Sleepyhead

Labour was isolated yesterday as two coalition partners and the National Party called for cross-party talks to solve New Zealand's manufacturing crisis.

It follows the announcement by iconic New Zealand manufacturer and exporter Fisher & Paykel that a significant portion of its manufacturing sector would be sent overseas, costing 350 jobs.

As New Zealand First, the Greens and National said they were prepared to talk and find a solution, Prime Minister Helen Clark had a stark message for the sector: "All western economies have seen manufacturers migrate to lower cost centres. It's been the way of the world for a long time."

Manufacturing employs 235,000 people, accounts for more than 65 per cent of our exports, and 15 per cent of GDP.

Last night, National deputy leader and finance spokesman Bill English said National would consider cross-party talks but only if they led to actual policy change.

"We would need to see an indication that the Government was willing to change its policies to make these industries more competitive and stop treating them as a cash machine for Labour to spend their money."

English said current policy had been of no benefit to manufacturers, despite the industry providing a strategy to the Government. He said flexible labour law, less red tape and competitive ACC are essential to making the industry more competitive. He also said if the Government hauled back their spending programme it would take pressure off interest rates and lower the dollar, easing pressure on exporters.

English said he believed there was a future for manufacturing in this country. "New Zealand manufacturing has proven to be very resilient. They've had a decade where they haven't had any protection at all and they've changed enormously in that time. I don't believe they're doomed. I don't think it's the end for New Zealand manufacturing.

"They're getting good at finding their niche and they don't have to be high-tech. As Fisher and Paykel proved being more sophisticated doesn't get you out of China's grasp. There's no doubt that a US75-cent dollar is a crisis for some manufacturers and they need all the help they can get."

The Green Party's Sue Bradford, who's driven the Buy New Zealand Made campaign, said manufacturing would be saved by addressing big-picture issues - especially how we tweak the value of our dollar through monetary policy. Bradford agreed that New Zealand needed to focus on the high-skilled, high-value elements of manufacturing - design, research and development - and niche products. She said the low-tech end was also important - specialising in the brainy stuff won't be enough as the Asian economies, with their bigger populations and good universities, become more sophisticated and move in on this territory.

Although global economic forces were beyond our control, New Zealand needed to retain the ability to manufacture here to avoid becoming more open to those external forces.

Fisher & Paykel bowed out with reasons that were an echo of those from other major New Zealand manufacturers - it was tired of trying to keep up with competitors who had already taken advantage of the cheap labour and other savings offered by China and other developing Asian economies. At home, high interest rates and the high dollar have also squeezed profit margins.

Bedmaker Sleepyhead has come out saying Fisher & Paykel's departure shows the sector has reached tipping point. Unless things change, expect more firms, including the bedmaker, to shift their factories - and jobs - offshore. "Manufacturers are not asking for hand-outs," says Sleepyhead's Graeme Turner. "They are asking for economic policy that assists them to be globally competitive."

The sentiment was echoed by the Engineering, Printing and Manufacturing Union (EPMU), which estimates that in the past 12 months the high dollar was behind 1200 redundancies, either through cheap importers pushing local firms out of the domestic market or exporting costs becoming too high. The smaller manufacturing businesses tended to simply shut rather than outsource overseas.

The Engineering, Printing and Manufacturing Union says it will spearhead discussions to find ways of keeping local manufacturers in New Zealand.

It follows Fisher & Paykel's announcement on Thursday that it will shift its laundry factory to Thailand to save an estimated $10 million a year, with the loss of 350 jobs in Auckland.

Sleepyhead, the country's biggest bed manufacturer, is also considering moving its operations to China next year. It employs about 500 people in New Zealand. About 250 jobs are expected to be lost.

The union's national secretary, Andrew Little, says an urgent review of manufacturing policies is needed to prevent a mass exodus overseas.

Mr Little says he plans to assemble representatives from the business community, other unions and the Government to discuss incentives for manufacturers to stay in New Zealand.

Sleepyhead managing director Graeme Turner says high interest rates and a huge array of costs have led it to look at China as a manufacturing site He says the only things that would keep Sleepyhead in New Zealand are a drop in interest rates and a change in government policy.

The Canterbury Manufacturers Association says it is the same situation for many manufacturers and warns that more will either leave or go under. Spokesman John Walley says manufacturers are being abandoned.

The Employers and Manufacturers Association says it makes sense for companies to move overseas because the business environment in New Zealand is not good.

Chief executive Alasdair Thompson says it is a mess for exporters trying to operate in the face of high taxes and other costs.

He says countries such as Thailand and China are offering manufacturers tax cuts and cheap land to help them to get started.

Manukau mayor Barry Curtis believes workers set to lose their jobs at Fisher & Paykel's east Tamaki plant will easily find work elsewhere.

He says "hundreds of jobs" are going spare in the district each month and it is unlikely that his constituents will be unemployed for long.

The Government says it acknowledges the pain many exporters are feeling but says it has an economic strategy to help.

Prime Minister Helen Clark says there is still a place for manufacturing in New Zealand, despite some companies shifting their production overseas She says what is happening in New Zealand is typical of many developed countries where manufacturers are moving their operations to low-cost countries.

Miss Clark acknowledges the high value of the dollar is causing problems for exporters, but points out that the Australian and British currencies are also at 25-year highs against the US dollar.

Minister of Economic Development Trevor Mallard says it is unfortunate some manufacturers feel they are being forced overseas, but the sector is changing. It is difficult to compete against other countries that supply cheap labour and land.

He says options apart from capital gains tax and mortgage levies need to be explored to try to help businesses that are struggling.

Mr Mallard says New Zealand must focus on high-end manufacturing that come from local research and design initiatives. Any wide-ranging change to monetary policy would need to have the support of all the main political parties.

The National Party says the Government should be doing what it can to help struggling businesses.

National finance spokesperson Bill English says the Government needs to stop charging record amounts of tax and change the business environment. He says the Government also needs to rein in its own spending, which would take pressure off interest rates and the dollar.