Fletcher eyes quitting Spain after house slump

Fletcher Building chief executive Jonathan Ling say that 'it's been very tough to manufacture in Spain'. Photo / Greg Bowker

A huge drop in new house construction in Spain is prompting Fletcher Building to consider winding down its operations there.

Chief executive Jonathan Ling said the long-term aim was to leave Spain because of severely reduced demand.

Spain's new house starts have been one of Fletchers' hardest-hit markets, down 57 per cent from 2008 to 2009.

Formica, Fletcher's international boards and laminates business, has factories in Valencia and Bilbao. Other European sales and manufacturing operations are in Russia, France, Holland, Britain, Sweden and Finland and the company headquarters are in in Cincinnati.

Ling is concerned about the impact Spain's economic problems have had on Formica.

If Spain were not in the European Union, its problems might be less severe and it could respond differently to its crisis, he said.

"They would go into government austerity programme for a few years and with inflation coming through they would be back into shape in 10 years. Overnight, devaluation of the currency improves their competitiveness considerably for their export/import industry.

"But as part of the EU, they can't change their currency. By being in the EU for 15 or so years, an hour of labour in Spain is roughly the same cost as an hour in England because it equalises over time.But the hour in England is more productive than the hour of labour in Spain.

"They have a serious competitive issue now. It's been very tough to manufacture in Spain.

"We've essentially scaled production right back to run our factories at a bare minimum because it's not competitive and there's no local demand since the global financial crisis started in 2008."

Formica's Bilbao factory was employing 400 people and Valencia 200 people, "so in the next three to five years we'll close one of those", Ling said.

Spain's economic problems are illustrated by developers being left with vast numbers of of unsold properties, and tens of thousands of construction workers being unemployed.