MTA testing pitch alarms members

By Geoff Senescall

Revelations that the Motor Trade Association is bidding for Vehicle Testing New Zealand has raised the ire of its members who believe the move will hurt their businesses.

Because many members own garages that issue warrants of fitness, they view Vehicle Testing as a competitor and cannot see why the association would want to buy it unless the intention was to close it down.

Members found out that MTA intended bidding for the state-owned asset on August 12 through a confidential letter asking their support for the venture.

This was passed on to the Business Herald by a member who owns a provincial garage which issues warrants and who plans to vigorously oppose the purchase.

The MTA has called a special meeting in Wellington next Tuesday for members to gain their approval.

In the letter the MTA board said the testing station would offer members an "excellent return on investment".

It described the acquisition as an outstanding opportunity and has urged its members to vote in favour of the association committing funds to buy it.

But while the board asked for consent to use available cash resources, it gave no details of what impact the purchase might have on its balance sheet.

It cited reasons of confidentiality agreements with the Crown and Vehicle Testing for not disclosing financial information about the asset.

The member spoken to by the Business Herald expressed concern that the MTA was looking to finance the purchase out of existing cash reserves.

While the association had cash of $12.5 million - according to its June 1998 financial statements - it had gift voucher liability of $10.8 million, he said.

"I am not sure if directors could say it is financially prudent to use this cash for any purpose other than gift voucher redemption."

The chief executive of the association, Stephen Matthews, declined to comment, saying it was an issue for members.

Because the purchase of Vehicle Testing is a big transaction the board needs 75 per cent acceptance of those present at the meetings. No proxies are allowed, although members who cannot make it can appoint an attorney to represent them.

The Government put Vehicle Testing up for sale last year but deferred it. It is now in the final stages of being sold.