Thursday April 17, 02:15 PM

F&P unfazed by likely consumer backlash

Fisher & Paykel Appliances Holdings Ltd is confident its decision to axe 740 jobs in Australia and New Zealand will not prompt a local consumer backlash. The New Zealand company is closing its Brisbane plant with the loss of 310 jobs as part of a strategy to concentrate its production operations in Thailand, Mexico and Italy. Another 430 jobs will go at the whitegoods maker's Dunedin plant and 330 jobs will go at its DCS cooking plant in California. "We're still a very, very proud New Zealand and Australian producer of home appliances," chief executive John Bongard told a briefing on Thursday. "Understandably there may be some people who say `that's the last time I ever buy a Fisher & Paykel'. "But in fact if they actually do that where are they actually going to buy things from? "They're going to be (from) China, Thailand, Korea, Japan India." The dual-listed firm plans to save $NZ50 million ($A42.22 million) pre-tax per annum from the changes, after a one-off cost of approximately $NZ50 million ($A42.22 million) from the move. The cost of the moves will be funded mostly from the sale of the sites in NZ and Australia that will be closed down, expected to sell for around $NZ100 million ($A84.43 million). Mr Bongard attributed the decision to globalisation - as developed countries struggle to compete with low labour costs in developing countries - exacerbated by local factors. The Fisher & Paykel chief cited the high New Zealand dollar, complex and expensive compliance costs in manufacturing in Australia and New Zealand and free trade agreements with China and Thailand as factors. "When you're having to compete on a playing field where you've got zero tariffs from low cost countries, it doesn't matter how smart and how tough our guys are, you can't compete against unlike economies," he said. Labor costs in Mexico, where Fisher & Paykel has acquired a plant from rival US whitegoods maker Whirlpool, are one sixth the cost of labour in New Zealand, he said. In terms of its local manufacturing operations, the restructure leaves Fisher & Paykel with refrigeration and production machinery facilities in Auckland with 350 workers. Mr Bongard said those workers "were about as secure as anyone in any one of our plants anywhere in the world, to be honest". "I would like to see us carry on making refrigerators in New Zealand," he said. "But if the time comes in one of our future reviews and we decide that's not possible any more then we'll have to take the action at that time." The Australian Manufacturing Workers Union said it wants to meet management to convince it to keep open its Brisbane manufacturing plant. "I'm not sure how we can be stopped from closing something," Mr Bongard said. "I'd rather have that discussion with them in private," he added when quizzed on the union's position during Thursday's briefing. In contrast, investors were enthusiastic about the restructure, pushing the stock 24 cents, or 12.77 per cent, higher to $2.12 on the Australian stock exchange by 1350 AEST. Fisher & Paykel also expects savings by sourcing components from the respective local vendors. Remaining production facilities in Auckland, Ohio, in the US, and Borso del Grappa, in Italy, along with their engineering and design teams, will continue to operate as before. The company will send New Zealand, Australian and US personnel to manage the manufacturing processes in the new facilities, to ensure quality standards are maintained. Facilities, including the refrigeration plant and Fisher & Paykel's head office, will remain in New Zealand, employing over 1600 people. The Australian operation will continue to employ 330 people and 340 staff will continue to work in the US. Fisher & Paykel, which has been a substantial manufacturer in New Zealand for almost 70 years, expects to save $NZ14.5 million ($A12.24 million) per annum by closing the Dunedin plant, after a one off cost of $NZ26.0 million ($A21.95 million), pre-tax. The company, which started manufacturing in Australia almost 20 years ago, will start the relocation of the Brisbane pant to Thailand by March 31, 2009.