KEY POINTS:
Investors have cheered at plans by Fisher & Paykel Appliances to shift more production overseas with shares rising 8c on the news.
It might seem cold, but from a purely financial point of view, the move makes sense.
It will eventually generate pre-tax savings of between $10 million
and $15 million a year - but it will cost about 350 New Zealanders their jobs.
Chief executive John Bongard blames a "crippling" local environment, competition from manufacturers in low-cost countries and the loss of a 5 per cent duty preference into Australia.
The relocation will also have its costs - a one-off hit of up to $38 million.
Forsyth Barr retail analyst Guy Hallwright said the news had been viewed positively because the company was taking action.
"Everybody knows that New Zealand is a pretty expensive place to manufacture [in] and everybody knows that most of the competitors are manufacturing in Asia," he said.
"So it's effectively removing what's becoming a competitive disadvantage to them."
The company had resisted such a move out of loyalty to its workers and because of its deep roots in South Auckland, Mr Hallwright said.
Fisher & Paykel Appliances can trace its history back to 1934 and has been making washing machines in New Zealand since 1939.
"The longer the New Zealand dollar stays where it is, the more likely we are to see these kinds of things happening," Mr Hallwright said.
Mr Bongard said the company had reached the tipping point for its laundry products and he would not be surprised to see other manufacturers follow suit.
"I'm sure that other manufacturers in New Zealand are finding it equally tough, if not tougher, in some cases."
Almost every competitor in the Australasian market was manufacturing in low-cost Asian countries, he said.
"Virtually any brand that you can give me in washing machines is made in Asia these days, with the exception of some of the very big American machines."
The new facility will be in Rayong Province. Production is expected to start by next March.
A "surprisingly high amount" of the expected $10 million to $15 million saving would be the difference in the cost of labour, Mr Bongard said.
The company would also benefit from other savings yet to be quantified.
"At the moment, for example, we're buying steel in places like Korea and China and Japan and we're shipping that coil of steel all the way to New Zealand, then shipping it back to Australia.
"So obviously with this new arrangement, [it's] much cheaper for us to ship them only half way and then on-ship them."
A range of incentives could also be available, including up to eight years' exemption for corporate income tax, double tax deductions on transport, electricity and water costs for 10 years and exemption from duty for raw materials.
"New Zealand offers no incentives for manufacturing at all," Mr Bongard said.
"I just think if we're going to encourage manufacturing [in New Zealand] ... you've got to be able to compete and at the moment we're not doing anything to compete as a country."
The company had been working on the relocation plan for five or six months and the decision was not taken lightly, Mr Bongard said.
The company would try to find as many alternative jobs as possible within the firm for those affected.
But there were no guarantees that more production lines would not be shifted overseas, with every part of the business under constant review.
Manufacturing including refrigerators, cookers, electronics and production machinery would still be undertaken in New Zealand.
What's on offer
The incentives which helped F&P choose Thailand:
* Exemption from corporate income tax for the first eight years and a 50 per cent reduction for the next five.
* Double tax deductions on transport, electricity and water costs for 10 years.
* Exemptions on import duties for machinery and on duties for raw or essential materials used in manufacturing of export products.
* A 25 per cent tax deduction from net profit of the project infrastructure, installation and construction costs.
* Other factors included: infrastructure, labour costs, the cost of doing business and location.
