FEARS OF SLUMP

Manawatu Standard, Volume LVII, Issue 203, 28 July 1937, Page 2

FEARS OF SLUMP

FACTORIES MAY HAVE TO CLOSE. MANUFACTURERS ALARMED. WELLINGTON, July 28. . New Zealand manufacturers are seriously alarmed at the imminent prospect of a tremendous slump in factory production, accompanied by widespread unemployment. Rising costs of raw materials, higher wages, increased staffs, necessitated by the shorter working week, and other restrictions caused by recent legislation have brought about a general rise in prices. In many cases it is cheaper to import than to manufacture, as-New Zealand manufacturers are now quite unable to compete witli the overseas producers. Unless immediate action is taken, many factories may find it necessary to close down.

In a single month the position has suddenly grown acute. Manufacturers who have been working at top speed for the past twelve months have been confronted with an almost complete absence of demand for New Zealandmade articles. During the boom period retailers and others on whom the manufacturers depend for their sales have laid in heavy stocks against further rises in prices. Consequently to-day the market for many kinds 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 of last year. In an interview yesterday the general secretary of the New Zealand Manufacturers’ Association, Mr Rocke O’Shea, stated that this critical state of affairs was by no means hallucinatory; he could produce signed statements by manufacturers all over the Dominion showing that they had no orders on hand, no prospects of work in the immediate future; that in many' cases they had already been obliged to reduce their staffs, and that in some instances the position was so grave tliat the factories concerned were faced with ceasing operations. “CRISIS APPROACHING.”

“It is no exaggeration,” said Mr O’Shea, “to say that we are to-day 'facing one of the most disturbing situations in the history of this Dominion. The position in which New Zealand industries now find themselves is so alarming that it, must bo regarded as approaching a crisis. » “A year ago the Prime Minister, Mr M. J. Savage, said: ‘We are pledged not only to the manufacturers, but also to the people of New Zealand to see that there is a substantial 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 take urgent action to save New Zealand secondary industry and the thousands and thousands of hardworking and capable citizens who look to industry for their livelihood and the support of their wives and children. “No description will be half so graphic as a bare statement of the situation in which individual business concerns and their workers to-day find themselves. I think you will find the weight of the following evidence overwhelming.” SPECIFIC INSTANCES.

Mr O’Shea then quoted specific instances of firms who had submitted particulars showing a marked fallingoff in business, and a complete dearth of orders for the immediate future.

The ■ directors of a hosiery manufacturing firm in this province are seriously considering closing down their factory, because of the extent to which their sales have diminished. Already they have reduced their staff by dismissing several employees. Tliis is a firm which for some years has specialised in the manufacture of men’s plain and fancy socks, women’s cashmere stockings and girls’ gym stockings. 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 halfhose.

SALES RETURNS. __ The firm’s monthly sales returns during the last two years have only twice fallen below £IOO, and have usually been above £2OO. In the latter quarter of 1936 they were ns high as £340 to £370. But for the period from June 19 to July 13 of this year, sales totalled only £sl 13s. It is considered that there is no likelihood of their recovering in the near future; whereas at this time last year the firm had 650 dozen pairs of stockings order-, ed in advance ,this year only 275 dozen pairs are on order. “The market is absolutely swamped with Australian goods. I am assured that Australian half-hose are sold cheaper on our market than on their own, due to the fact that they are dumping their surplus stocks over here,” writes the manager. “There is a further menace from foreign competition with the advent of the chain stores.” A POTTERY FIRM.

Here is another case of a factory, which may be put out of business by overseas competition and high wages. It is a pottery firm. “Lessened hours, together with certain wage increases, and the inauguration of the basic wage, have sent our wages costs up from approximately 38 per cent, of the sales value to 47" per cent.”, states the chairman of directors. “The workers’ unon is asking for greatly increased wages and shorter hours. While we have no objection to paying increased wages, reference to the financial results show that the business will have to be closed if any further increase is made, unless correspondingly higher prices can he charged. “The company’s main product is supplied in considerable quantities to Government departments, 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. “We are no longer competitive with English pottery. Tn nearly every instance where we have brought out a new article, we found at first that we were able to compete reasonably in price with British manufacturers; buf immediately we started marketing in earnest,, prices were reduced by importers to an unprofitable point. This seems to show that either New Zealand was greatly overcharged before our advent, or a form of diftnping is being practised to put us out of business.”

THE CLOTHING TRADE. The manufacture of clothing occupies 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 country has just doubled since last year. Here is 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 alarmed over the last three months" by the lack of orders and, wliat 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 be compelled to reduce staff. “It lias been suggested that the po-

sition will be serious in six months. We predict that it will be so within the next three months. There will, of course, be odd lines to manufacture before the season is finished, but these will in no way help to provide an organised factory with a continuity of work.”

Similar statements were made by managers and directors of other firms in various parts of the country. “There is no doubt that this is an alarming 6tate 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 sales representative w'itli the returns of the sales affected by him. • SALESMAN’S EFFORTS. In April this salesman’s expenses totalled £2O 10s, and he brought in £587 5s in business; his expenses were only 3J per cent, of the returns. So far in July his expenses were £8 15s, and only £23 2s worth of sales resulted., the salesman's expenses having jumped to 33 per cent, of the returns. A South Island manufacturer reports that whereas in July, 1936, he had in sight the manufacture of 12,000 pairs 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 three months’ work, as last year.

“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 keen our present staff in full employment.”

THE TANNERIES. With the brakes so heavily applied to the footwear trade, tannery orders, indicate a similar crisis. One of the country's principal tanneries 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. “We have dropped our consumption of hides from 1200 to 1100 a -week, and there is every prospect we will have to -drop it still further within the next week or so. As a result we have had to dispose of one man and three youths. DECREASE IN ORDERS.

“During Juiy we experienced a very definite decrease in orders from shoe factories throughout the Dominion,” reports a Northern tanner and leather merchant. “For the first six months of the year business was very good and orders plentiful, although, not more 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. “The effects are now being experienced in a decided slackness in demand for 6ole leather. In the case of two of our largest customers, one intimated that he did not require any leather for a month, and the other that no further supplies would be wanted for three months. Roth these cases refer to the boot and shoe trade, which consumes by far the largest proportion of leather manufactured in the Dominion.

“A 6 a result we are taking stops to restrict our output, as we would very soon accumulate much larger stocks than the New Zealand trade could absorb.” ..Tii An engineering 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. CONFECTIONERY FIRM.

A leading confectionery manufacturing firm summarises the position in that particular branch of manufacturing—one which relies to a great extent on the products of other New Zealand industries for raw materials. “Importations of chocolate and confectionery have been, growing steadily and have now reached the sta.ge 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 established their own organisations in New Zeala.nd. During the past year, however, imports have been growing steadily at the same time that local manufacturers were experiencing a distinct slowing-up in their 6ales. “Also, it is readily seen that the average value of imports, the unit cost, has been relatively reduced a.t the same time that increased wages, shorter hours and higher material'prices have forced local manufacturers to increase their prices. It is feared that if this rapid growth of confectionery imports is allowed to proceed unchecked during the remainder of the year the position will tie extremely serious. “From the foregoing exa.mples of the position in which many efficient and old-established firms find themselves to-day, it will be seen that the Government must take immediate action to avert a national crisis,” concluded Mr O’Shea. “The Government passed its industrial legislation in an honest attempt to substantially improve the lot of the worker, and in the expectation that in so doing it would benefit the people as a whole. Many people will hold that in the beginning it to some extent succeeded. T'o-dav these benefits are being lost to the workers of New Zealand and transferred to the workers overS€ “We submit that the correction of the position lies with the Government and that immediate measures are essential.”

MINISTER’S REPLY,

“MUCH EXAGGERATION.” Per Fre=s Association. WELLINGTON. July 28. “The whole atmosphere of Mr O’Shea’s story is onn of much exaggeration,” said the Minister of Industries and Commerce (Hon. D. G. Sulliven) in replv to the statement issued bv the Manufacturers’ Federation. “By that T mean there is some truth in it but. much absurdity. Various manufacturing firms have written to me voluntarily stating that, desnite the restoration of wages, the forty-hour week and the increased importations, they have more than held their own in the market and are not alarmed and have profited by the increased purchasing power provided bv the Government legislation. We should not be asked to protect inefficiency.” - Referring to the examinations of industries by special officers, the Minister said that surprisingly littl.e information

had been placed before him or his officers in sunport of the manufacturers’ case for increased protection until this week. Indeed, he said, the Government liad keen far more active in endeavouring to get useful information on the subject than the manufacturers had been in trying to help the Government. The Minister deplored the action of Mr O’Shea in selecting the morning of the arrival of Rt. Hon. M. J. Savage to publish an outburst of alarm. He said that the melodramatic language in which the statement,was couched was unnecessary, and it looked as if the Manufacturers’ Federation had emerged into party politics.

3.45 P.M. EDITION