By Fiona Rotherham
Morgan Furniture Auckland has invested in a Thai joint venture because duties into Australia make it cheaper to supply that market from Thailand.
The furniture-maker holds the New Zealand and Australian distribution rights for La-Z-Boy lounge chairs.
Chairman Graham Morgan said a quirk in the duties payable on leather and
leather products meant the company was unable to get a competitively priced chair from New Zealand into Australia.
An Australian furniture-maker could import leather duty-free from Thailand or another Asian country to make into chairs.
If the New Zealand furnituremaker did the same and then exported the chairs to Australia, it incurred a 5 per cent tariff, he said.
Even though the tariff had been cut from 7 per cent, it was still less competitive to export from here.
Yet demand in Australia had never been higher, with business there growing 48 per cent last year.
"That was the prime reason we went looking for a joint venture to produce leather," Mr Morgan said.
Morgan Furniture late last year took a minority shareholding in La-Z-Boy Thailand. The business is also owned by some Thai partners and the majority stake held by La-Z-Boy United States.
Several other Asian sites were considered before the decision was made to locate in Thailand.
Factors that swayed the decision included the compatability of the Thai partners, political stability, a cheap and available workforce, and attractive investment tax incentives.
Production at the $US640,000 ($1.29 million) plant is now running at 60 chairs a day, and is expected to triple within two years. Australia is the main export market.
Mr Morgan said the company was negotiating another overseas joint venture.
"We have identified China definitely as a call but the timing will be critical."
