Forestry log profit 'doomed'

The Amalgamated Workers Union New Zealand has laid blame for the impending closure of Southern Cross Forest Products squarely at the feet of the Dunedin City Council and local forestry growers.

Yesterday, receiver KordaMentha announced 101 Otago-based staff at SCFP would be laid off progressively from mid-June.

Staff were told there was no interest in buying the company's South Island assets as a going concern and KordaMentha was attempting to sell the sites separately.

The decision affects 66 staff from the company's New Zealand Wood Mouldings plant in Mosgiel, 26 from Millstream Lumber in Milton, one from its Milburn site and the eight remaining staff at Rosebank Sawmill, in Balclutha.

Union spokesman Calvin Fisher said the attempt to sell SCFP as a going concern was doomed from the start because DCC-owned forestry companies were taking recent record-high market prices for its locally grown logs and getting maximum profit, rather than lowering prices to support the beleaguered local business.

''It was never going to be a runner if they [SCFP] couldn't secure the wood, and those forest owners who had the opportunity simply saw the short-term gain for the log price at the wharf.

''That's why it's failed.''

He said market prices had grown so high because New Zealand was the only country in the world that did not place tariffs on its logs at the wharf to protect local industry-added value.

The industry had been burdened for decades because bought and sold cutting rights were usually held by large overseas superannuation funds which capitalised on the no-tariff profit margin.

Mr Fisher said the DCC needed to be ''put on the ropes'' over the issue.

''They'll tell you it's about the market forces. Where is the long-term strategy in that?

''How can people lose their jobs at a local manufacturing plant when the ratepayers have been told there's always a wall of wood to be felled and processed?''

He said New Zealand Wood Mouldings was established on the back of previous council decisions to plant pine trees around the city, with the promise of more jobs for ''ratepayers' children'' when the trees matured.

''But it's been bloody disappointing to hear current councillors and previous councillors comment that they have an obligation to take the market price.''

There was value in job retention, he said.

''The council need to have a good hard look at themselves, over long-term job benefits and added value in the region, because they are going to export hard-working people - [skilled mill workers] are going to leave the city.

''It wasn't that long ago, that factory [New Zealand Wood Mouldings] was producing 180 jobs, 24/7, on eight-hour shift rosters,'' Mr Fisher said.

''To think we've got forests right on our doorstep and we still can't keep plants running - someone has to be accountable for that.''

Dunedin Mayor David Cull rejected the criticism.

''What the union is suggesting is that City Forests should take a lower price, make a lower profit, and pay a lower dividend to the ratepayers - so essentially, they are suggesting the ratepayers of Dunedin subsidise the jobs of the wider Otago sawmilling community.

''It's a reasonable proposal, but that's what it means.''

Mr Cull said the loss of 100 jobs was a great loss for the local employment market.

''Unfortunately, this is the timber business and it is becoming too common around the country.

''It's another reason that we need to keep the effort up to diversify our economy and the employment types that we are able to offer in the Otago area,'' Mr Cull said.

City Forests chief executive Grant Dodson said the company had been a significant second-tier supplier to Southern Cross Forest Products for many years, and had increased supply to the mill since the receivership was announced. City Forests sold logs at market prices, he said, declining further comment.

SCFP was placed in receivership on March 3, and about 80 staff were made redundant in late April.

KordaMentha said it would help the 101 staff try to find other jobs.

- john.lewis@odt.co.nz

DCC job subsidies

One further point or two against the DCC getting involved with job subsidies:

If the other customers of City Forests got wind of a special deal for NZ Mouldings then those other customers, domestic or not, would want the same, or better deal.  This would further deplete returns to the DCC via dividend meaning less subsidies to the residential ratepayer voting base.

Ask yourself if you really want the DCC with their track record of picking winners involved in yet another entity that is nothing to do with core council activities?

 

Don't blame the trucks

@styly1: How can you say that it's the truck driver who is always at fault with regards to cyclists deaths? What about those who are on bikes and expect the right of way when they are clearly in the wrong? Or the cyclists who run the red lights? Or take short cuts over the footpath? They need to take responsibility for the way they operate their "machine", so change the record, OK?

The council and more

The council and more specifically the Mayor should be ashamed of themselves. It is not a subsidy to support local (ratepayer) industry to manufacture improved higher value exports.

These generate better profits and are an investment in the future. Taking the short term profit option over selling refined products makes no sence to an economy that is trying to move away from selling base level commodities to higher value products and most would agree that these decisions, being longer term investment strategies, should be championed by both local and central government.

Shame on you Dunedin

Subsidies didn't work then

Subsidies didn't work then and won't work now. That is just corporate welfare.

Out sourcing

For the sake of saving a couple of million the contract for the work for the Stadium was won by an Auckland based business which struck me then as a betrayal of the businesses of Dunedin by the Council and demonstarting the level of support given to local industries here. So many capable people here so many struggling businesses desperately needing a shot in the arm just left out in the cold. With the Mayor openly saying that manufacturing is dead here who can doubt that they believe it? Council needs to open up the City to industry not close it out and complain . Meanwhile the road is full of log trucks killing cyclists left and right leaving us to pay for a cycle lane. I say make the trucking companies pay as they are the real hazard.

Subsidising Dunedin workers

So Mayor Cull, let's not subsidise Dunedin workers and keep them employed. Let's pour millions upon millions into that stadium. Clearly Dunedin's flagging ecoonomy, record unemployment, lack of growth, empty shops and empty commercial properties are not enough for you. Now let's drive even more workers from the area by allowing yet another business to fold.

Loss of choice

As MikeStk points out, the options are now not there.  Its called loss of opportunity.  As soon as the DCC and the ORC aided and abetted by the Carisbrook Stadium Trust decided to go ahead and build the new rugby stadium, the city's fate was sealed.  All the opportunities to invest in existing jobs one way or another, or invest in opportunities for new jobs in encouraging new industries, went out the window.  The only people to benefit were those that were involved in the contracts or the sale of the land to build the thing, as well as those that got employed by the entities created - not to forget the dear old ORFU and professional rugby.  But while the debt is inescapable, the annual obscene operational costs can be got rid of at a stroke by mothballing the stadium or by enforcing the prime user to actually front up with both their promised construction contribution and some realistic fees for using it.

It's not called subsidy or protectionism

...when other countries do it.  That's where House's otherwise sensible idea falls down: "Better to have no tariffs by any countries than to start putting them back on."  We - Helen Clark a shining example - bounded like class goody-goods into agreements and treaties such as Kyoto to lead, to set a good example, to get our badge for International Virtue.  And did other countries give a fig, did their governments blush that brave little New Zealand was leading the world, and rush to do likewise?  Not so much.  Sure, they talked big about free trade and so on, all the virtuous stuff. But then, it wasn't NZ that was going to vote those politicians into power again next election, it wasn't NZ that was donating to their campaign funds.  

So, taking all-in-all, carefully assessing the situation vis-a-vis their own producters and consumers, there had to be a certain amount of how-you-say adaptation to their individual situations.  Powerful lobby groups for instance.  The important supporters of their party.  The danger that unemployment in key constituencies would result in galloping grumpiness.  The answer was not refusing to sign up.  

That would have looked like the didn't care, they weren't team players of Team World.  However health and safety could be called upon, that doesn't look bad, it looks responsible.  Apples, imported, could bring disease that wiped out the whole importing country's orchards!  Proof and further proof and more rigorous proof of safety could keep the risk of imports at bay for years, decades.  And so on.  NZ should get over the ambition to set a good example because all we end up with is praise from other idealists, and undermining by realpolitik-focused other governments who see naiive players who don't understand the grown-up game.  Heads we lost, tails they win.  Cynical, moi?

Oh dear

It's just crap.  It means more competition for the areas job seekers when hunting a job. I thought we had a "rockstar" economy........  

So short sighted

When the government cut the legs out from under Hillside by not allowing them to quote for work and not factoring in the secondary benefits to the economy by keeping some manufacturing within NZ, the DCC was up in arms!

Now the DCC does exactly the same thing, local work mean more DCC rates.  I am not saying subsidies, but I am saying factor in the secondary benifits to Otago's economy into the price.

When it comes to the Stadium (which I am a huge supporter), we always hear how the local economy benefits from it indirectly, how is this different? 

subsidie

Much better to have the  DCC put money into this company than DMVL. We may get a return in time.

 

Protecting multinationals

Tiwai Point is a government 'protected' industry.

Bad decision DCC

House: Many countries retain tariffs and subsidies to protect their own industries. Consider USA and European farming sudsidies. And Australian state supported protectionism for engineering companies. Japan still has a heap of tariff protectionism. NZ industry has very little protection from overseas exporters. The madness of the Douglas years' deregulation, and the current fixation on "market forces" has resulted in most NZ citizens either being offered low cost imported junk, or overpriced goods that few can afford. Since it was good enough for the DCC to (wrongly)"protect" the ORFU from going broke by using taxpayer funds, it would be certainly right to protect timber processing jobs and incomes and families. The ORFU bail-out did none of the latter.

Tariffs

As the article states, N.Z. is the only country in the world not using tariffs. So it is the insanity of our extreme neoliberal economic approach that is out of step with the rest of the world, not the conventional "people first" philosophy of the unions.

Chickens coming home to roost

The bulk of the money currently paying for the interest and principle on the rugby stadium is currently coming from council CCOs like the DCC owned forestry company - it's a stark choice it can either try and pay for the rugby stadium debt, or it can sell logs at a lower price and save jobs and help the local economy.

Personally I'd favour the economy and jobs over rugby, but sadly we don't really have a choice here.

The DCC has a record debt, something it just didn't have a decade ago, the various financial agencies are looking over its shoulders, every year its credit rating is on the line, if its rating drops then interest rates will go up and the situation would get worse, it's teetering on a viability cliff. Even without that, as the economy winds back up interest rates in general are going up, that only makes it worse

Note that this is a different problem from the problem of DVML hemorrhaging money - we can shut the rugby stadium down and stop DVML's obscene losses, but whatever we do we still have to pay the stadium debt, closing it doesn't fix this problem, we and our grand kids are stuck paying for this part of it.

Protected industries in this day and age?

I was surprised about Calvin Fisher's comments in that I didn't know people still thought like that (subsidised industries and tariffs).  Like a lot of union thought, a throwback to the 50's to late 70's which is why unions are becoming even more irrelevant.

Better to have no tariffs by any countries than to start putting them back on.

I have sympathy for the people who are losing their jobs having had that happen to myself a couple of times, however, Mayor Cull is right in that protection and subsidies would be paid for by the ratepayers.  He is wrong in that this is a reasonable proposal.

Subsidies didn't work in the past and they won't work now or in the future. 

ODT/directory - Local Businesses

CompanyLocationBusiness Type
Central WholesalersWanakaWholesalers & Distributors
McGregors on FrederickWanakaBakeries
Amcal Octagon PharmacyDunedinPharmacies
Waitaki Financial ServicesOamaruFinancial Consultants