No redundancies from F&P move

Fisher and Paykel Appliances says no redundancies will result in this country from its decision to move some production to North America.

The company announced today it was to relocate an Australian Smart Drive clothes washer production line and an Auckland motor manufacturing line to reduce costs of production, freight and working capital associated with supplying North America.

Chief executive John Bongard said 10 to 15 workers would go in Australia from a workforce of about 580 in that country.

While no redundancies would be made in this country, some opportunities for new employees would be lost.

Once fully operational, the move is expected to reduce working capital by around $15 million, leading to an earnings before interest and tax (ebit) improvement of $3.3 million per annum, at current sales levels.

The work is expected to take place over 12 months at a cost of $5.5 million.

Mr Bongard said that it was important for the company to retain its facilities in this country and Australia.

New Zealand was the best place to be producing products for the Australasian market, he said.

With the quality of engineering graduates, in particular, this country would definitely remain the company's base for innovation and new product development.

Reacting to today's announcement, Engineering, Printing and Manufacturing Union national secretary Andrew Little said the move was positive at a time of questions about the future of New Zealand manufacturing, as it was increasingly exposed to global competition.

Macquarie Equities investment director Arthur Lim said few New Zealand manufacturers had been able to move into Australia, let alone go beyond that.

"Here we have a company that has not only successfully established itself in Australia, it is now signalling that the same thing could happen in the US," he said.

"I guess it's a very, very significant milestone for the company."

With information suggesting sales growth in the US was strong, the bottom line impact for Fisher and Paykel Appliances was likely to be greater than the company had indicated so far, Mr Lim said.

Mr Bongard said that growth last year in the US for F&P branded products made in New Zealand and Australia was around 50 per cent. Adding the Dynamic Cooking Systems acquisition late last year, it was around 70 per cent. The US now accounted for just under 30 per cent of turnover and around 20 per cent in volume.

The DCS acquisition had taught the company much about manufacturing in the US, and it was going there with more confidence than it otherwise would have, Mr Bongard said.

A decision had yet to be made from two or three options on the location of the North American plant. Mexico was a possibility, but was chosen mainly by companies with high labour content on assembly lines.

In contrast, F&P Appliances prided itself on having small, efficient, highly-automated plants where labour content was lower than for some of its larger competitors.

Perhaps the ultimate location decision would be driven by freight and storage costs, Mr Bongard said.

A midpoint for the bulk of the company's business in the US would be between Chicago, New York, Orlando and Dallas.

Mr Bongard said that placing a plant closer to the US market, where the brand was launched six years ago, shortened lead times and meant the company was better placed to capitalise on sales opportunities.

High New Zealand and Australian currencies had also been reducing the company's competitive edge, he said.

Shares in Fisher and Paykel Appliances closed today up 11c, or 3.4 per cent, at $3.39.

- NZPA