New Zealand’s manufacturing industry has been in the spotlight over the last few weeks, with the government opposition launching a parliamentary enquiry into what they describe as a crisis.
Quoting a figure of 40,000 manufacturing job losses in four years, Labour, the Greens and New Zealand First launched the enquiry at the Engineering, Printing and Manufacturing Union’s job crisis summit on October 13, and say it will investigate the future role of manufacturing in the New Zealand economy.
The day before on October 12 the BNZ’s September Performance of Manufacturing Index (PMI) recorded a seasonally adjusted index of 48.2.
It was the fourth consecutive month of retraction. A sub-index for new orders dropped 2.0 points on August to its lowest level since May 2009.
Despite the seemingly depressed figures, BNZ senior economist, Craig Ebert, says they are likely to be a temporary turbulence, and reports general manufacturers expectations err on the side of positivity.
The government also refutes the crisis claims, saying manufacturing has grown 2.5% and any concerns voiced don’t take into account jobs created in other sectors.
Looking at transport, Kate Bucknell, national secretary of the Trailer Manufacturers Federation (TTMF), says that with almost two months left in the year, the heavy transport engineering sector is not in decline
“At the end of September we saw 643 trailers built. The 2011 total was 892 so we are looking at roughly the same output, if not a little more. It’s certainly up on 2010’s total of 571.
“Some of the members I talk to have strong orders filled for half a year out, and others keep their figures very guarded,” she says.
Bucknell believes 2013 will see further modest growth with less uncertainty surrounding road user charges, weight bands and configurations. Those leasing equipment may be looking to invest in their own equipment at the end of a contract, particularly if they have weathered the last few years well.
She adds the TTMF is currently working on another pro-forma design for high productivity motor vehicles (HPMV), which could see significant uptake once approved, helping keep the market buoyant as operators change the configuration of their fleet, if not increasing the size.
Fruehauf is one company that took a significant hit during the global financial crisis, feeling the brunt early and encountering a variety of tough market conditions on all sides.
We noticed a turn as early as 2006, which was before a lot of others did,” says Jeff Mear, a director and national manager of sales for Fruehauf.
“We faced increasing pressure from Australia and Asia, where a solid chunk of the industry’s talent and experience pool were heading. Finance companies were toppling; third tier companies disappeared outright, while the next ones up tightened lending conditions with most of their business going to existing clients. Industry design rule changes created further instability while material costs crept up, the price of steel surging by 500% at times.”
Mear says a number of competitors dropped off, easing some of the strain and helping contribute to positive growth in 2011, with builds ‘jumping’ to 50% of the company’s 2005 output level.
“We’ve seen slight movement this year too. Looking forward I believe growth will further improve during the third quarter of 2013.”
He suggests current staff levels are an indicator of his mid-term views for steady growth, with around 80 employees just shy of the pre-GFC count, and a far cry from the drop to 20 experienced when hard times struck.
Uncertainty amongst operators prior to the RUC changes is again voiced as a contributing factor to the cautious market.
“Some people hesitated on making certain decisions with the effect of new weight bands unknown. We still wait to see how they change the transport industry but an element of doubt has been removed, at least for some.”
Mears admits the industry is tough in the way it is exposed to a number of different variables, and sees the New Zealand dollar as a continuing worry. Increased funding for roads of national significance and HPMVs are positive moves, but will not materialise in a short burst. Government regulation and auditing is something he feels the industry is over subjected to, and although NZ manufacturing accounts for 90%, there is still pressure.
“Trailers built here still account for the bulk of the market, but like any manufacturer we feel pressure from overseas imports which don’t have to undergo the same regulations and auditing process that we do.”
