Key Points:

Shares in Fisher & Paykel Appliances are up seven cents on the New Zealand stock exchange, after the Prime Minister said letting such an important company fail because of a temporary crisis would be unacceptable.

Talk of committing to a bailout of the whiteware maker was premature though, said John Key, as around $102 million was wiped off the company's value in one day.

One business lobby group, the Manufacturers and Exporters Association, said today that talk of such a bailout is likely to make the company less attractive to potential international investors.

The F & P share price plummeted from $1 to 65 cents after a market update revealed sales had fallen significantly in the wake of the global economic crisis.

They are currently trading on the NZX up seven cents, changing hands at 72 cents each.

The company is predicting flat profits this year and said it planned to raise money from shareholders and a potential cornerstone investor to help reduce a debt level that had shot up to 43 per cent.

Key said today the Government would reserve the right to become a stakeholder in the company if it went to the wall, but suggested it had the strength to tackle the crisis itself.

"Yes they've got a short-term temporary funding issue which they're working through commercially with a number of alternatives, but I would be very concerned if a company of that nature ... was to go to the wall," he told TV3's Sunrise show.

Key said the Government needed to stay engaged with Fisher & Paykel as it was a "very unusual and unique" New Zealand company and important to the local economy.

"We don't want to be destroying the basis of New Zealand's manufacturing solely because there is a temporary credit crisis."


The New Zealand Manufacturers and Exporters Association (NZMEA) has issued a statement saying that the problems faced by Fisher and Paykel Appliances "have been a long time in the making".

While the economic crisis had provided the breaking point, Government policy failures had caused the instability and lack of incentives that had made it difficult for exporters to remain viable.

"We cannot afford to simply attribute F&P Appliance's problems to the global crisis," said association chief executive John Walley. "Poor sales and expensive credit have exacerbated the problem, but this was not what drove the company offshore originally. We need to have a look at why our policies are driving New Zealand exporters offshore."

Walley said the sustained high value of the New Zealand dollar - which reached over 80 US cents - ate into margins for exporters.

"Fisher and Paykel made the prudent decision to move offshore, but ironically, a falling dollar has left them in an overleveraged position," said Walley.

"The talk of a Government bailout is likely to make Fisher and Paykel seem less attractive to international investors. The Government needs to stick to its knitting and provide a policy framework that allows our exporters to succeed in the long term."

The union representing 600 workers at Fisher & Paykel is calling for strings to be attached to any Government bail-out.

Engineering, Printing and Manufacturing Union national secretary Andrew Little said Government support would be welcome but the company should make a commitment to the country and its workforce.

"Any taxpayer bailout should also come with some public equity in the company, otherwise it's a situation of privatising the profits in the good times and socialising the losses in the bad.

"It also needs to be recognised that while companies like Fisher & Paykel are facing hard times, the greatest personal costs will be faced by workers during this recession," said Little.

Last year Fisher & Paykel announced it was moving its Mosgiel factory off-shore and 430 workers would lose their jobs.

John Key said this morning that the F & P situation had developed quickly on the back of the global financial crisis.

"We're in very difficult times, and I think the issue here for a company like Fisher & Paykel is that it's a very good company ... if it has a temporary funding issue because the credit markets are essentially closed for those types of companies, we need to sometimes look a bit beyond that."

Yesterday, Key said he had phoned chief executive John Bongard to discuss the company's situation and while Bongard had not asked for support, Key said he would keep in touch.

"They are an iconic New Zealand company, employing 1600 people. I've made it clear I'll be staying in contact."

Key said the Government did not want to become a primary banker, but it was not ruling out the option of helping Fisher & Paykel.

"Governments around the world have taken that course and we reserve the right to do so."

Key said if the new cornerstone investor came from overseas and it was in breach of the rules, it would need to consider a number of factors.

"One of those is what would be the prognosis for the company if we failed to approve the shareholding. If that meant the loss of jobs and the collapse of an iconic company, that would be unacceptable to me."


NZPA/HERALD ONLINE