Fisher & Paykel to Shift Some Manufacturing to North America
Jul 6, 2005
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New Zealand-based Fisher & Paykel Appliances has announced plans to relocate part of its manufacturing operations to North America.

The Smart Drive(R) clothes washer line, which is currently located in Cleveland, Australia and a motor manufacturing line, located in Auckland, New Zealand are to be moved to North America in order to reduce costs of production, freight, and working capital associated with supplying that market. The appliance maker said the move will involve shifting injection molding machines and dies, roll-forming machines, wire-winding equipment, and ancillary assembly jigs and fixtures.

As part of the previously disclosed supply agreement with Whirlpool Corporation, Fisher & Paykel is providing a motor for Whirlpool's high-efficiency machines. The machinery and equipment required to produce this design, as well as the equipment which produces Fisher & Paykel's main motor for its washer production, will be relocated to the new washer production plant in North America.

The work involved in these moves is expected to take place in two stages over the next 12 months and will require additional capital of approximately U.S. $5.5 million. In preparation for the moves, Fisher & Paykel said stocks of washers and motors will be built to cover the lead-times for the transfer and re-commissioning of the plants. Once the plants are fully operational in North America, the expected benefits are a reduction in working capital of approximately $15 million and an earnings improvement (at EBIT level) of approximately $3.3 million per annum, at current sales levels.

"Having plants located in the South Pacific, and shipping to and across the North American continent incurs a sizeable freight bill and ties up cash in finished goods," said John Bongard, CEO and managing director. "With the expected increase in washer sales in the USA, placing a plant closer to that market shortens lead times and means that we are better placed to capitalize on growing sales opportunities. The strength of the New Zealand and Australian currencies against the United States dollar is also impacting the economics of doing business in this major export market."

The relocation will lead to a reduction in the work force on the company's site at Cleveland, Australia of 10 to 15 positions. The appliance maker said the balance of the people employed on that site will be utilized to increase output from the refrigeration plant in order to meet higher sales volumes. Fisher & Paykel currently employs 580 people around Australia.

"The New Zealand and Australian markets are very important to us," said Mr. Bongard. "We have strong relationships with many retailers and consumers here and have a wealth of talent working for us in these countries. We base our design and manufacturing teams alongside each other in New Zealand to ensure that we continue with the innovation and technology developments that give us our competitive edge."

The New Zealand appliance maker said it has seen rapid sales growth in North America since launching its brand there 6 years ago. It sells DishDrawer(R) dishwashers, wall ovens, cooktops, SmartLoad(R) clothes dryers, Smart Drive(R) clothes washers, and refrigerators that are manufactured in New Zealand and Australia. In October 2004, the company purchased Dynamic Cooking Systems Inc, a manufacturer of indoor and outdoor cooking products with manufacturing facilities in the U.S.

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