Chch company considers offshore move

Press, 17 December 1985, Page 4

Chch company considers offshore move

Increased costs and the removal of export incentives had forced the Christchurch electrical product manufacturer, PDL Industries, Ltd, to consider manufacturing its Australianbound goods and some domestic goods offshore. Now the dramatic drop of the value of the New Zealand dollar meant the company would have to “re-do its sums,” said PDL’s executive chairman, Sir Robertson Stewart. “We don’t want to shift if we can still export to Australia, but we will have to wait and see how the dollar stabilises over the next week,” he said.

Sir Robertson said that manufacturing costs had increased 15 per cent in the last year and as a result the company’s ability to pro-

duce electrical goods for the Australian market was at risk.

The increased value of the New Zealand dollar, high interest rates, high wages, high inflation, high electricity charges, fringe benefit and road-user taxes, as well as the removal of export incentives had severely diminished the company’s competitive edge on the Australian market.

Australia is the company’s biggest overseas z market and is worth about $lO million in sales a year (or half the total export sales). The company produces about $lOO million in goods for the domestic and overseas market each year. Sir Robertson said that the company had worked hard to build up its reputation and market in Australia and did not want to

lose ground. The company was forced to consider following other Christchurch companies in the move towards offshore production to keep itself on the market. The clothing manufacturer, Canterbury International, and the rubber footwear exporter, Skellerup Industries, plan to move manufacturing units to Australia. The Government’s decision to reduce tariffs and import duties also made the production of electrical goods offshore for the domestic market an attractive proposition, said Sir Robertson.

The company has not committed itself to offshore production yet. A decision would be made by March. It would depend on the costs and strength and stability of the New Zealand dollar.

Any move offshore would not affect the company’s present 1200 employees in Christchurch, said Sir Robertson. The company would not, however, replace staff or expand production in the city. The biggest concerns to exporters had been the loss of export incentives and the volatile nature of the New Zealand dollar. For the last three decades companies had been encouraged by successive Governments to increase production so that they could establish export markets, and now that that had been achieved the plug had been pulled out, said Sir Robertson. “It now looks as if manufacturers will be forced to produce less just to suit the domestic market and not, attempt to export because it is no longer viable,” he said.

The company already has one offshore factory. It started producing electrical

goods in Malaysia for its South-East Asian markets 10 years ago. That move offshore was prompted by similar financial considerations to those faced today. The Malaysian factory, which employs about 160 Ble, assembles New Zeamade parts. It produces about $l2 million worth of goods eadh year. The latest proposal involves componentry from China and assembly time somewhere like Hong Kong, with most goods going direct to the Australian market.

The proposal to produce offshore may end plans to expand in Christchurch. The Christchurch City Council looked last evening at procedures to stop part of Hazeldean Road to allow the PDL factory to expand. For the last 30 years the Sy had considered ex- , using Railways tion land across the

road from the factory. It had asked the council to stop the road so that it could buy the land and that part of the road. The.council last evening approved the stopping procedures. The next step will be public notification. Sir Robertson said it was very unlikely that the company would now expand on to the Hazeldean Road site. It was ironic that after 30 years of trying to buy the land from the Railways the company was almost in the position of being able to but “would not know what to do with it.”

The company could not now afford to buy the land or produce anything on it. “It is a shame to think that all those plans have gone down the road in such a short time,” Sir Robertson said.

The company, however, had to make a profit if it was going to be viable and

survive,' he said. Cr Helen Garrett has been concerned that delays in stopping Hazeldean Road might dissuade the company from expanding in Christchurch and instead go elsewhere.

The proposal by PDL to move offshore underlined the point that if New Zealand manufacturers were not looked after by New Zealand they would go elsewhere. The company’s decision to move was probably prompted by Government policy rather than delays in having the road stopped, she said.

If the company decided to expand overseas it would mean a loss of employment opportunities in Christchurch and also continued cramped space for many of the people who worked with PDL Industries, Ltd.

“It is a disappointment from all points of view,” she said.