Click Clack Moves to Protect Against Kiwi Dollar
Click Clack moves to protect workers against Kiwi dollar Moves $3+ million worth of contracts off-shore
Supplier contracts worth more than $3 million to New Zealand businesses have been moved offshore by Click Clack Limited in a bid to combat the impact on its export-led manufacturing business of the run-away New Zealand dollar and escalating interest rates.
Click Clack Group Chief Executive, John Heng, said today that his company could not wait any longer for the kiwi dollar to cool down and for interest rates to drop.
“The savings we achieve by moving these contracts offshore mean we can protect Click Clack workers’ jobs for a while longer. We simply cannot go on forever with a New Zealand dollar that is so ridiculously over-valued.”
The Click Clack announcement comes as a growing number of New Zealand based manufacturers are laying off workers as they struggle to combat the effects on the continuing high value of the dollar and absence of moves from the Reserve Bank or Government to do anything about it. Other manufacturers have also announced that workers must be laid off or manufacturing moved offshore while international analysts have commented that the kiwi dollar is 20% overheated.
Heng said that over the last three months of 2005 Click Clack discontinued a number of its supplier contracts in New Zealand for display packaging and the wood for its brushware and awarded these contracts to Asian suppliers.
“While we have been able to protect Click Clack jobs, the net effect in removing the contracts from local suppliers is that they will have to lay off workers unless they can land new contracts to the same value. We estimate some 30 to 35 jobs amongst our previous suppliers stand to be lost. We are sorry about this but our first responsibility must be to protect Click Clack and our workers.”
Heng said the new supplier for the wood for Click Clack’s brushware was a Sri Lankan company which was also partially finishing the components – “and for a much better price than we could get in New Zealand, even with the added freight costs”.
Securing supplier contracts offshore is the latest of many changes to the way it does business that Click Clack has made in order to combat the escalating dollar over the past three years.
Heng said that although Click Clack’s output had grown consistently since the company’s inception in 1996, the current state of the economy has had a hugely adverse impact on profit.
“We’ve actually gone backwards in the last few years because of the exchange rate. We make and sell more product than we did three years ago and earn less. We’re exporting about $NZ32 million and, three years ago, that was worth $NZ42 million because of the effect of the exchange rate.”
He said production output had grown month on month, year on year, because of Click Clack’s ability to design highly sought-after products which fit well into competitive markets.
“In fact, Click Clack’s productive unit growth rate has been 40% over the past four years during which time export revenue has actually dropped by 25%. New Zealand exporters are, quite simply, being forced to operate in an extremely unusual and damaging environment.
“An upward fluctuation in the value of the kiwi dollar can do monumental damage to an exporter’s margins. If this coincides with a downward demand fluctuation – and there’s every evidence as the global economy slows that this could readily occur – an exporter could suffer a mortal blow.”
Click Clack designs and manufacturers a range of high quality polycarbonate storage containers, beverageware and brushware. It employs 300 staff between its Palmerston North head office and design facilities and manufacturing plant in Levin and Christchurch. Some 90% of Click Clack’s production is exported to 50 countries around the globe with major markets including Australia, the United States and the United Kingdom. The company has a turnover of between $30-40 million.
Comment from the Manufacturing and Construction Workers Union
The Manufacturing and Construction Workers Union’s General Secretary Graeme Clarke said the Government’s high exchange rate policy was forcing a number of innovative New Zealand manufacturers to take the same steps as Click Clack.
“This has the effect of reducing the range of manufacturers supplying input components to the manufacturers of products for retail markets. The longer this trend continues the harder it will be for new innovative manufacturing companies to establish themselves and to grow in the way that Click Clack has been able to do. In other words, New Zealand’s manufacturing base is being undermined,” he said.
Clarke added that the focus on inflation seemed unabated in spite of changes to the Reserve Bank Act.
“New Zealand now has a very competitive market because of the lowering and elimination of tariffs. In such an unregulated market inflation should be controlled by competition, not by the operation of a law such as the Reserve Bank Act,” he said. “Price increases (inflation) are a market signal that should not be suppressed by Government policy. Rather they should be allowed to stimulate growth in the resources allocated to the section of the economy where inflation is occurring.”
The union’s Wellington Regional Secretary, George Larkins, said that over the past three years the union and Click Clack employees had worked closely with the company to try to overcome the impact of the escalating dollar.
“We’ve all worked together on numerous productivity initiatives and the workforce has been accommodating during annual negotiations of collective agreements to not put undue pressure on Click Clack with salary and wages increases.”
Larkins said that the Government and the Reserve Bank appeared to be disregarding New Zealand workers in not addressing issues in the economy that have and will continue to result in job losses.
“We believe that Click Clack, unlike many other employers that have taken the easy option by moving manufacturing offshore, is genuine it its commitment to provide jobs for Kiwi workers – but the company can’t go on forever without something giving.”