement over whether the business of making and selling stuff can also be neatly divided into two quite separate processes: the shiny bits and the dirty bits.

The shiny bits are the high-paying jobs that employ skilled workers such as designers and engineers. The dirty bits are the factory-type jobs that almost every Third World country seems grateful to take on.

Andrew Little, who remains national secretary of the Engineering, Printing and Manufacturing Union (as well as his new role as Labour Party president), notes that for all its optimism about retaining highly skilled jobs here, F&P Appliances has in fact shifted some of its design and development staff to Thailand.

"The unit they had in Dunedin that was doing their constant innovation, that's all on its way up. Likewise with the laundry division in East Tamaki. They originally said a lot of the design engineers would stay in Auckland. That, in fact, hasn't happened."

To Little, it's entirely logical that a company would want to keep its design and production staff together.

"Every bit of commonsense tells you that when your production function is so integrated with your research and design and development function, that when you send one away you invariably send the other away too."

John Walley, who heads the Manufacturers and Exporters Association, happens to agree. Anyone deeply familiar with manufacturing elaborately transformed products doesn't see a long-term future in splitting the design and production processes, he argues.

"The idea that we flick off all the dirty bits somewhere else and keep all the shiny bits here - sadly, we concluded that it's impossible, largely because a lot of competitive advantage comes in the rubbing surfaces between different departments. When you split them up, you actually lose a lot of that.

"Unfortunately, the [Ministry of Economic Development], being the true ideologues they are, don't let facts confuse their conclusions, and take a different view."

Walley claims to know some company bosses who now regret moving their production abroad, given the fall in value of our currency, and other business costs. But he doesn't blame them for making tough decisions, saying the real problem New Zealand's manufacturers face is not high labour costs, but an extremely volatile currency.

Like almost everyone else in the sector he would like to see more thought given to how we manage monetary policy. Meanwhile, his main fear is that countries now seen as cheap places to pay workers will eventually attract the higher-paying jobs as well.

"Do we think everybody else is an idiot? Do we think they can't design? And if the designers in Vietnam are cheaper than the designers in New Zealand what are you going to do?"

Across the Tasman, Australia is having its own "Bendon" moment right now, with the announcement last week by clothing, sporting, footwear and bedding company Pacific Brands that it intends to slash 1200 manufacturing jobs and 650 non-manufacturing jobs over the next 18 months, to try to stay afloat.

Like Bendon and F&P here, Pacific Brands is seen as an "iconic" company in Australia, with more than 300 brands that are top sellers. Those it is best known for here include Jockey, Sleepmaker, Fairydown, Hanes, Liberty, Thermatech and Everwarm.

It is also a big employer in New Zealand, with nearly 500 staff throughout the country. It confirmed this week that at least 89 jobs will go when it closes factories in Palmerston North and Christchurch.

Former Bendon chief executive Stefan Preston is these days overseeing a yoga clothing business, We'ar, and remains a passionate advocate for the dynamos.

"It doesn't take a rocket scientist to figure out that manufacturing offshore is, in fact, the default methodology," he says. "Let's think of the US - and Japan for that matter - where you've got all manner of high-end design-oriented 'whatever'. Where is all that stuff manufactured? It's not manufactured in high-cost economies."

Even the car industry, which is an obvious exception to the rule, is hardly a shining example of how keeping your manufacturing at home is good idea, says Preston. Bought a Beemer lately? Chances are it was made in South Africa.

"About the only negative thing you could say is there is a level of collaboration that needs to take place between designers and the people that manufacture. But that doesn't mean you have to have your factories here."

Preston acknowledges that Bendon solves the problem by flying around many of its design staff. It also keeps 30 sample machinists, who are highly skilled staff, in New Zealand, although that is almost unheard of in the United States.

"In fact, it's got to the point now where they do the creative design and do what's called a tech-pack, which is a specification with measurements in it, and the factories do the patterns because the factories have got more skill in that area."

According to Preston, New Zealanders' stereotypical view of foreign sweatshops is often far from the truth. He has visited many electronics factories in China, for example, that are just as sophisticated - if not more so - than anything he has seen elsewhere in the world. "It's almost laughable to me that we would think we have superior manufacturing technology here."

Preston notes that F&P's designers have had a huge influence on other Kiwi companies and have been behind many other start-ups.

"If it wasn't for F&P we'd have less than half the executive-level design talent in this country that we've got. They just pop up everywhere... It would be tragic if it folded, that's for sure."