Overseas competition, falling productivity, decade of losses led to closure of Huhtamaki manufacturing plant in Auckland, 135 job losses

By Alex Tarrant

Falling productivity, a lack of income for capital investment, and offshore competition are the reasons behind the closure of the Huhtamaki Flexible Packaging plant in New Lynn last week, the company says.

The closure of the plant, which employs 135 people, came after management could not turn Huhtamaki Flexible Packaging’s (HFP) books around following a decade of losses.

The wind-down in production would be managed over the coming eleven months, a spokeswoman for the company, Annabelle Tyrie, told interest.co.nz. Production would then be shifted to other Huhtamaki plants in Asia, which were able to produce items cheaper than in New Zealand.

Use of Asian production by competitors, who were able to make products for less, had been one of the key reasons for the closure of the New Lynn plant.

Competitors had therefore been able to sell products into HFP’s markets of Australia and New Zealand for less.

“The Huhtamaki Flexible Packaging business has been losing money for a number of years, so the decision was taken to close the New Lynn plant because we just can’t continue to sustain the loss of money,” Tyrie told interest.co.nz.

“The key [reasons] would be operational efficiencies internally, and competition. So there are external and internal factors,” Tyrie said.

Operational efficiencies included productivity and labour and machinery costs.

“We haven’t been able to make the business profitable, haven’t been profitable for a number of years. We’ve looked back, and for at least the last 10 years we haven’t been a profitable business,” Tyrie said.

The business was not making enough money to invest in new machinery, which was made in Europe. Neither was there much support from the New Zealand labour pool for machinery operation and maintenance.

“There aren’t a lot of other businesses that run the type of machinery that we run, so therefore in terms of things like training up staff, there isn’t a great deal of opportunity to get expertise because I think we’re one of the only companies that run gravure printing presses anymore,” Tyrie said.

There was no easy answer to what would have been required for the business to not be shut down.

“We’ve had a lot of people over the last few years try and answer that question, and a lot of people trying to turn the business around, and we’ve unfortunately been unsuccessful,” Tyrie said.

“I think it’s because there are many facets to the reason why we’re closing. There’s many problems and issues that we haven’t been able to address,” she said.

“There is competition from overseas, there’s the age of our machinery, there are lots of other issues.”

Exchange rate not a factor

Products made in the New Lynn factory were primarily sold in New Zealand (about 40%) and Australia (60%).

That meant the ‘exchange rate’ argument from most export industries for closures and low profitability had not affected business much.

“It has been a factor, but it hasn’t brought about this [closure],” Tyrie said.

Sixty years

The New Lynn site had been operating since the early 1950s.

“It’s been around for a while, and definitely struggled for quite a number of years recently over the last few years,” Tyrie said.

HFP in New Lynn was one of three Huhtamaki plants in Auckland. All three were separate legal entities, with the other two still operating profitably.

Huhtamaki Henderson made rigid items like disposable plates, cups and lids, including takeaway coffee lids, and icecream containers. Huhtamaki Otahuhu made moulded fibre items such as egg cartons and fruit trays for Kiwifruit.

The New Lynn plant produced flexible food packaging like yogurt container lids, and packets for cereals, Tyrie said.

The nature of what the three respective plants produced was one reason the Henderson and Otahuhu ones could survive, as they produced larger products than the flexibles plant, which made it more difficult for competitors to import competing goods.

“[The goods they produce are] larger physically, so that’s one thing in their favour. They certainly are operating in a profitable manner,” Tyrie said.

What now?

The decision to shift production to Asia was separate from the initial decision to close down the plant.

“We’ve made the decision to close because we haven’t been able to turn the business around. Then the next thing we need to do is look at our customers and see how we can best help them going forward,” Tyrie said.

“We hope to maintain a presence in New Zealand in terms of a trading organisation, so we will still have Huhtamaki Flexible Packaging in New Zealand, but we won’t be operating a manufacturing unit,” she said.

HFP had plants in India, Thailand, Vietnam, Italy and Germany.

“We’re going to be talking with our customers – we only started on Wednesday when we made the announcement, so we’ll be sitting down talking with customers and seeing how we can continue to assist them with their needs,” Tyrie said.

The workers

Huhtamaki Flexibles was trying to support its 135 employees where it could, Tyrie said. There would be coping with change workshops put on for the workers, as well as help with CV preparation, interview skills, job searches and financial planning.

“Just trying to give them skills to equip them to enter into the marketplace as confidently as they can,” she said.

There was also talk with the plants in Otahuhu and Henderson in terms of any vacancies and openings they might have.

“The plant that we have here won’t be transferring [production] to the other New Zealand operations though, so we won’t have great transfers, but we will attempt to help facilitate them into other roles," Tyrie said.

She had also had calls from other employers in the region, who had indicated they would be looking for workers next year.

Workers at the plant had a range of skills.

“We have quite a number of printers and people who operate our printing presses. We have people who operate other machinery like our laminating machinery. So there are quite a few skilled people who are skilled at operating various different types of product lines," Tyrie said.

“Then we have semi-skilled people who are doing things like packing and preparing ink,” she said.

It was a hard time for all involved. Tyrie’s own role would also be disestablished.

The ultimate closure was still eleven months away, with the company anticipating it would keep the plant open until July 31, 2012, although that could change after discussions with customers.

A ramping down of production would ideally be done in a staged approach, depending on feedback from customers.

“We’ll be winding down – we’ve got eleven months worth of time to give people to plan what they’re going to be doing next, and also to give them some of these skills in terms of the workshops we’ll be running,” Tyrie said.

The first instance of roles being made redundant would likely happen in the new year, between February and July.

There were about 100 staff in the plant itself, with the remaining 35 in the office.

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