Should Tyres be Made in Dominion?

Manawatu Times, Volume 70, Issue 281, 28 November 1945, Page 7

Should Tyres be Made in Dominion?

Three Firms Appeal Against License Grants

(Per Press Association.) WELLINGTON, Nov. 26.

The case for and against the granting of any licenses for the manufacture of motor tyres and tubes in New Zealand was further argued today before Sir Francis Frazer, the Industrial Efficiency Appeal Authority.

Mr. Hoggard, who is appearing for Michelin and Co., Ltd., one of the three firms appealing against the granting of any licenses at all, pointed out that the output of the various units would he small and the costs would naturally be high. The prewar market in New Zealand was worth £1,200,000, but with the durability of the new tyres and the smaller demand, there would be a very small local market to divide among three plants. As far as costs were concerned, he said that the raw materials had to he imported, wages per manhour were higher than in Britain and the output per man was likely to be lower. Moreover, high capitalisation meant high charges in the way of interest and dividends and would mean a very high depreciation charge. New Zealand had the world to buy from and at present there were 11 competing importers in the Dominion. He produced a schedule showing that the Tyre Importers’ Association had ordered 56 different sizes for the ensuing year. The market was well served under conditions of free importation and was not likely to he so well served under local manufacture.

Another question involved in local manufacture was the loss of import duties, which before the war amounted to about £105,000 and had been up as high as £150,000. Counsel contended that, when everything was assessed, there would be a substantial adverse balance against the local industry. Tyre manufacturing would place an extra demand on coal and electric power resources, both of which were already notoriously overburdened. It would be foolish for New Zealand to go to extremes in the matter of economic nationalism. Tyre manufacturing was not a natural secondary industry—it did not process the country’s own products—and the granting of the licences would do irreparable harm. COUNTRY’S WELFARE Mr. Sim, who with Mr. Simpson is appearing for A. S. Paterson and Co., Ltd., and Avon India Rubber Co., Ltd., submitted that the Industrial Efficiency Act was designed to promote the economic welfare of New Zealand and not of any particular industrialist who wished to make money in New Zealand. The case presented to the Bureau paid very little regard to that aspect, but was concerned more with pressing the desirable claims of the applicants.

Counsel submitted that the main point as. to whether the licensing of the industry would be in the interests of the country as a whole had not been considered by the Bureau as it should have been. These companies were proposing to start in New Zealand on a capital basis of more than £2,000,000. Could the Bureau have been reasonably satisfied that each or any of these companies was going to make a do of it without adding a substantial increase in the cost to New Zealand? The licensees had not produced any profit and loss account to show the Bureau that they expected to make a profit. “Tariff protection is a sine qua non of the granting of these licenses,” continued Mr. Sim. “These firms all know that the only possibility of carrying on at all on paying terms will be behind a tariff wall and import restriction. This state of affairs exists in Australia and South Africa with very adverse consequences. I suggest that Britain and America do not really want these licenses. They are being dragged along at the heels of Reid’s and Skjellerup, who seek to establish a New Zealand industry.” Counsel said that New Zealand was admirably catered for in the matter of tyres, and that the applications of Goodrich and Firestone were purely defensive and not related to the advancement of the welfare of New Zealand as a whole. The only good as suggested as likely to arise from the establishment of the industry was that employment would be found for an estimated 800 men. The labour content, however, was low, being estimated at about 10 per cent of the cost of production. It was a question not of finding employment but of finding manpower. Mr. H. M. Rogerson, for Reid (N.Z.) Rubber Mills, Ltd., and E. W. Pidgeon and Co., Ltd., in association with the B. F. Goodrich Company, was the first of three counsel to reply on behalf of the three companies to which licences to manufacture have been issued. The dominant purpose of the Industrial Efficiency Act, he said, was to promote the economic welfare of New Zealand by encouraging the establishment of new industries and the development of existing ones, provided always that they were economic. It was open to discussion whether it was the intention of the Legislature in passing the Act to confer on any part of its executive power to prohibit all industries. If such power were conferred, before it was exercised it was incumbent on the appellants to prove beyond doubt by clear evidence that the Bureau had come to a wrong decision. That they had not done.

Replying to points raised by Mr. Hoggard, Mr. Rogerson said that in the

licensing of industry, some hardship was inevitable. There was nothing in the Nash-Stanley agreement to prevent the licensing of the tyre industry. There was no evidence of the comparative effect on the dollar exchange of establishing a local industry or continuing to buy, as in the past, tyres made in America and Canada. In either case, dollars would he used.

On the question of costs, Mr. Rogerson said the' fact that raw materials would be imported did not necessarily mean the costs would be increased. He understood there would be a slight saving in New Zealand compared with other countries. There was no evidence that the New Zealand wages per manhour were higher than in England, and they were lower than in America. The output per man-hour in New Zealand should he just as high as anywhere else. It was not proper to take the abnormal position of the coal industry and say that it should be the determining factor. New Zealand, said Mr. Rogerson, had the largest population in the world of any country without a tyre factory, and in the use per capita of motor vehicle it was second in the world only to the United States. Other countries manufacturing tyres also had to import raw materials.

Replying to Mr Sim, Mr. Rogerson said, the evidence as to the suitability of the industry for New Zealand had been so conclusive when presented to the Bureau that there had been little dispute about it. The potential employment was not 800, as had been stated, but 1200. Statistics relating to vacancies in industry and personnel overseas showed that there would be a serious problem of surplus manpower in New Zealand.

QUALITY OF. LOCAL PRODUCT Mr. I. MacArthur, for the Firestone Tire and Rubber Co. of New Zealand, Ltd., another licensee, challenged statements about the possible quality of the local product. The parent company, he said, would not risk its reputation by not producing tyres of the first quality. When Mr. MacArthur proceeded to discuss tariffs, his Honour said he was not so much concerned about tariffs and embargoes in themselves. What he wanted to know was whether, assuming that the local manufacturers were protected against outside competition and had the whole market to themselves, they would manufacture ax prices not appreciably higher than those at which tyres could be importea. Mr. MacArthur said they believed they could. Mr. J. Stanton, for the Dunlop Rubber Company (N.Z.) Ltd., the third licensee, said all the companies concerned had indicated that, even if the industry were delicensed, it woula make no difference to their plans to manufacture. His Honour said the question of import control would then arise. Mr. Stanton said the three firms, all of undoubted financial stability and long experience, all said they coula manufacture economically at a price comparable with that of the imported product. When Mr. Stanton went on to answer opposing counsels’ remarks about Britain’s export trade, his Honour said: “Doesn’t the whole thing bon down to whether the industry in New Zealand is economic?” He added that he did not think New Zealand would he expected to refrain from developing economic secondary industries. The hearing will conclude to-morrow.

United States firemen on Sunday fought a tremendous tire on the Rhone River resulting from burning petrol flowing from a pipeline leak, says Reuter's Paris correspondent. The tire destroyed a largo flourmill near Lyons. Houses within a radius of several miles were evacuated, r