SURVIVAL TEST

Northern Advocate, 21 June 1926, Page 2

SURVIVAL TEST

IN MINES AND FREEZERS. UNECONOMIC UNITS PROBLEM. The view of the report is that hardships are inseparable from a solution of the problem, and that the disappearance of the smaller and poorer collieries would ultimately lead to an increase in the efficiency of the industry. , . . The amalgamation of small ■collieries is recommended, and the Government is urged to take the necessary legislative power to over-ride unreasonable opposition to such amalgamations. —From the report of the British Coal Commission, as interpreted in “Barclay’s Bank .Monthly Review.”

The above amounts to an assertion that the smaller and poorer coal mines in Britain are uneconomic, or are bordering on that state; and that the British Government should take legislative power to compel amalgamation. Thus might be attained an economic condition that would enable such amalgamated collieries to give a fair return to both mine owner and miner. AMALGAMATION OBSTACLES. It is possible, perhaps, to take a detached view of something that is happening at the other end of the world. Unpayable units in a widespread industry—whether such units bo mines or factories —generally have shareholders and also creditors. An amalgamation of units that have fallen below paying point, with little prospect of recovery, generally moans a writing down of capital and a sharing of losses. It is never easy to agree on the terms of a sharing of losses. Apportionment has to be made as between the several units concerned: In each unit questions arise as between shareholder and creditor; there may also be different classes of shareholder interest. The whole reorganisation in a case like- that -generally bristles with points of dispute or of difficulty. Opposition, whether “unreasonable” or otherwise, is liable to centre in one or more of such points. That is why the British Coal Commission went so far as to recommend the Government “to take the necessary legislative power fo over-ride unreasonable opposition to such amalgamations.”

On the other hand, those who object to legislative, inteiwention in matters of that kind will point out that by voluntary methods —negotiation, conferences, etc. —-most difficult amalgamation of companies, -or reorganisations of particular companies, have been carried out; and they may argue that give-and-take arrangements are better attainable on a free and unfettered basis.

FROM COAL TO MEAT. The subject is valuable to New Zealand because the amalgamation issue is raised by such an eminent authority as the British Coal Commission, and because there is in New Zealand an industry with small unpayable units, whose position is sufficiently like those of Britain’s smaller unpayable coal mines to warrant the mention of both problems in the one column. The New Zealand freezing industry is served by too many freezing works. Without attempting to analyse its very complicated position, it is safe to say that below a certain turnover, a freezing works becomes uneconomic. Compared with her competitor Argentina, New Zealand is over-supplied with freezing works to an astonishing extent. There are various small works that have no reasonable hope of becoming economic. To use the words of the British Coal Commission, their disappearance “would ultimately lead to -an increase in the efficiency of the industry.” If one man owned them all, ho would close some of them up, and would be ultimately better off. But each of them, like the coal mines, has its own shareholder interest and creditor interest—and perhaps it should be added (these terms have no meaning in coal mining) guarantor-interest and supplier-interest. Therefore, to secure amalgamation on a basis of sharing losses is a formidable venture.

The problem of the financial stability of the freezing works, in themselves, might possfibly be isettlecl through their purchase by big oversea meat firms. But recently, through the machinery of export licensing, such a firm has been prevented from extending its works-ownership in New Zealand. This policy of prevention, which has the Government’s approval so far, is based on a consideration of the interests of freezing companies, the interests of meat producers, and the public interest.

CHOICE OP THREE WAYS. Only three courses seem to be possible with regard to the meat-freezing industry in New Zealand: (a) To allow oversea meat firms to buy up purchaseablo works, acccpt- ' ing whatever risk there may bo that such firm or firm® will become able to dictate prices to the supplier. (b) To allow the present uneconomic position to drift, awaiting the "survival of the fittest’’ among the weak units. (c) To encourage (or compel) amalgamations as between New Zealand owners, tending towards economic output and efficient working The purpose of this article is not to discover the best course, but to restate the position in order that the public

may take stock of it anew. Next to the question of dairy produce control, there is nothing more important before the country. The desirability of amalgamation was foreseen by those who promoted the freezing works “merger” of two years ago. It failed. But that is not to say that smaller amalgamations are impossible. The present condition is bound to be radically altered. Shall -the alterations come by process of drift, or will someone take hold of the movement and guide it?