Mini-Mosgiel close to home?

Press, 11 June 1980, Page 1

Mini-Mosgiel close to home?

Christchurch may have a mini-Mosgiel on its hands as J. Mercer and Sons, Ltd, a leading fabricator of stainless steel products, is in serious trouble, which will result in a substantial loss, of jobs.

The company suffered an audited loss of $1,380,000 in the year ended February 29. Last year a profit of $107,815 was made. As a result, the corm pany plans a reconstruction aimed at returning to profitability, and saving most of the productive jobs. But about a third of the staff will be laid off. The plans have the approval of the main shareholder, the South Island

Dairy Association, and the main secured creditors which include the Bank of New Zealand, and Marac Holdings, Ltd, the finance company. The restructuring will entail the closing of the company’s Wellington manufacturing unit, and the reduction of admi-

nistrative and production staff at the main Christchurch plant by 64. Total redundancies are expected to be 84. Mr J. Mercer, chairman of the company, said that the downturn in the building industry over the last few years had severely affected sales, and inflation in production material, costs and heavy management overheads had created liquidity problems. “Borrowing was undertaken to fund further

development work to help diversify production, but continued high overhead costs and the cost of servicing debt has left the company in a weak position,” said Mr Mercer.

Sales for the year decreased 20 per cent to $6.2 million, ‘ which, when adjusted for inflation, meant that income was reduced almost 40 per cent on the previous year, he said.

“Earlier this year, our expected loss for the 197980 year was estimated at $250,000. On this basis we invited S.I.D.A. to become a major shareholder, and agreement was reached which provided us with a further $480,000 in capital, the opportunity to achieve additional productive work, new management expertise, ai d agree, lent

that severe pruning of management overheads would be undertaken. “At that stage we did not envisage any redundancy of manufacturing staff.

“However, the audited loss of $1.38 million has changed this entirely. We are now in a situation in which the company would, without support and the commitment of 5.1.D.A., find itself in receivership, and with all 263 jobs throughout the country lost.”

The South Island Dairy Association, and the main creditors had agreed that the company could be saved and returned to profitability, albeit through a drastic restructuring.

“Naturally , we hope the unions will support the restructuring plans, bearing in mind the likely

alternative,” said • Mr Mercer. There had been much criticism of the role played by Mr Bruce Judge, the financial consultant , approached for help and advice.

“Without the sound advice he gave us, which led to bur association with the S.I.D.A. and the injection of new and vital capital, the company would almost certainly be in receivership or liquidation, and all 263 jobs lost,” Mr Mercer said. Mercer’s expanded strongly during the last decade and established manufacturing and sales offices at Dunedin, Wellington, New Plymouth, Rotorua, and Auckland, as well’ as sales representation at Nelson. The manufacturing unit at Dunedin was closed last year, but a

storage and sales section is maintained there. It is believed that most production workers being laid off belong to the Engineers’ Union. There are also members of the Moulders’ Union, the Canterbury Clerical Workers’ Union, the Canterbury Storemen and Packers’ Union, and the Canterbury Commercial Travellers’ Union.

The unions were represented at a meeting with the management yesterday.

Mr T. Smith, assistant secretary of the Storemen’s Union, said the workers had reacted to the redundancy news with shocked silence. There had not been time to call a meeting between union officials and the workers but one would be called soon.

The workers decided at a meeting on May 29 to resist redundancies, but that was when only six had been given notice. Their attitude might have changed, said Mr Smith.

A financial adviser would examine Mercer’s position to help the unions formulate policy. The Labour Party’s shadow minister of Regional Development, Mr M. K. Moore, said that Mercer’s was not a fly-by-night organisation that had over-stepped itself. It had been in business since 1884.

“I put the blame where the company puts it — on the state of the housing industry. Therefore the Minister of Housing (Mr Quigley) must shoulder some of the responsibility,” Mr Moore said.