Closure Of Upper Hutt Factory Under Discussion

Proposed Closure Of Upper Hutt Factory Consultation

Upper Hutt, New Zealand, 30 June, 2006…South Pacific Tyres has announced it has initiated consultation with unions and employees about proposals to move from seven to five days production at its Upper Hutt factory, and ultimately to withdraw from tyre manufacturing at this factory.

While the details of the proposals will be discussed with unions and employees before being finalised, at this time, the company envisages the proposed move from seven to five days production to occur over two months, and the proposed closure to be within six to eight months.

SPT Country Manager (New Zealand) Wayne Johnston said these proposals are a result of:
• a declining local market for tyres made in Upper Hutt (just 30% of Upper Hutt’s capacity is for domestic consumption) - this has led to excess production capacity;
• the installed capacity of the factory being for predominantly low value-added tyres which attract the lowest margins and most competitive pricing; and
• ongoing strategic efforts by Goodyear, which owns SPT, to reduce high-cost capacity worldwide.

“The pressures on the factory have been compounded over time by materially adverse foreign currency movements, which have further eroded already thin margins, a 30% rise in energy costs over the past three years, and the previous loss of the nation’s automobile assembly industry, which was once a significant market for SPT,” Mr Johnston said.

“All of these factors have combined to compromise the viability of tyre manufacturing for SPT in New Zealand,” he added.

SPT remains committed to the consumer and commercial tyre markets in New Zealand and, if the proposed closure is implemented, would supply customers with Goodyear products from its plants in the Asia Pacific region.

SPT appreciates the potential economic and social impacts of these proposals for the Upper Hutt region, and will collaborate with all stakeholders throughout the consultation process.

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