Fisher & Paykel Appliances yesterday unveiled plans to relocate manufacturing of Smart Drive® and AquaSmart® washing machines and clothes dryers from its traditional home in Auckland, New Zealand to Thailand.
"Most of our competitors supplying the Australasian market do so from facilities in low cost Asian countries which offer generous manufacturing incentives," said CEO and Managing Director John Bongard. "Also the environment in New Zealand for our type of manufacturing operation has deteriorated due to a combination of factors, such as high interest rates, persistently high exchange rates and some trade and tariff policies. Our laundry margins have suffered considerably over the past 4-5 years. Without this relocation to Thailand our continued future in Laundry design and manufacture would be doubtful."
The relocation of facilities will take place over the next 12 months, with additional inventory manufactured in order to cover the lead times for the transfer and re-commissioning of the plants. The move will involve shifting plastic injection molding machines and dies, fabrication equipment, assembly equipment, and metal pressing facilities. Initial production is expected to start up in Thailand by March, 2008. The move will result in about 350 job losses in Auckland in 2008 and the company said it will attempt to accommodate as many staff as possible elsewhere in the organization.
Once the lines are fully operational, F&P expects the financial benefits to be about NZ $10 to $15 million (approx. U.S. $7.4 to $11 million) annually, at a one-off cost in the order of NZ $20-$25 million (approx. U.S. $14.8 to $18.5 million), both at a pre-tax level. Additional cost savings are expected from the sourcing of some raw materials and purchased parts from local vendors in Thailand. These overall savings will be offset partially with a small increase in working capital. Capital expenditure is estimated at NZ $13.0 million (approx. U.S. $9.6 million).
"The ongoing research and development for these products will continue to be based in New Zealand," said Bongard. "We must persist in pushing the innovative envelope for our products in order to stay ahead of the game. We cannot afford to be a me-too company. If we don't continue to innovate, we won't survive, but in order to do this, we also need competitive manufacturing facilities. This is what this move is addressing."
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