Employers & Manufacturers Association (EMA)

A fully-fuelled company car is worth $4000 more than a year ago - and businesses are trimming salaries to claw cash back, writes Esther Harward. If you've got a company car, don't expect a pay rise.

Bosses are cutting salaries to compensate for higher vehicle running costs and cancelling perks such as allowing staff to take vehicles away for long weekend trips.

Remuneration consultant Helene Higbee said higher petrol prices and interest rates had pushed up the value of a company car to an employee. A medium- sized 2.4 litre company car for personal use was now worth $17,306 a year - up from $13,199 last year.

Higbee said employers were now less willing to give staff unlimited use of company vehicles and most set a spending limit on personal travel. One employer asked last week if she could do anything about an employee running up an $800 monthly fuel bill.

Cars were the most emotive part of remuneration negotiations and most companies tried to keep them out of contracts so they weren't forced to meet rising costs, she said.

Employers and Manufacturers Association (Northern) chief executive Alasdair Thompson said employers were starting to factor in the increasing value of a company car when considering a pay rise. It was now very common for employers to reduce salaries to make up for higher vehicle running costs, he said. Companies tended to revise the value of car and fuel packages every year, and the price of petrol had risen by more than a third over the past 12 months.

At the same time bosses were increasingly wanting to cash up vehicles and paying employees the equivalent in cash because they were sick of the hassle of insurance claims, administration and staff abuse of vehicles.

HR consultant Kevin McBride said most employees preferred the cash equivalent of a company car, despite paying more for fuel. "Whereas in the past a company car was a bit of a status symbol, increasingly employees prefer to make their own decisions about what sort of vehicle they buy."

Staff who use their own car for work and claim costs back from their employers could find they are not getting properly reimbursed.

Many companies use the IRD's mileage rate of 62 cents a kilometre to claim back tax. The rate was set in 2005 when petrol was $1.53 a litre, and is under review. The AA says it costs 79c a kilometre to run a medium-sized car.

Meanwhile, the AA says motorists are getting stranded in increasing numbers as they try to stretch out the last few drops of fuel in their tanks. Its staff delivered 2061 emergency fuel drops in May - a 20% increase on the February total.

National road service manager John Healy said more city dwellers than rural people got stranded, and in many cases they ran out of fuel on motorways and bridges. "People are taking a risk, thinking 'I'll just let it get down a bit further and wait till I see a petrol station where fuel's a bit cheaper, or they have fuel vouchers for a particular type of station."

Superintendent John Kelly, of Waitemata's road policing unit, said drivers who got stuck on high- volume roads such as the Auckland Harbour Bridge caused chaos and made it dangerous for police and AA staff to rescue them. "They don't save anything . . . It defies any sort of common sense really."

Six months in and the Government's $11.5 million Buy Kiwi Made campaign is being seen as a feelgood venture to appease the Green Party rather than an initiative providing direct economic benefits.

While the Government is claiming success in terms of growing membership of the Business New Zealand-owned Buy New Zealand Made scheme, and increased awareness, critics doubt the campaign is making Kiwis patriotically throw their buying power behind local enterprises.  The campaign, made up of advertising, research, and a $3 million grant scheme, was part of the Labour Government's post-election co-operation agreement with the Greens. It has been running for six months, with television adverts featuring a robotic Oliver Driver starting in September.

Green MP Sue Bradford, government spokeswoman for Buy Kiwi Made, said attitudes were moving in the right direction.

A Research International survey showed that the percentage of consumers who always or often considered whether a product was New Zealand made before buying had increased from 35 per cent before the campaign, to 41 per cent in December.

Fifteen per cent of retailers said New Zealand goods now made up 6-10 per cent of their stock, up from 10 per cent pre-campaign.

Buy New Zealand Made, the separate self-funding organisation which administers the triangular kiwi logo, has benefited from the publicity. Director Samantha Seath said since Buy Kiwi Made started, membership had risen from 650 to 950.  Hits on the Buy New Zealand made website had also increased from 5000 to 40,000 a month.

"People want to buy New Zealand made products, there's no doubt about it," she said. "It's just getting that message through to manufacturers and retailers that they need to make sure that they are stocking products that are showing they are New Zealand made."

But both Seath and Bradford concede there is no way of measuring the campaign's success in terms of dollars spent on New Zealand goods.  The Green MP said the value of Buy Kiwi Made was in enhancing the way New Zealanders saw manufacturing, and improving their understanding of its role in our economy.  Manufacturing needed to be looked after as much as possible, she said. "We just see this as one element of trying to nurture the New Zealand economy and prepare our economy for the impacts of climate change and peak oil."

Bruce Goldsworthy, advocacy manager for EMA Northern, said while it was pleasing a government had "finally" got behind a campaign to buy local products, it had missed its window. New Zealand consumers were now used to a wide range of choice, and were less likely to err on the side of patriotism.  "The extent to which it [the campaign] is good for the country I'm not sure. I believe it would have had a much greater impact if they'd started it 20 years ago."  Referring to the deal with the Greens, Goldsworthy said Buy Kiwi Made was a political move. "There'd have to be a question whether this money is well spent."

David Skilling, chief executive of think tank the New Zealand Institute, is similarly sceptical.  "I would be surprised if what they've done to date in terms of the initiative is going to generate significant changes in behaviour." He said consumers would say one thing in a survey, but behave differently. "The issue is whether people are prepared to pay a premium, or what sort of trade up they're prepared to make, to make good on that intent."  Skilling said New Zealand enterprises in search of profitability were adopting all sorts of business models, including manufacturing offshore. "Increasingly we should be supporting New Zealand companies that are going global, and not sending a message that somehow they're less than fully New Zealand."

One area of the campaign which has clearly not been a success is the $3 million Regional and Sector Initiatives Fund. It was designed to provide support on a 50/50 funding basis for sector and regional projects that are consistent with Buy Kiwi Made's aims.  Two out of three funding rounds have now been completed, and only $575,000 has been handed out to five initiatives.  Bradford said the fund hadn't worked out as well as she had hoped.  She said she and the Ministry of Economic Development were "well aware" of the situation, and an announcement about the fund would be made shortly.

Mixed views as new members sign up

Fine furniture maker Ashton Grove has recently joined the Buy New Zealand Made scheme.  General manager Emma Davies said with the Buy Kiwi Made campaign running, the company felt it was a good time to get on the bandwagon. "A lot of people when they come into our retail shops don't realise that the product is made in New Zealand."  But she said the campaign itself hadn't necessarily brought customers to Ashton Grove's door.  "It [being Kiwi made] always had been one of our selling tools, so to publicise that a bit more is a good thing."

Supermarket group Foodstuffs, which operates the Pak'nSave, New World and Four Square chains, is another new member of Buy New Zealand Made. General manager of strategy and new ventures Rob Chemaly said it fitted with the group's sense of "Kiwi-ness", in being 100 per cent New Zealand owned and operated.  He said there would be some benefit to store operators in being able to promote Kiwi-made products, but there was no way of measuring sales made as a result.  "Certainly we would have some difficulty in keeping accurate track of individual item sales because we don't always know which are which."

One organisation which has benefited from the Buy Kiwi Made campaign's Regional and Sector Initiatives Fund is DesignTex, a group of 21 Horowhenua and Kapiti clothing manufacturers.  The $252,000 grant it received helped it win a $500,000 job to make clothing for the New Zealand Olympic team. The work is also providing spin-off benefits.  Chief executive Andy Wynne cannot speak highly enough of the scheme. "The way in which they have managed the fund is exemplary."

However the Jewellery Manufacturers Federation of New Zealand did not have as happy an experience. It decided not to take up its $88,000 grant. Chairman Alan Priestley said the need to come up with the other 50 per cent of the funding was prohibitive for a small organisation. He also felt the scheme was aimed more at helping retailers than manufacturers.

Farmers' Markets New Zealand, representing 40 markets nationwide, received a $96,000 allocation in the last funding round but has yet to sign on the dotted line. Spokesman Chris Fortune said the Buy Kiwi Made concept fitted well into what farmers' markets were trying to do, but the fund wasn't for everyone. "The criteria's fairly strict, I wouldn't see it suiting a lot of other organisations."

Caption: Emma Davies, general manager of Ashton Grove Furniture. Photo / Paul Estcourt

The maker of the La-Z-Boy recliner chair is closing down its manufacturing operations in this country with the loss of about 70 jobs.  Morgan Furniture is shutting its Auckland factory and moving production to Thailand and China from the start of next year.

Board chairman Graham Morgan said the move had been a gradual process, with the company having started manufacturing in Thailand a decade ago.  At one time the company had more than 300 manufacturing staff in this country and even three years ago the number was 230, Mr Morgan said.

Next year Morgan Furniture would be down to a New Zealand workforce of 30 administrative staff.  The company initially started manufacturing in Thailand after finding it was uncompetitive in leather furniture in the Australian market, which it entered about 15 years ago. 

New Zealand manufacturing was becoming increasingly less competitive, Mr Morgan said.  A high exchange rate had a major effect but essentially costs in this country kept escalating, including in areas such as ACC and holidays, he said.  He saw a gloomy outlook for volume manufacturers in this country, but thought niche suppliers would have a future.  Mr Morgan also expected the staff at Morgan Furniture losing their jobs would find alternative work quickly, although probably not in upholstery. 

The closure of Morgan's factory is part of a continuing shift of manufacturing jobs from this country to Asia.

Manufacturers and Exporters Association chief executive John Walley said the country's manufacturing base would be lost unless the Government reined in exchange rate fluctuations.  He told the Herald On Sunday that more businesses such as Morgan Furniture would desert this country in the near future.

But Employers and Manufacturers Association communications manager Gilbert Peterson said the challenges presented by countries such as Vietnam and China were big but not insurmountable.  "We have areas of expertise that other countries just can't match, including specialist skills, value-added products," he said.

Auckland's business community is criticising a decision which will delay completion of a crucial motorway project in the region. The area's Regional Land Transport Committee has dropped construction of the Avondale section of State Highway 20 from its 10 year plan.

It has instead adopted a package that pumps money into upgrading the public transport system. But the move has frustrated and angered members of Auckland's business community. They say the highway, which provides a desperately needed alternative route to the heavily congested southern motorway, will now not be built until 2020.

The Employers and Manufacturers Association says completing State Highway 20 should be a top priority and the authorites are just making excuses for not proceeding with the crucial link. Business leaders say with road congestion estimated to cost the region a billion dollars a year, completing the highway could be worth $800 million in benefits.

The Chief Executive of the Northern Employers' and Manufacturers' Association, Alasdair Thompson says the delay means the 5 year motorway project won't even be started for over a decade. He says it needs to be completed with urgency, but instead is being hindered by local and roading authorities with the same old attitudes.

The managing director of trucking company Carr-Haslam, Chris Carr, says the decision fails to recognise the commercial needs of the region, and the road is needed.

But committee's chair, Auckland Regional Councillor Joel Cayford, says the region's public transport system needs attention if patronage is to grow. Cayford says $6 billion has still been allocated to roading projects and that there is no way the section could be built within the ten year time.