Assembly Of Fewer Brands Of Cars?

Press, Volume CVIII, Issue 31658, 19 April 1968, Page 10

Assembly Of Fewer Brands Of Cars?

The rationalisation of New Zealand’s motor assembly industry is the subject of negotiations between the Government and some major assembly companies, says an article in the March issue of “Welding and Metal Trades News.” “Present indications are that the major assembly companies have acknowledeged the need for rationalisation but the smaller assembly companies—which have the most to lose—are strongly opposed to rationalisation,” the article says. “Some political observers believe that the rationalisation proposals are one of the reasons the Prime Minister (Mr Holyoake) rejected the suggestion by the Monetary and Economic Council that c.k.d. (completely knocked down) motor-vehicles be freed from import controls from July 1. 1968. If the assembly companies were now given freedom to import as they required, there would be no

chance to rationalise the industry. “The main points of the rationalisation proposals are understood to be: “The major assembly companies, which at present assemble a wide range of vehicles, will produce a greatly reduced range of cars but in a larger volume. “The major assembly companies will reach agreements with official approval, to produce this reduced range which will cover the New Zealand requirements—for example, instead of, say, 10 brands in the 1000 c.c. to 1200 c.c. range being assembled here, this could be reduced to four or five. “The local motor component manufacturers will be required to produce a smaller range of components but in greater volume. Australian Market “In some cases, component manufacturers will have the opportunity to produce not only for the New Zealand market, but for the Australian assembly companies; a number of these agreements will come under the scope of

article 3 (7) of the New Zea-land-Australia Free Trade Agreement, which will allow Australia to supply New Zealand component manufacturers with the basic raw materials for production of the selected parts for both countriles,” says the article. “Under the agreement, the Australian Government will allow the use of these New Zealand made components to be included as part of its ultimate plan for a 95 per cent local content—in other words, these components will be classed as Australian made. “It is also possible that, while the New Zealand assembly of many vehicles will cease, efforts will be made to have some of less popular motor vehicles assembled here for the Australian market. “No official announcement of these proposals is likely to be made for some months, as there are still many problems to be solved, but some sources believe the Government is prepared to force the issue of the rationalisation of the industry. “Today, rationalisation is being accepted by some larger firms, which have found the chances of increasing local content above 45 per eent to 50 per cent uneconomic. “The recent amalgamation of Leyland and the British Motor Corporation will assist New Zealand rationalisation,

but here again this will cause local problems. For some time, B.M.C. has been looking for the most suitable New Zealand site for a new large assembly plant. Effect On Nelson “When this plant is established, it could well be that Nelson may find that not only has it lost its cotton mill, but its car assembly (which took over the cotton mill building) will not be with it for ever. "As a result of these rationalisation moves, it appears it may not be wise for the Anziel group to go ahead with the production of a high localcontent Nova car, even if the Government gives the green light. “Rather, the future of the New Zealand motor industry appears to be in a limited range of cars being assembled here, with no large increase in local content; the growth of the component industry being not in diversification of production but in increased volume of production, with exports to the Australian assembly plants. “It is hoped that this rationalisation will reduce vehicle costs. With the easing of import licensing, anyone wanting an imported assembled vehicle, rather than one from New Zealand’s reduced range, will be able to buy it—provided, of course, he is prepared to pay the additional cost, because of factors such as higher duties. 17 Planta “For many years, there has been strong criticism that New Zealand, with a population of only 2jm, should have 17 assembly plants, which produce more than 50 models of 25 makes of cars. "Some critics have even argued that assembly in New Zealand is uneconomic and that this sick industry should be allowed to die.' This, of course, from many viewpoints is completely unrealistic; especially from a political point of view. It is just not a viable proposition to wipe out an assembly industry with a capital investment of more than s6m, plus the many ancillary industries. “The present rationalisation proposals will be strongly debated and, if implemented, will create many initial problems, but many believe that rationalisation provides the basis for a sound future,” the article says.