KEY POINTS:
Was the move by companies like F & P to move manufacturing out of NZ inevitable in this global economic age -or is there something we as a nation should be doing differently?
The move has led to a lively debate. While this forum debate has now closed, here is a selection of your views on the topic.
Steve Colantuoni
Fisher Paykel is just doing what makes economic sense. Their competitors can sell a product of equal quality at a lower price. If Fisher Paykel does not do the same thing, it will cease to exist as an entity. Nothing different is happening to manufacturing in New Zealand than is happening anywhere else. The fact is the manufacture of certain items has and will continue to migrate. That is a natural result of the economic concept of comparative advantage. The way to handle this is to educate the population so that innovation can take place. Innovation is the well from which new jobs spring.
Trevor
I'm a Kiwi now living in Ozzie and the manufacturers are packing up here and heading to Asia and Fiji. This global economy thing which is supposed to be the holy grail for the economy is a long term disaster. How can labour workers in westernised countries compete with low cost markets where workers earn between $2 and $5 a day. Fisher @ Paykel, Qantas, you name them they'll be off. Unfortunately they're just the first. What's the answer. If a product is currently manufactured in NZ then similar products should only be imported from countries with similar labour markets. Tough yes, but fair.
Jenna
I worked for F&P in laundry for 4 years and left to go on my OE last year. This is such sad news to think that 350 people are losing there jobs but it does not come as a surprise when it is much cheaper to manufacture overseas and at the end of the day, F&P is a company - and as any company, they want to succeed and the only way to do that is for them to go overseas. Working at F&P was fantastic and I enjoyed every minute of it - the people and the atmosphere (at the time) was great, the staff were treated well and I always had fun and I thank all who I worked with/for for that. It is the end of an era but to all who work there - make the most of what you have left.
David Johnston
Why is anyone surprised about this? Ask any exporter what their number one issue is at the moment and they will tell you its the exchange rate and the level the dollar is at. Just last month it hit its highest level since being floated. From there - its simple maths. Higher dollar means a higher cost for exports. If you want to stay in business you have to cut costs somewhere else - and in this case by moving off shore F&P will cut costs twice - first by reducing the wage bill, and secondly by lowering on-going production costs. Yes - people will lose their jobs but the alternative is F&P going bankrupt - which would mean an even greater job loss. Don't blame the company for trying to survive.
Trading on the international stage is tough at the best of time - but if your dollar keeps going up it just gets harder. Unfortunately in an effort to curb house prices the government has single mindedly pursued a policy that has pushed the dollar higher and higher - and hang the consequences. This hasn't happened overnight as there have calls for months from exporters for the Government to find some other way of dealing with housing that doesn't rely on raising interest rates (which doesn't work anyway since most people have fixed home loans). Expect more exporters to depart. What else can they do?
James Gregory
Fisher and Paykel have made a move based on commercial considerations. Hard to argue against that. And most people would agree that NZ can't compete fairly against countries where wages are very low compared with NZ. However NZ compounds its disadvantages with policies like one months paid holiday for employees. Not enough tax breaks for employers.
Kat
NZ losing F&Ps laundry manufacturing for a mere $10million per year is tragic. The 10 million is nothing compared to the loss for the economy.
Take the obvious 350 jobs earning $10/hour is $6.7million in wages. But more importantly, the total value of appliances the laundry division built is at least $120 million per year. At least half of that would have gone to other NZ manufacturers and contractors supplying F+P factory with parts and services. Thats a lot more jobs and NZ company profits exported out of NZ, lets say $67 million lost from the economy for a measly 10 million per year in profit. And thats a conservative estimate. Furthermore, now that NZ has to import all of its laundry appliances thats at least $30 million per year extra, now spent on imports, which goes on the current account deficit. Lets say interest payments on the deficit grow $1.5 million each year. So adding all that up, thats $98.5 million per year of our economy exported to Thailand, for the sake of $10 million needed to make the F+P sales competitive. Some incentive from the government (like the Thais offer) seems to make sense. Especially when other manufacturers are about to do the same... What does the prime minister have to say about it? Well "Its the way of the world"!
Carl Forster
The key role of the government is economic development. The government is the leader and should provide the infrastructure, tax incentives, making it easier to do business. When local companies prosper the government will prosper even more. The government thinks it from their efforts that the economy was doing well. They have absolutely no knowledge on how the economy should be run and compete with the rest of the world or at least close the gap. They just let it run its course. We cannot compete with the rest of the world when we this government will not take control of the economy. Any changes made now may take another decade for NZ to reap the results.
There has been a lack of response from the government to Fisher and Paykels announcement and the current difficulties exporters are facing?. Labour who promised to push New Zealand's export sector into the forefront back in 2000? Clearly they are failing to live up to the rhetoric instead the sector is rapidly heading backwards, and with the current Labour Government and the Reserve Bank there appears to be no comprehension as to the economic impact of current policies. As I see it we should not have this open free trade deals that seem to be the poultice this government keeps pushing we should be placing tariffs and import duties on goods that compete with NZ produced products. Every country we compete with has these duties and what does the government state? No worry it will level its self out. Labour wrong and you have had 9 years to put it right. Maybe we need to put our governments on a floating wage based on how the NZ$ is rated and the GDP of the economy. If this government's pay was based on their productivity and gains to the NZ economy that would have – zero wage.
NeillR
Many people have mentioned the high dollar, but it's been high for a while now. There's also been cheap Asian labour for a long time - so there must be some other reason. Brian Gaynor's column in the Herald alluded to a massive dropoff in productivity in the last few years. The government crowed about moving us up the OECD ladder, but the results have been exactly the opposite. I would suggest that the recent implementation of four weeks paid holiday, combined with a "tipping point" on interest rates has forced companies like F&P to push the button. Perhaps those workers would have preferred three weeks holiday to no job at all?
Abraham
Moving of manufacturing jobs will hit the lower end of the society. As you all might know manufacturing doesn't need any highly skilled personnel in today's automated world but the bottom line is a group of people are moved from the employed category to unemployed category. As companies move out these people may never get job and this will further increase the number of unemployed and thereby a increase in the social support the govt has to pay them when they are out of job. Someone has said that once the free trade agreement between Thailand and NZ comes into effect people in NZ will get the whitewares at a much cheaper price. Do you think the companies are so benevolent? The basic idea of moving to cheaper destinations is to make the company richer and not to provide customers with cheap goods. The pockets of few will be filled up at the expense of many.
Jon
On the point of the NZ Dollar being too high, I am confused by the decision to raise interest rates in order to "weaken" the dollar. Raising interest rates strengthens the dollar, and as interest rates increase the dollar is going to get stronger and stronger as more international money comes flooding in (more than likely from Australia where most of our Banks are getting their money) as the banks make it easier and easier to get finance because they're making such good profit on their money in NZ.
Raff Dellavaris
I absolutely agree with Marc. New Zealand needs to maintain intellectual and manufacturing dignity or else risk being labeled a backwater only capable of accepting tourists, and deserving our low standard of living.NZ gave up on manufacturing, essentially when we stopped assembling Japanese cars here, somewhere back in the early '90s. We must believe there is still room for industry, cottage industry at least. Korea has achieved a vehicle and electronics industry fairly recently, China has too. If we can produce high quality Fisher and Paykel washing machines, and extremely high technology weapons components (like Rakon does) then surely we can produce vehicles,trucks, trains too. I think we need think tanks coming together charged with finding out how we can make environmentally friendly vehicles, railway systems and world class architecture ourselves. The English Teaching industry declined when students opted for practical business/IT/design qualifications to get real jobs and create real income producing businesses. The only total renewable energy solutions packages I've come across have been German and Japanese technology being sold by bright and cheerful marketers sent here specifically to teach us about their high-quality products. The Bio-pharmaceuticals industry was predicted to be bigger than the beef industry by 2010. Have we built the laboratories and production plants to achieve this end? How can we attract high grade scientists, engineers, and other technologists if we haven't got any projects for them to aspire to work on? Self-sufficiency is the way to go, let's not give up now.
Peter Rice
Manufacturing will only be of use to this country if it has either a competitive or strategic advantage. We have to develop more rapidly a service economy and accept we are now in the transition phase from manufacturing to the service/knowlege economy. Spend more money on people and knowledge and appropriate infrastructure. There is no use prattling on blaming government or globalisation; New Zealanders; get real and man up.
Ray Carini
During the dot-com boom back in the late 1990's the US Dollar was flying high and Greenspan kept raising interest rates to cool things down. If you recall, the Kiwi dipped below 40 cents and the Aussie dipped below 50 cents. Manufacturing became too expensive in the US as to compared with other countries and many companies beat a path to China. Now with imports soaring, the US Dollar is struggling to keep its head above water. Equilibrium will be reached when the Dollar drops sufficiently to make some manufacturing in the US cost effective. Fast forward to 2007. Commodities are booming, the Kiwi is flying high and Bollard is raising rates to cool things down. It's likely that with the high interest rate and the resultant soaring Kiwi, manufacturing will move offshore. It will begin with a couple of manufacturers moving and then the floodgates will open.
Andrew Dyson
This is exactly why 3m manufacturing jobs in the USA went overseas since 2000. Does nobody see what is going on? Shoes made by slave labourers in China maybe cheap in dollars, but what is the cost to New Zealand jobs?
Fosta
Sadly there will be many more jobs than the 350 jobs at F+P that go. F+P has many NZ suppliers to its factories, also providing jobs and many of these jobs will be exported also. Also more imports will add to our deficit. However, F+P had no choice, it was either move and survive or stay and be competed out of its markets. Sure, many people buy NZ made, but not when the price begins to get too high. Also other countries who F+P sell to arent interested in "NZ made". However, F+P hasnt moved out altogether. The product development, accounting, logistics, sales jobs all stay in NZ. The same kiwis will be involved in all the same aspects in the products except assembly. These same changes have already happened in the US and Europe. Most companies in Europe and the US (including F+Ps competitors, even though they may have European or American names) tend to have technical centres for product development and other white-collar jobs in the home country, and manufacturing in Asia. This is where the 'knowledge economy' comes in. Most people in New Zealand arent farmers, so if we dont find new markets and skills, well... maybe we will end up sewing underwear and shoes for big Chinese companies.
J.Hill
Offshore movement of manufacturing is a logical consequence of 'Nanny State" policies that force free-thinking productive people out when these individuals can no longer sustain the burden of regulatory effects.Laissez-faire!
FTC
I fail to understand why people are surprised at the news article. In NZ 99 per cent of the products are imported from China and other Asian countries. The simple reason being that the cost at which these countries can manufacture NZ companies can not even dream of doing that. Lets accept the realities of the 21st century, if you want to survive you need to compete with countries like China, India, Thailand, Malaysia etc. Its time the Finance Minister started implementing prudent economic policies which can stabilize the NZ dollar and reduce inflation etc, instead of just providing lip service.
I totally agree with the decision taken by F&P, if they do not do it now, in a few years time they will have to close shop, and lastly we New Zealanders should not be surprised if more companies follow F&P in coming months?. Thanks to the Labour Govt policies over the last 8 years.
Richard
I think it's sad the after all these years New Zealand companies are moving away but also one must understand the commercial reasons behind it. Over the past years New Zealand has priced itself out of the local market with wages and other expensives that the Government has created. I closed my business in New Zealand 4 years ago as I was done with all the rules set in place. I think New Zealanders need to remember that the place is really nothing more than a group of islands at the bottom of the pacific, and a very expensive place to go to. The Government will only listen to the worker on the street whom does not understand anything about the costs of running a business in New Zealand. The worker today has far more rights in New Zealand than the US. Helen gives them a little more just before election time lets their families into the country, everyone thinks its great so the votes from them all go Helens way to keep her in power. The voice of a businessman has not been listened to for a long time in New Zealand and this needs to change. I see National is now 10 per cent ahead in the polls over Labour so this says something. New Zealand needs an overhaul, and there is nothing there now for business people, New Zealand is just a joke and I think people need to take a look at whats going on in the rest of the western world and New Zealand needs to accept restorability for its good people moving and strong financial businesses also. Look at the Faye Richwhite, they put New Zealand on the world map as far as the America's cup was concerned and brought how many millions of dollars back in New Zealand. Around 600 million. They were forced out. The bottom line many New Zealanders are small minded with little or any commercially ability tom think and consider the big picture. I support the moving of New Zealand businesses leaving as New Zealanders need to wake up to what they have created and stop crying about what they have created. The bottom-line is what does New Zealand have to offer to it business people? Nothing.New Zealand needs to sort out the low life it keeps letting into New Zealand. Maybe they should sell to the Australians or Americans, if someone would take us. The legal system needs a complete overhaul. Its just to expensive to be in New Zealand now and many people realise New Zealand has become a third world country. Who wants to waste their time earning 700 to 800 dollars a week? I would not get out of bed for this lunch money.
David J. Webb
People that do not learn from history are doomed to repeat the mistakes made in the past.1. Exchange rates change. Sometimes up and sometimes down. It depends a lot on the ratio of imports and exports to a country. (example: all goods in Britain are almost double the price of goods in the USA.) The exchange rate on the British Pound is unnaturally higher than what it should be. 2. Companies in foreign lands are commonly nationalized (stolen by governments). This has ruined Britain in the past after World War II. China has a dictatorship type government which is the second factor that creates nationalization. 3. The only protection is to tariff foreign manufacturing when there is unfair competition. (example: China keeping the currency unfairly low in respect to the rest of the world.) (China labor kept at slave labor in order to keep prices down) 4. The ultimate plan these countries such as China and India have is somewhere down the road they will own you. When 85 per cent of your manufactured goods come from overseas the system will break. At this point your exchange rates go up in smoke and your currency is irreparably damaged to the point where your people can no longer afford the goods. 5. Japan's answer was to place their plants in the United States to avoid the terrible slide of devaluation down the road.That is why the companies leaving should have to pay a huge penalty on the way out.
Michael
The problem of NZ manufacturing is that companies here simply do not have the core technologies or some essential patents. Loads of manufacturers simply import parts from other developed nations and assemble them together. The production techniques here are probably poorer that those of developing nations. Without intellectual property rights and superior production techniques, NZ manufacturers simply cannot become serious global competitors and will be dead within a decade. The harsh reality is that NZ manufacturers cannot compete against industrialised nations (Europe, Japan, USA), cannot compete against newly industriliased nations (South Korea, Taiwan) and cannot even compete with companies from China and India. For example, the companies here are just not at the same level as South Korea's Samsung (electronics maker), China's Huawei (telecommunicatoin equipment provider) or India's Infosys (software giant).
B Williams
Whilst there are several contributing factors, the main reason to many of New Zealand's problems is quite simple. We have no Capital Gains Tax here. Just about every other developed country around the world has one and therefore can enjoy the benefits that a lower OCR affords them.
New Zealand is suffering from a high dollar, high interest rates, low levels of affordable housing, poor productivity growth, medium levels of inflation, low wages, and only small gains in GDP.Many of these issues could be solved by having a lower OCR (ie lower interest rates). The dollar would drop, businesses could borrow and invest to allow for much greater productivity increases thus allowing for much more GDP growth and thus wage growth.
The downside of having low interest rates would be the housing market would overheat more than it already has. By having a Capital Gains Tax on 2nd and subsequent homes (ie not the family home), this market would cool off and not overheat like it currently is. Since housing would not be providing such high levels of returns, people would switch to investing and saving money which in turn would grow the economy. One other thing that could possibly be solved quite easily and quickly would be to place restrictions on non-resident foreign ownership of property. This is driving up property prices and the proceeds are simply flowing right out of New Zealand and into foreign hands. The government needs to act quickly before manufacturing and other businesses in New Zealand close up permanently!
Andy
Cullen runs a huge surplus (that is, more money extorted from the public using coercive powers than was actually required to run the country) and people wonder why our major manufacturers are getting while the goings good? C'mon! Too easy! New Zealand is progressively becoming more and more difficult to make a decent living in: or a decent and fair profit for anyone other than a foreign-owned utility or multinational (most of whom require a return-on-investment that will never be re-invested in New Zealand, only bled out). Or a decent affordable lifestyle for anyone other than Shania Twain of Cher or other foreigners who will buy up vast tracts of our best land for cheap, as "holiday homes" -- but to never contribute in a meaningful way to our economy. Never.Or our banks: of our financial institutions do not need to answer to foreign masters. No mysteries here: New Zealand has been tragically mis-managed ever since the Winebox affair bled huge amounts of value from our economy. The buck stops at the Beehive for this. And much of this damage has been done during the past decade, during a few governments dominated by one party and one prime minister.
Neil
Outsourcing manufacturing is the only way NZ firms can be competitive on the global market. Just look at one of NZ's most successful companies - Pumpkin Patch does most of its production in China, enabling it to offer competitive prices on its products in the global market. If it wasn't for lower costs of production overseas, it wouldn't have been a success and wouldn't be providing jobs for hundreds of Kiwis in its NZ stores, warehouses and head office.
Matt Jeff
Since when did governments have to help out private companies or offer them any incentives? This move of F&P's to take its manufacturing base to countries such as Thailand has nothing to do with the Labour Govt or minimum wage legislation. I can't see why people are letting loose their vitriol towards Helen Clark & Labour. This move has nothing to do with them. Also driving wages down to keep up with developing Asian economies is more detrimental to NZ as a society and these businesses will always look for countries that offer even lower waged workers. The people who should be getting the flak are the shareholders and management of F&P. The saddest thing about this is that loads of hard working New Zealanders are now going to be out of work simply because a few wealthy shareholders woke up one morning and decided their profit margins weren't big enough to buy that brand spanking new yacht.
Herbert Segmuller
Sad story about all these manufacturing job losses here in NZ. Be assured it is only the beginning. As long as policy makers believe they have to fight inflation of apparently 3 pct with interest rates as high as 7.75 per cent, well thats the price to pay for it. The whole story does just not match. Does this country really have to make all the same mistakes as all other industrialized countries or are the decision takers a little bit smarter and look over the borders of NZ and realize what happened elsewhere and do not make the same mistakes?
Mel
F&P used to be one of the best companies in NZ in years gone by. They were so good to the staff when I worked there,seems as though the greed for the almighty dollar has got in the way,lets hope sanity will prevail. People in NZ are paid peanuts,but the profit isnt enough,wont be long before F&P will soon tire of the next contractors,then move onto somewhere cheaper. Bet the appliances don't sell any cheaper. Sadly all these hair brained work practices are now moving into Australia. I moved here to get away from them. A good example of how these work practices don't work for companies - look at Air NZ when through greed, bought Ansett Airlines,ran it into the ground,then nearly bankrupted Air NZ. Bled all the staff super funds and skipped off out of Australia,and by the way,the Ansett staff are still waiting to be paid all their entitlements. Vote with your feet consumers of NZ,that's the only way,hit F&F where it hurts,in the bank account.
Ms Auckland
Wonder why on earth F&P and other New Zealand businesses wants to move to Asia for lower wages, since New Zealand already is one of the lowest wage regions in the western world, if not the lowest?
Stephen Chak
I'm not surprised to learn that F&P will relocate part of its operations to Thailand. In the past 8 years, how many local manufacturers had already closed down their shops and moved the production lines to overseas? Has our inherent government done enough to create a more business friendly environment to our local manufacturers? We can't solely depend on a clean and green environment for survival. We need to keep our local manufacturers and attract more global corporations to invest here. NZers need more job opportunities with decent salaries. Otherwise, more primary school kids will go to school with hungry stomach apart from deterioration of brain drain and crime rates.
Rick (Hong Kong)
Maybe two comments I heard recently here in China explain what is/gone wrong. A Chinese guy who lived nearly ten years in New Zealand, but now moved back to China permanently snapped, "They [Kiwis] are dammed lazy". This combined with another Chinese' puzzled comment, who had never been in New Zealand, who said, "why does New Zealand have all these book keepers [accountants] managing their companies?" Bean counters in New Zealand are always looking for that discount, and that "free lunch". If the employees can not discount enough, the beanies move elsewhere. Japan, and most European countries, and even partly China, has higher cost of people than New Zealand, but still make good. Change the system Kiwis. Get rid of the discounters and the discount bean counter culture.
Christian
Like many other large companies in NZ, F&P is a publicly listed company, therefore the first and foremost priority of the management/directors is to keep shareholders happy. I have no doubt that the news of 350 jobs going offshore will boost their share price. Nobody should be under the misconception that F&P is still a New Zealand company, it is a company operating globally, owned by some large institutional shareholders as well as many individual shareholders, having manufacturing sites and subsidiaries in the US of A, Australia and Italy. F&P cannot compete with the cheap & mass-produced products swamping their traditional markets, the key to survival is innovation (SmartLoad Dryer, Dishdrawer, etc.), but the market for high-end products with proper margins is small. Further to that they have to fight companies dumping products in their main markets such as Australia. Another sad truth, the upcoming and emerging countries are hungry, we have become complacent & lethargic. While we keep on relying on government handouts, go fishing etc., the competition is learning, improving, and marching ahead. And the quality they produce is getting better and better. Get used to it, manufacturing in NZ is a dud, activate the often quoted Kiwi ingenuity, and train or re-train, our driving standard is poor, panelbeaters will always do well!
Murray Tait
The over inflated NZD is causing huge damage to our productive sector. Why is it OK for overseas bond traders and Japanese dentists to make massive profits from our inflated interest rates & why is it OK for Australian owned banks to be pushed by the Reserve Bank to lift mortgage lending margins/profits when NZers are being forced to bear the consequences. Harsh consequences such as the F&P closure - with more to come. Our Government needs to get its hands back on the wheel & stop hiding behind the Reserve Bank inflation targets. Take action now - get its spending under control. If the Government was serious about taking the heat out of the housing market it could enforce existing capital gains tax legislation on speculators and review current tax law for negative gearing and LAQC type tax offsets on investment residential property.
Peter
Further to Sam comments. NZ should learn from Singapore. They have moved all labour intensive manufacturing plants out of Singapore leaving only the high technology manufacturings. Only skilled migrants with employment offer are allowed into Singapore. Singapore has attacted huge number of skilled labour yet did not implemented minimum wages like NZ that push up consumer prices. NZ should leave wages to the labour markets.Some Asian countries economies are much better off than NZ now. Are we heading backwards?
Aaron
As an ex-patriot kiwi living in Japan for 16 years and working at a communications manufacturer here for the last seven, I have seen the exodus of major Japanese manufacturing corporations to China mostly, and commiserated by the politicians and industry here as the 'hollowing out' of Japan's manufacturing base. It was brought on by similar factors mentioned in the opinions above. I.e. globalization, high wages in Japan, inefficiency of domestic orientated manufacturers, high debt from the assets inflated bubble economy of the 80s and a strong yen, to name a few.
However, the major difference I see here is the willingness to adapt and change. Lifetime employment no longer exists and average wages continue to fall, but export orientated companies in particular are making record profits and employment is actually expanding now. Japan still leads the world in investment in new technology and such new technology is not be exported to lower cost countries as it is an advantage to keep it at home. NZ needs to do the same, but from assumption and what I have read here, a mixture of Government policies and a lack of skilling up the population will keep NZ 'at the bottom of the world' I think. I am proud to be a New Zealander and love the country, but I don't foresee myself going back to live at all as I don't see it moving forward. A business trip there at the end of last year via Australia reinforced this view. Australians were driving cars of a level with that seen in Japan despite being twice the price, and the cars I saw in NZ were at least 10 years older. After 11 years away, it was saddening that no visible progress could be seen in the standard of living of NZ. While nature and a spacious environment would beat anything here in Japan, that is not enough to put food on the table as the unfortunate workers at F&P will painfully experience.
Prem Deshpande
I came to NZ five years ago, and found F&P a family owned company. It's a pure Kiwi company catering to Kiwi needs and I love that. Now F&P is moving overseas due to high interest rates and bloated NZ currency. This also means we will lose quality trade personnel to OZ or overseas. How can we stop this, Labor Government please step in and find out why NZ $ is made stronger. Who are responsible for this? Read the comments sent by readers and try to analysis the cause. Stop foreigners and Real estate Agents covering their ass under Privacy laws buying and selling properties and bloating the house price abnormally high. Take an inventory of house for sale, find the owners and penalize them if bought by foreigners only to make money on our losses. Remember Bollard increased interest rates only to dampen the ever-increasing house prices.
John
There is nothing wrong, its just plain and simple, adjust to change, embrace change or disappear. Nothing to cry for really, only in communism do you have a job for life.
Stanley
The job loss at F&P is a manifest example of the e
