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Godfrey Hirst buys unprofitable Oamaru plant, 192 staff on notice

Godfrey Hirst, the biggest carpet maker in Australasia, has bought Oamaru's unprofitable yarn-spinning plant from Japan's Sumitomo Corp, effectively putting 192 staff on notice as it looks at ways to turn the operation around.

The company, which bought the Feltex business out of receivership, was granted Overseas Investment Office approval to buy the assets last month. It is reviewing the wool yarn spinning business to see how best to manage the loss-making plant, Godfrey Hirst says in a statement.

The plant has been on the market for the past two years, with Godfrey Hirst the only viable buyer, and ends a 21-year ownership by the Japanese group.

"This was driven by a number of factors affecting trading results including an unfavourable exchange rate and less local demand for wool carpets," Summit Wool Spinners managing director Harry Ogawa says in a statement.

Summit Wool Spinners was one of a handful of companies that participated in the government's "nine-day fortnight" scheme in 2009, which came out of the jobs summit at the start of the current National-led administration.

The scheme let companies cut staff hours by one day a fortnight to receive a subsidy on wages and saved a reported 377 jobs.

Summit Wool Spinners told staff the plant will be closed some time near the end of February, according to a joint statement by the Engineering, Printing and Manufacturing Union and First Union.

"Summit has been a very good employer and didn't want to make these redundancies," EPMU organiser John Gardner says. "The government's refusal to act on the overvalued exchange rate or provide any kind of strategy for manufacturing means they were left with few options."

Union members were told of the decision this afternoon and will receive redundancy compensation through their collective agreements, the unions say.

The proposed closure coincides with the parliamentary inquiry into manufacturing job losses being run by opposition parties, which claim nearly 40,000 jobs in the sector have been lost since 2008.

The wool carpet sector has been in disarray in the past couple of years as high wool prices and cheap synthetic alternatives have eroded their customer base and squeezed their margins.

NZX-listed Cavalier Corp, which left the stock exchange's top 50 index this month, shut a yarn spinning plant in Onehunga last year because of over-capacity in the sector.

(BusinessDesk)

Comments and questions
5

Would be interesting to see what R&D can be done on cut pile carpet to make it look like a Sisal for the residential market and promote it more heavily to the corporate construction market. With the bulk of new buildings going for high green star ratings - cut pile offers pretty high thermal insulation. Think it's like 18% or something.

Really sad to hear. See that unions blamed the high dollar but back in December the company said it was high wool prices. Why didn't they import cheaper wool while the dollar was high? Years ago when the wool prices were at rock bottom did the unions ask for higher prices for the farmer?

The unions want a lower dollar that would lower the real income of all New Zealanders. However, they are not willing to lower the wages of staff at an uncompetitive company and instead blame the Government. Go figure.

Is the problem the high dollar or high wages? I assume wool is now being spun in countries will lower wages. Wool is a commodity so is the same for all, as is the USD.

Any fall in the dollar will cause inflation, reducing real pay anyway.

Wages for workers on the floor at Summit were $17 - $18, depending upon your length of service and shift upon which you worked. Can that be considered a "high wage"?