TONNAGE OUTPUT

Evening Post, Volume CXXIX, Issue 64, 15 March 1940, Page 4

TONNAGE OUTPUT

WHAKATANE MILLS

COMPANY'S SUBMISSIONS

TRIBUNAL'S FIGURE

Legal submissions on the cardboard tonnage output of 12,500 tons a year fixed by the Price Investigation Tribunal for Whakatane Paper Mills, Ltd., occupied the v whole of yester- -', day's sitting of the tribunal: This question was one of five arising from the company's application to be allowed to increase the prices of its cardboard and one on which the tribunal earlier this-month gave an interim decision. The hearing yesterday was ' granted at the request of counsel for the company. The tribunal comprises Mr. Justice Hunter and Mr. H. L. Wise. Mr. H. P. Richmond and Mr. W. G. Clavis appeared for the company, Dr. N. A. Foden for the Crown, and Mr. W. Perry for users of Whakatane cardboard. The tribunal, said Mr. Richmond, had assessed the tonnage output of the ' mill on the basis of the combined outputs of all boards. From the point of view of the company's representatives that type of tonnage output never entered into their calculations at all. Mr. 'Wise observed that the annual tonnage output had to be determined by someone. Some definite tonnage output had to be'fixed to enable the costs to be arrived at. Mr. Richmond contended that there was no statement in the evidence which precisely, stated the value of the market for 1940 in New Zealand, except the statements made by the Factory Controller, Mr. Pascoe, and by another witness, Mr. Everton, and he was quite content to abide by those statements. Mr. 'Nisbet, on behalf of the committee of boxmakers, had made a general statement which had not been dissected. , Mr. Wise: What figure should be taken? —I suggest 9000 tons. Mr. Wise asked Mr. Richmond if. the true position was that the company had" not sufficient working capital and that prices had to be raised sufficiently high to provide that capital. "I should think not, sir,"-Mr. Richmond replied. "I should think the position is that no matter what working capital the company had, it could not be expected to sell its products in New Zealand at below ordinary commercial prices." All he asked, continued Mr. Rich- . mond, was that the matter should be looked at from the practical point of - view. At the present stage anything beyond 9000 tons was purely speculative. The company was not going to be so stupid as to sit back on 9000 tons. The company wanted to work to the position of being able to bring its costs right down. Mr. Wise: That is the whole point. If there is a reasonable prospect of the , company doing that, it is the duty of the tribunal.to protect the public. Mr. Richmond: It cannot be done now. " - Mr. Wise said it did seem extraordinary that the figure of 9000 tons was now put forward, a figure which at no stage of the hearing was men- • tioned, after the costs had been worked out on the basis of the evidence that had been given. His Honour: To be quite frank, isn't the real position . that. the financial position of the. company is so bad or the lack of working capital is so great, ' that unless prices are fixed above a fair cost of production, the company won't be able to carry on?—I say most definitely that is not so. The company is prepared to work for a less profit than any ordinary commercial under- ' taking would be prepared to under- \ take an enterprise for. It is perfectly willing to do that. I am sure you can take that as an absolutely candid ' statement. PRICE INCREASES. His Honour pointed out that in December the tribunal had granted the company, on prices which the company had fixed, an average increase of £3 10s a ton and the accountants had calculated that the result of the interim judgment would be another increase of about £2 a ton, which would amount to an increase of the com- • pany's own prices of £5 10s a ton - since December. Did not that seem enough to give on the company's own December prices? Mr. Richmond referred to the competition from overseas the company had been faced with last year before the outbreak of war, making it necessary for the company to base' its prices on overseas prices. With the increase in overseas prices he submitted the industry became one which the. tribunal was. entitled to support, i His Honour: You. may be faced now with lower prices from overseas in view of what has happened in the last 48 hours. Mr. Richmond said that while he recognised the full force of his Honour's criticisms upon the company, he thought many of them were subject to explanation. Mr. Wise: If you put before .us theoretical costs based on certain weekly tonnages for different boards, and you have got no idea in mind of what the tonnage is going to be, how can you say what the result of the company's operations is going to be? You cannot do it on that basis. It is utterly impossible. How can you say the company s going to make a cash loss of £23,000 in regard to the tonnage for the year? How can you say whether the tribunal's decision is going to come out on .the wrong or right side of the company's operations? You must have some regard to what the tonnage is going to be. Mr. Richmond said that, applying the tribunal's method of fixing it, the company's representatives could not fix the tonnage at beyond 9000 tons. The members of the tribunal observed that in the evidence given by the company the minimum suggested was 10,000 tons. Mr. Richmond said that, quite seriously, the company did not see any market at the present time beyond 9000 tons. In reply to his Honour, Mr. Richmond said he would accept 9000 tons for a short cycle to test it out. The, demand from the boxmakers so far this year had been very small. Dr. F-oden: There is an explanation for that. Your people , threatened to shut down in December and licences were given to import some board. That is not entirely the fault of the boxmakers. Mr. Richmond: I am not saying it is the fault of the boxmakers or anyone else. The prices we are now asking for are so far below the cost of importing board, that it would be a very sad thing if we had to shut down. The only reason I suggested the matter • should be dealt with in chambers was that I didnt want to seem to be hold- • ing out a threat. We want to carry on. In reply to further questions. Mr. Richmond said that what the company was asking the tribunal to do was to work out the prices, taking the estimated weekly tonnage on the basis of a continuous run of each type of board. JThose continuing runs had been, ar- i

rived at as the result of experimentation. A NEW APPROACH. In«;his address to ■ the' tribunal Dr. Foderi submitted that the tribunal was being asked to approach the question from a different angle in order to get a different result, because the result arrived at from the other approach was unfavourable to the company. The tribunal had fixed the output at 12,500 tons, and in view of the evidence before the tribunal, there was nothing submitted by Mr. Richmond to make that figure appear unreasonable. If as the months went by it was found to be likely that the sales might not exceed 9000 tons, that would be the time for the company to make its application to the tribunal, supported by evidence. In his submission there had not yet been time to fix with any degree of finality the market for cardboard for any long period ahead. "It may be," continued Dr. Foden, "that the company is playing a losing hazard with this cardboard. On the other hand, I think myself—and it.is supported by the evidence—that the prospects for the cardboard industry, meaning in particular this mill, are really very bright. There is no reason why such a low figure as 9000 tons should be taken as a basis for fixing these prices." Dealing with the general principle i underlying the application, Dr. Foden said he considered the tribunal would be establishing ( a very dangerous precedent if it reviewed any of its findings. Dr. Foden contended that if the prices went much higher, the company would be biting off its nose to spite its face. It would be seeking to enhance its prices to such an extent that it would produce other problems, such as the problems of substitutes for cardboard, overseas importations, and competition in some form.or other. The question of the company closing down, said Dr. Foden, was not an issut before the tribunal. The tribunal was concerned with whether the prices were reasonable. It might be that the prices were too low from the company's point of view to permit it to carr,y on successfully, but that might be only one of a dozen factors that might contribute to the question of whether the company should close down. APPEAL TO TRIBUNAL. What was before the tribunal, said Mr. Perry, was not apparently a question' of the interpretation of the interim judgment given by the tribunal, but, really an appeal on a question of fact from the tribunal, which had already decided that question. The result, of the tribunal's finding as to tonnage must increase the prices of Whakatane products, and the company now came before the tribunal and asked for more. Surely there must be hundreds of instances of applicants to the tribunal for increases.in prices who had been, for the time being at any rate, dissatisfied with the increases the tribunal had given, but, nevertheless, had accepted the decision and had made the necessary readjustments in their business to meet the. new or changed situation. If it were not so, then the position would be that there would be applications every five minutes in an endeavour to persuade the tribunal to approve ,of prices' that would satisfy the applicant in each case. \ Dealing with the cardboard requirements of:'boxmakers, Mr. Perry said that the effect of Mr. Pascoe's evidence was that, in consultation with the boxmakers, he found that they could take 8500 tons a year, but that they could take more if they were assured of a regular supply from the Whakatane mill at reasonable prices. Mr. Perry submitted that in view of the startling increases that had been made in the prices of the company's products since December, the .tribunal would hesitate very long before coming, to any:.other decision than the one- it'"canifi ?to, in its interim 'judgment/ whereby, the prices of Whakatane produces; from what could be gathered, would be increased approximately £2 a ton. Any further increase on the £3 10s and the £2 must, it was submitted, necessarily have an extremely serious effect upon the box-making industry. Replying, Mr. Richmond said that the Emergency Regulations Act, 1939, among other things, empowered the making of regulations to maintain supplies and services essential to the life of the community. It did not appear to him that the matter before the tribunal was one for forensic appeal or brilliancy. It was a matter of actual common sense. The purpose of the tribunal, as he imagined it to be in dealing with an exceedingly difficult, and complicated matter such as this, was to maintain the supplies of cardboard as being essential to New Zealand. It was essential to New Zealand because of the high import prices. , His honour asked Mr. Richmond if the company could not carry on for two months if the tonnage remained at 12,500. ■ ' ; LOSSES THIS YEAR. Mr. Richmond said that the company had lost enormously during the two months of this year already. His Honour: On your £3 10s increase? . . Mr. Richmond: Qh, yes, I wouldn't be asking for this, if we hadn't. After some" further discussion, the tribunal adjourned on the understanding that, if counsel desired, it would sit again this mprning.