KEY POINTS:
Fisher & Paykel, one of this country's manufacturing success stories, seems very sensitive that it may be accused of desertion. That presumably is why it was so keen to shift the blame for the closure of any of its New Zealand factories.
Last week, it gave a variety of reasons for the closure of its manufacturing operations in Dunedin, Brisbane and California, and the shifting of the work to a combination of existing sites in Thailand and Italy, and a newly bought fridge factory in Mexico.
The exchange rate, compliance costs and even free trade agreements with low-cost labour countries were all mentioned by chief executive John Bongard. None got to the nub of its decision. Cue a heated exchange with Government ministers, and a distraction from the loss of 430 jobs at Fisher & Paykel's Mosgiel plant.
The company used similar excuses a year ago when it shifted its washing machine production to Thailand, with the loss of 350 jobs in South Auckland. It blamed a "crippling" environment at home, even though the exchange rate had been relatively benign when it began planning the move. Clearly, it suits its purposes now to make similar ill-directed stabs. Yet this is all unnecessary.
Quite simply, Fisher & Paykel has made a sensible decision based on its need to remain internationally competitive. Government policies and the local economic climate have little, if anything, to do with this.
As Mr Bongard pointed out, all of Fisher & Paykel's competitors globally are manufacturing in low-cost labour countries. His company must supply at world prices, and cannot stand apart from that trend. Already, LG and Maytag are established in Reynosa, Fisher & Paykel's new Mexican base.
Not only are labour and freight costs there about one-sixth of that of New Zealand but manufacturing in Mexico gives the company duty-free access to the North American market. Perhaps the only real question is why Fisher & Paykel delayed the move so long.
Fisher & Paykel's sensitivity might be more understandable if it was truly deserting New Zealand. But it will retain about 1600 staff in this country. Research and development work will still be predominantly done here. It is in this area, not the labour-intensive assembly of products, that New Zealand can retain an edge.
Tellingly, not even Queensland, which is admired for the way in which it attracted industry through a range of incentives, is now sufficiently competitive for Fisher & Paykel. Australia, like New Zealand, cannot compete with Asia, Eastern Europe, Mexico or any other area offering cut-price labour.
It is a pity, therefore, that Fisher & Paykel chose to muddy the reasons for its shift by citing extraneous factors. Compliance costs are a perennial red herring for companies making unpopular decisions. Likewise, the free trade agreement with China can hardly have been a reason, given that Fisher & Paykel's Mexican initiative would have been on the drawing board for a long time. The company also knows that, in terms of local manufacturing, the pact merely accelerates a well-established process.
This discordant note so soon after the signing of the agreement in Beijing is regrettable. It takes some of the shine off the huge benefits on offer to exporters and the New Zealand economy. Worse, the note was struck only to serve Fisher & Paykel's purposes. It has a rational reason for shifting its operations to low-labour-cost countries. It should explain it in these terms, not by trying to divert attention elsewhere.
