INCREASING COSTS OF PRODUCTION

Hawke's Bay Herald-Tribune, Issue 163, 28 July 1937, Page 6

INCREASING COSTS OF PRODUCTION

— Pres? Association.i

MANUFACTURERS ALARMED Factories May Have To Close Down CHEAPER TO IMPORT

,"Br Telegraph

WELLINGTON, Last Night. New Zealand manufacturers are sericusly alarmed at the imminent prospect of a tremendous slump in factory production accompanied by widespread un«nployment. Rising costs of raw materials, higher wages aud increased staffs necessitated by the shorter working week and other restrictions caused by the recent legislation have brought about a general rise in prices and in many cases it is now cheaper to import than manufacture as New Zealand manufacturers are now quite unable to compete with overseas producers. Unless immediate action is taken many factories may be obliged to close down. In a single month the posltion has •uddenly grown acute. Manufacturers ■who Rave beeu working at top speed f°r the past 12 months h%ve suddenly been confronted with an almost complete a-bsence of demand for New Zealandmade articles. During the boom period retailers and others on whom manufacturers depend for ihe saies have laid in heavy stocks against a, further rise ju. prices, consequently to-day the market for many hinds of wares is hopelessly glutted. The position is reflected in the May import statistics which show an excess of more than £1,250,000 over the figures for May last year. in an mterview yesterday the secretary of the New Zealand Manufacturers' Association, Mr R. O'Shea, stated that this critical state of affairs was by no means hailicinatory. He could produce signed st-atements by manufacturers all over the Dominion showing they had no orders on hand and no prospects of work in the immediate future, that in many cases they had already been obliged to reduce their staffs, and in some instances the position wa.s so grave that the factories concerned were faced jvith ceasing operations. « {It ig no • exaggeration," said Mr O'Shea, ''to say that we are today facing one of the most disturbing situationa in the history of this Dominion. The position in whicn New Zealand industiies now find themselves is so alarming that it must be regarded as approaching a crisis, "A year ago the Prime Minister, Mr 11. J, Savage. said: *'We aro pledged not only to the manufacturers, but also to the people of Netf Zealand to see that there is a, substautial development of secondary industries. .We are pledged to that. and we are not going to do anything else. . . ' "I sincerely hope that it is not too late to taho urgent action to save New Zealand secondary industry and the thousands and thousands of hardworking and capable citizens who look to industry fGr their livelihood and tho nupport of their wives and ciuldrei). • "No description will be half so graphic as a bare statement of the situ , ation in which individual business coucerns and- their workers to-day find themselves. 1 think you will find the weight- of the following evidence overwhelming." Mr O'Shea then quoted speeific instances oi' firms who had rubmitted particuiars sbowing a marked faHing-ofl in business, aud a complete dearth oi orders for the immediate future. Considering ciosing Down The directors of a hosiery manufaoturing firm in this province are seriously considering closing down their factory, hecause of the extent to which their saies have diminished. Already they have reduced their staff by dismissing several employees. Thb is a firm which for some years faas specialised in the manufacture of inen's plain and fancy socks, women's cashmere stoekings and girls' gyru atockings. With the increased costs due to shorter hours and higher wages they were obliged to raise their prices. Since then they have been unable to compete with Australian imported halfhoBe. The firm's monthly saies refurns duriirg the last two years have only twice falleu below £100, aud have usually been above £200. In the latter quarter o.f 1936 they were as liigh as £340 to £370. But for the period from June 19 to July 13 of this year, saies totalled only £51 13/-. It is considered that there is no likelihood oE their recovering in the near future; whereas at this timo last year tho firm had 650 dozqu pairs of stoekings ordered in advuncC, this year only 275 dozen pairs are on order. "The market is absolutely swamped with Australian goods. I am assured that Australian baU-hose are 8old cheaper on our market than on their own, due to the fact that they are dumping their surplus stocks over Rere," writes tho manager. "There ls a further menace from foreign competition with the advent of the chain stores You no doubt have seen and heard them advertising full-fashioned pure silk hose at 2/11 and 3/11 a pair, and seamless hosiery as low as 1/6 a pair, What chance have we in this eountry of competing against such ridiculously low prices?" Here is another case of a factory, wMch may be put out of business by overseas competition and high wages. Jt is a pottery firm. "Lessened hours, together with certain wage increases, a."d the niauguration of the basic wage, bave sent our wages costs up froiu approxunately 38 per cent of the saies walue to 47 per cent.," states the chairman of directors. "The Workers' Union is asking for greatly increased wages and shorter kours. While we have no objection to ftVing ' ixicxeasfcd wagest ieferencja &

felie ness will have to be closed if any further increase is made, unless correspondingly higher prices can b© charged. "The company's main product is supplied in considerable quantities to Government deparfments, and now it is a question of whether the Government will agree to these departments accepting further increased prices. if they will not do so, and decide to import at a lower price than they would have to pay for the New Zealand-made article, then the company must wind up. There is no question of quality involved, the New Zealand-made article being fully equal to the imported. The Clothing Trade. The manufacture of clothing oceupies some 35,000 men and 10,000 women of New. Zealand. Import statistics show that here, too, the quantity of foreign-made goods coming into the eountry has just doubled since last year. Here w a statement by a prominent Dunedin clothier: — "We, as perhaps one of the largest manufacturers of women's and children 's clothing and underwear, have been seriously alaimed over the last three months by the lack of orders, and, what is far worse, we have no actual future prospects after the middle of September. Usually the months of May to November are our busiest months, but this year we shall actually he compelled to reduce staff. This week we have reduced it by six, and inteud to do so still further during the next five or six weeks. Any of our staff now leaving us through natural causes wo aTe not replacing." Similar statements were made by rnanagers and directors of other firms in various parts of the eountry. "Whilst indent orders taken last January for delivery from August to Dccember were larger than ever before, we have taken practically no orders for the winter of 1938, although this time last year we had large indents on hand," says an Auckland clothing factory manager. "We have not only very serious reports as to stocks held by retailers, bought against any abnormal rise of the j market, but we have also the special report of our saies manager, who has made a special tour of our main territories to size up the position. "We cannot stress too much that it is the excess of work at the present moment which, apart from any excess importations, has created a surplus over the quantity of goods consumed, which must create the unemployment we can see coming during the 12 j months immediately preceding the next election." , "There is no doubt that this is an alarming state of affairs, and one which I have not experienced during the last 10 years," states a Northern footwear-maker, quoting the travelling costs of a saies representative with the returns of the saies affected by him. In April this salesman's expenses totalled £20 10/-, and he brought in £587 5/- in business; his expenses were only 3J per cent. of the returns. So far in July his expenses were £8 15/-, and only £23 2/- worth of saies resulted, the salesman's expensps having jumped to 38 per cent. of the returns." • A South Island manufacturer reports that whereas in July, 1936, he had in sight the manufacture of 12,000 p?,irs of shoes, at present he has only 1900 pairs. Another well-known firm says that, whereas they were many weeks' work behind their orders last year, at the moment they are only five days behind. Yet another has no orders on hand whatever, instead of tlirep months' work, as last year. A big falling-off in orders was noticed at the end of June, and was attributed to over-buying by retailers afraid of rising prices, increased prices resultant from increased wages and shorter hours, and an increase of imports. Yet andther, owing to complete absence of orders, has dismissed 15 skilled hands and expects to put off more."We are quite satisfied that we have not been able to produce as much per factory hand in the 40 hours as we did previously in the 44 hours. The output of the factory is stated to have been 128,402 pairs of shoes in the first six months of 1935, when 180 hands were employed, and 159,629 pairs in the same period of this year, with a staff of 266 and a correspondingly increased wages bill. "We have been proposing to extend our factory and increase our output, but we are not satisfied that this step would be warranted, and we are also* faced with the problem of securing orders to keep our present staff in full employment." New Zealand 's footwear industry is one wlxiclx provides employment for more than 2600 workers, uses approximately £200,000 worth of New- Zealand raw materials every year, and produces goods valued at over £1,000,000 annually. In 1935 it produced more than 470,000 pairs of men's and 1,000,000 pairs of women 's, as against imports of 80,000 and 320,000 respectively. In other words, the New Zealand-made article had captured the New Zealand market. But tlie May importations are nearly douLle those of tlie preceding May, and i'rom tho import statistics it is plain that overseas makers aro rapidly regainiug the lost ground. The Tamierles. With the brakes so lieavily applied to the footwear trade, tannery orders indicate a similar crisis. Ono of tho eountry 's principal taunpries reports that they are wholly without orders for gloves, and are practically without orders in the tan chrome and upholstery leather departments, with the result that two youths had to be dismissed from that department. Unless business improved more employees would have to be put out of work. "During July we experienced a very definite decrease in orders from shoe factories throughout the Dominion/' reports a Northern tanner and leather merehant. "For the first six months of the year business was very good and orders plentiful, although ? not moro than we could supply. During this period apparently factories bought more leather than they were using, either through reduction in output on account of shorter hours, lack of orders, or the temptation to buy owing to a rising market for leather, the result being that most shoe factories are now overstocked with .leather. _Aa en^ineering firm in, [Auckland

finds that its output has fallen away very rapidly during the last three months. . A dowel manufacturer states that since obliged to raise his prices to cover increased wages and like expenses, he has had no orders in the lines affected. "The higher price of timber, and not being allowed to employ youths for feeding the machines and handling small timber, which is only boys' work, does not allow us to compete with imported articles", especially Canadian and Australia. Other years we have kept our full staff employed through the winter, building up stocks for the busy season, but owing to the high cost and doubtful position, I do not feel inclined to this season," he states. Imports of Chocolates. A leading confectionery manufacturing firm summarises the position in that particular branch of manufacturing — oiie which relies to a great extent on the products of other New Zealand industries for raw materials. "Importations of chocolate and confectionery have been growiug steadily and have now reached the stage where they are beginning to concern local manufacturers. To understand the position, it is necessary to remember that the once large imports of these things diminished to practically nothing after two of the largest exporters establishei their. own organisations in New Zealand. During the past year, however, imports have been growing steadily at the same time that local manufacturers were experiencing a distinct slowiug-up in their saies. "It is feared that if this rapid growth of confectionery imports is allowed fo proceed unchecked during the remainder of the year the position will be extremely serious. While the imports show quantitative increases of 100 to 300 per cent., our own increases for the last sxi months is under 3 per cent., and for the last three months decreases have been shown."