Analysis: Taxpayer funds F&P Appliance's "R&D" push to tune of $15m+

The good news: The Chinese-owned F&P Appliances has hired more skilled staff than it has laid off low-skilled staff. The bad news: you're helping to pay for it.

As the company announced it will lay off 180 this year with the closure of its only remaining whiteware plant in NZ, Economic Development Minister Steven Joyce was quick to point out they were relatively low-skill, low paid manufacturing roles. 

Over the past 12 months, F&P Appliances has hired 270 people amid a push to expand research and development in Auckland.

While acknowledging the pain of those who will be laid off, Mr Joyce pitched it as a positive transformation story overall. Low skilled jobs were out, a greater number of high-skilled R&D roles were in.

He's right, but with a couple of important caveats.

One, not all the new staff are in R&D. Chief executive Stuart Broadhurst tells NBR the company has had a net gain of 260 staff since being bought by China's Haier in 2012.

It employs about 400 research and development staff, with about 110 added to the product development team since Haier bought the business. The 270 new hires over the past year have been across engineering, procurement, supply chain and call centre roles.

Two, F&P Appliances' R&D efforts since 2012 have been part-funded by Crown-owned Callaghan Innovation.

In October 2013, F&P Appliances was awarded a Callaghan Growth Grant of up to $15 million over three years* (the contract expires in September this year, at which point F&P Appliances can apply for another three years, which would take the potential total grant to $30 million).

A growth grant funds 20% of a company’s R&D up to a maximum of $5 million a year. 

Some companies win growth grants but then don't claim the maximum because they don't end up spending enough on R&D  to qualify for Callaghan's matching funds.

Callaghan would not comment on how much had been forked over to F&P Appliances for its growth grant.

F&P Appliances was happy to reveal numbers for the first two years of its three-year growth grant.

A spokeswoman said, "In 2015 (year ending 31 December 2015) we received $4.9m related to individual research and development projects approved by the Callaghan Innovation Fund. In 2014 this was $5.3 million."

On top of its growth grant, F&P has been paid $575,520 by Callaghan to cover the cost of 86 students taken on under a Callaghan-backed internship programme.

Mr Broadhurst says that overall, "Research and development spending has doubled since 2012 and, including capital, we now spend $100 million per annum on growing to become the world’s leading premium appliance brand."

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* The NZX-listed F&P Healthcare, which was spun-off from F&P in 2001, also qualified for a growth grant of up to $15 million.

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