Job losses loom at Fonterra plant

Relying on milk powder exports to China has risks. Photo by Peter McIntosh
Relying on milk powder exports to China has risks. Photo by Peter McIntosh
Job losses at Fonterra's Canpac facility in Waikato show the dangers of relying on dairy exports to China to sustain the economy, union leaders say.

Staff members gathered at the Kingsgate Hotel in Hamilton, where a senior Fonterra executive told them the plant was running below capacity and changes were needed.

They emerged from the meeting downcast and refused to speak with media, saying confidentiality agreements with their employer prevented them from doing so.

Fonterra director of New Zealand operations Robert Spurway said the proposed changes could mean around 110 roles might not be required at the site which now employs 330.

Engineering, Printing and Manufacturing Union national secretary Bill Newson said the announcement from Fonterra had followed a downturn in business over the past five years.

Mr Spurway said the changes had nothing to do with last year's botulism scare but were more about simplifying the business, including its range of products, to make it more efficient.

''We are running below capacity, so this is about us being clear about what we face in the future.

''There's no surprise for many of the staff. One of the things that was apparent to the team was they were running below capacity and that needed to change.''

Mr Newson said it was clear New Zealand needed a national strategy for skills, jobs and a strong manufacturing sector which was not reliant on the price of commodities such as milk powder.

Bill Newson
Bill Newson
''It's not good enough for the Government to sit on its hands and talk about a `rock-star economy' while our regions continue to suffer and well-paid skilled jobs are vanishing,'' he said.

EPMU members were entitled to redundancy compensation as part of their collective agreement. The union would work closely with Fonterra to ensure any job losses were minimised, Mr Newson said.

Mr Spurway said there would be changes ''right across the board'', affecting not only staff on the plant floor but also people in senior management positions.

A formal consultation with staff would likely begin next week and he expected the proposed changes would be enacted by late next month or early September, Mr Spurway said.

Staff at the plant packed infant formula and milk products, but changes could also see the plant focus more on paediatric products and high value-added products, Mr Spurway said.

Canpac is Fonterra's largest secondary packager of milk powders, and supplies branded nutritional powders, bulk blended nutritional milk powders, cans and can components around the world.

Labour Party economic development spokesman Grant Robertson said Fonterra was facing tough times with falling milk prices and increasing competition from other dairy producers on the international market.

The job losses highlighted the risk the Government was taking in allowing the export base to narrow. New Zealand must not be so reliant on one industry, Mr Robertson said.

''Exporters are also hurting because of the Government's hands-off approach to curbing the high dollar. Questions must be asked about whether these jobs are being lost because our overvalued dollar is squeezing out manufacturing in New Zealand,'' he said.

The Reserve Bank is likely to lift its official cash rate again this morning, putting more pressure on the dollar, which has fallen in recent days after near highs against the Australian and United States currencies.

ASB chief economist Nick Tuffley said New Zealand's trade-weighted index - the basket of currencies from the country's main trading partners - had pulled back from record highs on lower dairy prices, benign inflation and risk aversion.

ASB had cut its milk price forecast for next season after an 8.9% fall in GlobalDairyTrade dairy milk prices last week. Compared with this time last year, dairy prices were down by about a third, he said.

''These falls are more than we had factored in previously. We had expected dairy prices to stabilise through the middle of 2014 before recovering. We would have expected to have seen clearer signs prices were stabilising at this juncture. But these signs have yet to emerge.''

ASB cut its milk price payout forecast by 80c a kilogram of milk solids to $6.20.

If current trends continued, forecasts could head even lower, Mr Tuffley said. The possibility of a sub-$6 milk price for the 2014-15 season was increasing.

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