Christopher Adams

The Business Herald’s markets and banking reporter.

F&P now a global premium brand

Haier intends to capitalise on more than 80 years of expertise from the F&P research and development team

Fisher & Paykel Appliances chief executive Stuart Broadhurst. Photo / NZH
Fisher & Paykel Appliances chief executive Stuart Broadhurst. Photo / NZH

Haier's ultimately successful takeover bid for Fisher & Paykel Appliances became a contentious issue last year. When the Qingdao-based home goods giant launched its initial $1.20 a share buyout attempt in September, investors - at both retail and institutional levels - voiced concern that the East Tamaki-based manufacturer would be snapped up for too cheap a price.

At the same time, business commentators and the Labour Party speculated that F&P Appliances' local operations would be gutted should the firm fall into Chinese hands, despite Haier's promises to beef up its New Zealand-based R&D capabilities should the sale get the go-ahead.

When Haier sealed the deal in October after lifting its offer to $1.28 a share, valuing F&P Appliances at $927 million, Sunday Star-Times business columnist Rod Oram said the acquisition was bad news.

"Potentially this could work in that Haier really could make Fisher & Paykel the centre, or a large part of, its technology development and design function - but it seems incredibly unlikely that a major multi-national would do that in New Zealand," Oram told RadioLive.

"While they will keep some jobs here for a while I can imagine that in a few years time all that will be here will be a sales and distribution function."

Labour's former economic development spokesman, David Cunliffe, voiced similar sentiment, saying the risk of skilled jobs being lost overseas was "worryingly high".

Though there is a lot of water yet to pass under the bridge, six months on from the acquisition Haier appears to be keeping some of its promises.

After paying a visit to his new masters at Haier's sprawling Chinese headquarters in February, F&P Appliances chief executive Stuart Broadhurst returned home and announced a plan to take on an additional 100 R&D staff across the firm's Auckland and Dunedin operations over the next two years. He wouldn't reveal the current headcount of the firm's product development team, saying that figure was commercially sensitive. But Broadhurst says F&P Appliances' product development talent is world class and Haier knows it.

"They [the R&D team] punch considerably above their weight when you compare them with other companies, and the culture in New Zealand is very unique," he says. "Our parent [Haier] recognises that, and they want to ensure the culture remains and we employ New Zealanders to do this work in an environment that's been honed over close to 80 years to produce very productive engineers."

Haier's main motivation for buying the New Zealand company was to secure that R&D expertise, as well as unique technology such as DishDrawer dishwashers and direct drive washing machine motors.

Broadhurst says the company will become a "design and innovation centre" for the wider Haier Group.

The plan is for F&P Appliances to become Haier's premium global brand, he says, at the same time providing technological assistance to its Chinese parent firm.

"We've looked at where the opportunities are for both Fisher & Paykel to get a significant advantage and for us to deliver technology solutions to the Haier Group to make sure they're more competitive," Broadhurst says.

In less than 30 years Haier has transformed itself from a nearly bankrupt state-owned manufacturer, with just one line of poor-quality refrigerators, into one of the world's biggest whiteware makers, with products sold in more than 100 countries and revenue north of US$20 billion. But it's still far from a high-end brand and F&P Appliances provides an offering for the premium end of the market.

Broadhurst wouldn't be drawn on whether being unlisted since the takeover, and answering to Chinese executives rather than local shareholders and analysts every six months at result time, made his task of growing the company easier.

Over the past few years F&P Appliances has appeared primarily focused on getting the best performance out of its core markets in Australasia and North America - and presumably securing the best short-term financial results - rather than growing sales in its emerging markets such as China, India and Vietnam.

Broadhurst says F&P Appliances has focused on ensuring the Australian, US and New Zealand markets are "doing as well as they possibly could".

"We really need to move faster now to build on the steps we've made in China and India and other growth markets and start to move outside of Australia, New Zealand and the USA quicker to create this global premium brand," he says.

F&P Appliances has faced some the toughest years in its entire history since the onset of the global financial crisis, which sapped demand for its products at the same time as the company was carrying out an expensive reorganisation of its global manufacturing locations.

Haier came to the rescue when the New Zealand firm was facing pressure from its bankers in early 2009, investing around $82 million in return for a 20 per cent stake in the company.

But for F&P Appliances' investors the outlook had hardly improved by early 2012, when shares were trading as low as 34c as the world's ongoing economic woes continued to make the appliance business one of the most difficult areas of the retail trade.

"There's complete support within the Haier Group to take Fisher & Paykel to the to world aggressively to become a leading premium whiteware company," Broadhurst says.

- NZ Herald

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