Big ramifications from collapse

Treasury projections place major reliance on the Christchurch rebuild

The Mainzeal failure is expected to kill off  sub-contracting firms unless receivers are able to continue trading.

The receivership of New Zealand’s third largest construction company should have government ministers worried.

Treasury projections place major reliance on the Christchurch rebuild to lead New Zealand out of the economic doldrums.

Will the collapse of Mainzeal compromise the reconstruction of quake-ravaged Christchurch?

The company is the main contractor for the near-complete demolition of the Clarendon building on Oxford Tce, which has been one of the longest-running deconstructions.

It was also in charge of demolishing QE11 sports centre, managing the $15 million expansion of Barrington Shopping Centre, a temporary justice centre in Durham St and a $15 million accommodation building for St Andrews.

Mainzeal was also expected to be involved in repairing homes for Vero Insurance.

The collapse may mean further delays in the house repair programme for homeowners whose patience is wearing thin three years after the earthquakes.

This is likely to have ramifications for government because many of these long-suffering homeowners are located in the well-heeled suburbs around Sumner, as well as the Labour areas around New Brighton.

c.hutch@clear.net.nz

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28 Comments & Questions

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We await the directors' statement as to how they let this happen.
liberte

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A collapse of this magnitude requires some clear statement from Govt as to how their oversight failed.
WG

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What? It's not up to Government to oversee or "protect us" from Commercial success or failure. In fact it would be better if they got out of the way and stopped providing a false sense of security.

These are very experienced Directors and if there is wrong doing they'll no doubt be taken to task.

I certainly feel for the sub-contractors and people who relied on them, but those of us in business know that sometimes sh*t happens, but suffering and moaning about it is optional.

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WG, are you on something? What on earth should the government have been watching. The only people that need to be explaining are the directors who jumped ship, when in all likelihood the good ship Mainzeal was already doomed.

We will probably find that the directors will dress up the great future prospects (Christchurch rebuild) if they can just keep bailing for a few more months. These notes should be in board minutes middle of 2012. But hope is not a good strategy when running businesses.

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I don't think the Govt has anything to answer here but Mike Wilson, TV3 business editor, made an interesting observation about Jenny Shipley being appointed by the govt to chair the Meridian board. His point was that many ex-politicians have been implicated in governance failures where they have been members of public company boards of failed companies. I think this is where the govt will be wise to consider its position on making "political" appointments.

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Since Richina was delisted as a public company and became private, and then several noteworthy very cautionary opinions about the prosepcts for the company (including Mainzeal) by a past chairman and also Brian Gaynor, what makes anyone believe that this is somehow a result of so-called lack of government insight or responsibility? Look to the directors and their suitability for their goverenance roles.

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The directors, not the government, are responsible for 'oversight' in private industry.

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Companies fail. The government can't stop this.

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You really don't have a clue, do you?

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It was announced in the media this morning that the home repairs contract is with a different Mainzeal company that is not in receivership. The Mainzeal Group as a whole is still trading. It is only the commercial building arm, Mainzeal Construction, that is in trouble.

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Point well made!

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It's a bit suspicious that the company has just been restructured, and then one part put into receivership.

I hope I'm not reading something into this that isn't there.

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After nearly 30 years as a sub-contractor with very little bad debt, mainly due to my careful and experienced management, to now be caught by Mainzeal will see me shut up shop and put a further 15 people out of work. The construction industry in general lacks intergrity, and the law incredibly allows main contractors to have total disregard to the proper tendering processes.

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Bring back the Lien Act and protect sub-contractors who are really taking all the risk!

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What about the Construction Contracts Act? Will that not help?

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Sweet, the directors are resigning. Some analogy about a sinking ship comes to mind.

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Hi #2 Willie
What's the government got to do with it? This is a free market. No government interference, remember. Don't forget, many of the recent contracts signed by Mainzeal were for the government, who has, at the public's insistence, screwed every last penny out of the deal.
Nice!

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There has always been an unpleasant odour around some of the individuals involved in this company and Richina. Sadly, governance standards in NZ are very poor across all sectors.

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This hightlights economy is not getting better.

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Mismanaged companies fail all the time.

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My thoughts at this stage are once again leaning towards the need for extreme caution needed when dealing or investing in any company that has a celebrity or politician advertising services or worse on the board.

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Just having been through the liquidation process myself, getting too big, too fast and not managing to keep up with the work I took on - I can understand when a larger company see's the potential in Chch. However, a company as big as Mainzeal Construction, which has been around for 40 years - no mean feat - should have decent systems in place to set alarm bells off when something isn't right. Either that, or they've been 'winging it' far too long. Nothing to do with govt. Crikey, if the govt was to blame for bad private management, I'd have my hand out. Solely and squarely on the shoulders of directors and shareholders. Risk-return.

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Jenny Shipley shouldn't be chairing anything other than a small rural school's PTA.

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I have been hearing that Mainzeal were bidding for projects below cost for many projects just to get the work. Someone getting commission or bonuses on the wrong metric again!

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it staggers 40jobs on the go no money in it couldnt even make a dent in there o/draft no margin when pricing works so low holding back subbies money on invoice each month sure the director got money tucked away in2010 brought a vineyard he be fine no morals no business ethics sad thing is a lot more companies out there like mainzeal just getting through fingers crossed they dont go down each day no way to run a business how do we change it

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No doubt the directors have walked away from this mess very well remunerated and they will be looking forward to new board memberships cosily offered by peers and colleagues.
Mainzeals contractors, employers, shareholders and investors will pay but most of the directors will benefit enormously from the 'free' market that they operate in.

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Just like the collapse of finance companies which have now being blamed on poor governance by the "authorities",isn't that under the purview of some politician(s)/Minister(s)?
Mercifully,this time taxpayers won't have to pay for the failure of a private company?
About time New Zealand steps up its level of corporate governance to be on par with the rest of the developed economies,don't you think?

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Subs will take the biggest hit again and in part deserve it sadly. Don't wait for the Government to sort things - do something about it yourselves. How about not accepting late or part payments from main contractors, use the CCA and stop working if you are not being paid on time. Mainzeal might have gone long ago and saved a lot of pain - or lifted their game if subs insisted on main contractors paying every month what is owed.
There are other main contractors out there still doing it - maybe a sign they are next to fall. Stand up to the buggers!

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