KEY POINTS:
Fisher & Paykel Appliances is still a great company with good brands and strong market position. It has a future.
But sadly, whether it has a future as a New Zealand company looks in doubt.
Like many others around the world it has been caught out doing the
right thing at the wrong time - stung by a credit crunch that is brutally unforgiving.
The move to globalise its workforce will save money in the long term. But building new factories is costly even in Thailand and Mexico. And Appliances has had to borrow to do it.
The kiwi dollar has dropped too far, too fast and F&P's debt position has blown out. The banks won't help so the board is forced to go cap in hand to investors and beg for more capital to see them through. The response from investors has been equally unforgiving.
Those who could afford to have cut their losses and bailed, dropping the market capitalisation of the company by 35 per cent. More than $100 million in value gone in less than a day.
How much goodwill there is among remaining investors for a share issue may be a moot point. They have been presented with few other options for survival.
One is the possibility of a white knight, a heavyweight investor - possibly a competitor - prepared to buy a strategic stake in the company. Someone who'd take a decent chunk of equity, diluting the value for existing shareholders but providing the cash to let the management team see through the long-term strategy.
Unfortunately white knights, like the dragons they battled in legend, are looking increasing like mythical beasts.
All around the world there are debt-plagued companies seeking strategic investors. Typically those investors are standing back, watching the desperation grow and only stepping in on terms that would be unthinkable in normal times.
Under the management of John Bongard, F&P Appliances has become a true multinational. It has done all the things that we know in our hearts New Zealand business needs to do.
That this crisis is caused by a fall in the New Zealand dollar - something exporters have wished so hard for - is a cruel irony that won't be lost on the likeable and diligent chief executive.
The company will benefit from a lower New Zealand dollar in time. But whether it stays in New Zealand long enough to reap those benefits will depend on New Zealanders.
First of all on the New Zealand investors who have backed this company for so long. And then ultimately on the will of the wider public. Whether taxpayers should answer the call of a Kiwi corporation in a time of need has been raised only hypothetically thus far. But the need for serious debate about the issue seems to be getting more pressing every day.
