Fonterra and Fletcher Building

Written By: - Date published: 2:05 pm, February 9th, 2018 - 52 comments
Categories: business, Conservation, Economy, Environment, farming - Tags: ,

New Zealand only has two businesses of world-competitive scale that are also majority owned by New Zealanders: Fonterra, and Fletcher Building.

As Fran O’Sullivan notes, Fonterra’s China plan is far from clear. Its’ Australia plan is also far from clear.

As Bryan Gaynor notes, Fletcher are in really serious trouble. Serious on the scale similar to that which led to the breakup of Fletcher Challenge several decades ago.

It was only in 2016 that Fonterra and Fletchers were two of the most profitable companies that we had.

By number of employees, Fletcher and Fonterra are also in New Zealand’s top three.

They are our most important private companies. And they appear to have lost their way and put much of their value and our wellbeing at risk.

Back in the day, faced with such developments central government would have called one of those almighty summits together to generate a sense of coherence about where such massive parts of our economy, our society, and our environment, were pushing New Zealand. Anderton and Clark would have, and did.

Both Fonterra and Fletcher Building have dominated their respective industries, and evolved with them, for long enough that we should be able to trust them to plan and succeed over a far greater time horizon than governments ordinarily operate.

Yet trade deals and R&D grants are no substitute for a common direction – a strategy – which recognises the vulnerability and latent potential for New Zealand of these two enterprises. Neither of their corporate leaders retains much credibility.

It’s time for this government to call them both out, very loudly, and show that the Labour-led coalition doesn’t just focus on more generous tax redistribution and stronger social support: this government needs to show that it is responding to a clear market failure in commercial strategy, start to give faith back to their global customers, and hold these two most powerful local businesses to public account. In its absence from Fonterra and Fletcher Building, this government needs to show leadership.

52 comments on “Fonterra and Fletcher Building”

  1. Jack Ramaka 1

    I was told Fletcher’s are over 80% foreign owned, haven’t checked their share registry lately however someone like J B Were the Stockbrokers would be able to clarify that ?

  2. Ad 2

    Forgot to mention.

    If Fonterra is really audited and then restuctured and carved up, there is aboslutely no way the local constructor market will have a shit show of building enough houses, or enough public transport, to do even part of this government’s housing and transport policies.

    So I hope Fletchers has Minister Twyford, MIBIE, and NZTA’s full attention.

  3. Herodotus 3

    And don’t forget this
    No responsibility on Fletcher EQR for shoddy quake repairs, contract suggests
    https://www.stuff.co.nz/business/71124031/no-responsibility-on-fletcher-eqr-for-shoddy-quake-repairs-contract-suggestsHow well our elected reps look after the voter over the corporate !!

  4. Bill 4

    Just as an aside on the slogans of those protesters… no they can’t.

    What is it with people? They think physics sits back and says “I’ll designate this here carbon as “nice” carbon and put it over here out of the way, while this here “bad” carbon – well, that’s going to make things a bit hot under the collar, innit?” 🙄

    • weka 4.1

      true, although technically if you plant more trees than you burn you’re in a negative carbon scenario, and in a world that was dropping fossil fuels fast that might be a useful thing. Not that we could run industrial, export milk powder economies based on that mind. And we’re not dropping fossil fuels fast enough.

    • Rosemary McDonald 4.2

      “Just as an aside on the slogans of those protesters… no they can’t.”

      Can you hold that thought Bill? I need to check with an expert in the field…but it may be a goer…Later. 😉

      • Bill 4.2.1

        🙂 Aye. It may be a goer. Or then again…

        Sarah Mandera, Kevin Andersona, Alice Larkin, Clair Gough and Naomi Vaughan …

        Taking the requirement of 70EJ p.a. of dedicated BECCS by 2050 and comparing this with the capacity of world’s largest non-nuclear thermal power station (5.6GW) illustrates starkly the scale of deployment assumed [in IPCC scenarios]. By 2050 there would need to be at least 500 fully-BECCS power stations of a size equivalent to the largest thermal plant currently in operation on the planet. Given the fledgling biomass and CCS industry, there is no prospect of a significant roll out of such large biomass plants before 2025 at the very earliest. Even under such unprecedented optimism, there would still need to be one BECCS power station (the size of the largest conventional thermal plant today) constructed and commissioned every eighteen days and for twenty five years in order to deliver the 70EJ of BECCS by 2050. Given that most large modern thermal power stations typically have a capacity of 1 to 2 GW, and again assuming a high annual load factor, a more realistic, but still highly ambitious, capacity for biomass plants would suggest construction and commissioning up to two large BECCS plants each week for a quarter of a century.

        • Rosemary McDonald 4.2.1.1

          How about local solutions to local problems? Because Bill, we have some truly awesome researchers right here in Godzone.

          We’re talking about replacing coal with woodwaste and forestry residues in Fonterra milk drying plants….

          http://nzjf.org.nz/free_issues/NZJF53_4_2009/6B50C54A-C7E0-4775-ACC8-0EBC47004F64.pdf

          “Bioenergy from forestry” Peter Hall, Scion

          Burning woodwaste directly for heat is more energy efficient than converting it to biofuel. Estimates back in 2005 were in the region of 26 PJ of energy available in forestry residues and wood processing waste in New Zealand.

          According to this…https://www.stuff.co.nz/business/farming/agribusiness/68714710/fonterra-a-large-scale-coal-user

          the dairy industry burns about 513,000 tonnes of coal per year.

          You’d need to burn approximately 1million tonnes of wood waste to produce the same amount of energy as heat. (depending on moisture content and other factors) If you’re incentivised to haul this wood waste out of the pine forest (where it is currently rotting and sending tonnes of CO2 and CH4 into the atmosphere) we have easily got enough available to replace coal in the dairy industry.

          If Fonterra switched to woodwaste, they would need to close their coalmines permanently. For ever.

          There would possibly/probably be some re modelling of boilers needed and in the long term one might even consider growing biomass closer to the factory to save on trucking.

          This might help too… it has a chart…https://www.engineeringtoolbox.com/fossil-fuels-energy-content-d_1298.html

          The feasibility (or lack of) of BECCS to single handedly save us all from climate change apocalypse is a much, much larger discussion.

          • Bill 4.2.1.1.1

            Swapping out one carbon source of energy for another does nothing towards averting 2 degrees. We have a carbon budget, and just as coal or gas diminishes that budget when we burn it, so does wood or other bio-fuels.

          • Draco T Bastard 4.2.1.1.2

            (where it is currently rotting and sending tonnes of CO2 and CH4 into the atmosphere)

            And while it’s rotting it feeds the forest and down stream plants. Taking it out and burning it would likely cause major ecological disruption.

            • Rosemary McDonald 4.2.1.1.2.1

              true, but while bark and leaves/pine needles contain nutrients, the wood itself is nutrient poor.

              No more ecological disruption taking the wood waste than harvesting the trees for timber…do it at the same time…leaving the bark and needles behind.

  5. weka 5

    “Back in the day, faced with such developments central government would have called one of those almighty summits together to generate a sense of coherence about where such massive parts of our economy, our society, and our environment, were pushing New Zealand. Anderton and Clark would have, and did.”

    What were some examples?

  6. weka 6

    “Both Fonterra and Fletcher Building have dominated their respective industries, and evolved with them, for long enough that we should be able to trust them to plan and succeed over a far greater time horizon than governments ordinarily operate.”

    I like the idea of government intervening proactively, but have to say that both Fonterra and Fletchers were designed for creating the problems they have. i.e. they were never to be trusted. Fonterra for obvious environmental reasons, Fletchers for their involvement in tying up the building industry and preventing lower cost housing and more varied supply chains. We pay a price for the domination model.

  7. Antoine 7

    > Back in the day, faced with such developments central government would have called one of those almighty summits together to generate a sense of coherence about where such massive parts of our economy, our society, and our environment, were pushing New Zealand.

    I would expect that in such a situation, Fonterra or Fletchers would either:

    (a) decline to attend, or
    (b) turn up and spin the Government some reassuring bullshit, or
    (c) turn up and ask for a hand out

    A.

    • Ad 7.1

      In the previous incarnation, the diary industry held out and persuaded the government to form Fonterra itself.

      The Clark government also generated the Fast Forward Fund, a $$billion plus agriculture research and development fund with the pastoral sector braodly.

      National’s approach was to fund irrigation directly, and rail directly, to support Fonterra.

      They assisted Fletchers’ indirectly through the entire Christchurch rebuild set of arrangements.

      • Antoine 7.1.1

        That’s right, so if Fonterra rocks up to a meeting, they’re only going to be wanting more assistance.

        A.

        • Draco T Bastard 7.1.1.1

          Private business, throughout history, has only managed to survive with government help.

          And the end result has been the collapse of society.

          • Antoine 7.1.1.1.1

            Whateva

            My point is that central Govt can’t reasonably expect to drive Fonterra or Fletchers’ strategy, and nor should it.

            A.

            • Draco T Bastard 7.1.1.1.1.1

              Fonterra and Fletchers obviously can’t.

              Thing is, we actually do need the capabilities as represented by Fletchers. We need to be able to build at a pace that allows people and business to be well housed. We probably don’t Fletchers per se. Probably need research into building practices and materials.

              Fonterra? Well, we probably don’t need them in their present incarnation. What we need is a centralised research institute that researches the best farming practice which then filters that out to the farmers. Researches high value end products from farm produce and develops the capability to produce them.

              I’d say that the government is probably the best option for both. MoW to replace Fletchers, a government replacement for Fonterra and an R&D of a billion dollars per year or so for research on each.

            • Ad 7.1.1.1.1.2

              Antoine, the government was at the core of the formation of both Fonterra and Fletchers. Fonterra is fully a creature of the government. There are fat trails of Cabinet papers about what Fonterra should do, how the formative legislation should achieve it, and what the formative legislation required it to achieve.

              There are several histories of the Fletcher family, Fletcher Challenge, and Fletcher Building. Look them up and educate yourself on how closely the state and Fletchers have built each other up.

              We’ve been a state-market hybrid country for all but 30 of our 180 years.

  8. greywarshark 8

    The diary industry is dying out. No-one writes meaningful memoirs these days – the police might raid you and read all your secrets.

  9. ropata 9

    NZ building industry being shafted.

    Employers say there are labour shortages that force them to go overseas. But construction sector wage inflation was just 2.0% last year. Does. Not compute. Migration suppresses wage inflation. The market is not allowed to respond with higher wages to drive higher productivity https://t.co/V7qLs63BnZ— Bernard Hickey (@bernardchickey) February 8, 2018

    Hickey is quoting this tweet:

    Chinese tradies: Company says not given tender opportunity https://t.co/WYH6meOzrn @TomFurleyNZ— Jane Patterson (@janepatterson) February 8, 2018

    • Ed 9.1

      New Zealand has become a slave state

    • Keepcalmcarryon 9.2

      Absolutely true, how do we change it?

      • ropata 9.2.1

        Nationalise core infrastructure. Apply massively punitive taxes on foreign ownership of land. Take China to the WTO for breaching free trade agreements. Deport thousands of useless students and unskilled migrants. Deport communist spies. Make it harder for Aussie banks to do business here and clip tickets for doing fuck all. Bring back industry wide compulsory unionism. Get rid of criminal corporations like HSBC. Increase the numbers of labour inspectors and enhance their powers to shut down dodgy operators.

    • Exkiwiforces 9.3

      Yep, this was always eventually going to happen when those dump Tories back in the 90’s stuff up the Trade training and the Farm Cadetship scheme, brought in the ECA and let the so-called free market, user pays to dictate instead of the whole of government and industry base training in under the old scheme.

      But then again the last Labour did sweet F All about the appending disaster that was slowly developing and that was without the earthquakes. The useless Tories again let the market dictate by bring overseas tradies, dumbing down the education, workers rights/ training instead of investing the New Zealand workers. This type of shit would’ve never happen here in Australia and I won’t be hold my breath with this Labour Government fixing the problem when you look at the previous record of the last Labour Government with it middle class latte set.

      When was the last time a Labour Government look after the work class which was the backbone of the Labour Party?

      • ropata 9.3.1

        The 1990s Nats only saw the costs not the investment value of having skilled tradesmen. Then their fucken leaky homes scandal and dodgy developers ruined the Auckland property market, and Clark’s Labour allowed it to continue, then Key’s National really opened the floodgates and the market became corrupted with money laundering, property flipping, land banking, an obscene orgy of greed. Meanwhile Kiwi families were made homeless by earthquakes and poverty and forced to sleep in garages or in cars.

        Time to start jailing those who continue making money from this cycle of exploitation and market manipulation.

        As for Australia — yeah right.

        A terrific review and summary of my book Game of Mates. https://t.co/Wr1NTBFauW Get the book via https://t.co/J8mu3aG8qT pic.twitter.com/e7M0cE27qJ— Cameron Murray (@DrCameronMurray) February 8, 2018

        • Exkiwiforces 9.3.1.1

          If Bruce was smart he would get an accountant as there are ways to beat the James of the world. It was the first piece of advice the uncles and cousins said to me when move to Oz in 98, second piece of advice use the bloody trains in Sydney or get the hell out of Sydney, 3rd piece advice live within your means and save for a rainy day so when the housing market tanks as it always does then buy a house or get the hell out Sydney and Dads advice was join a bloody union.

          The system can be beating if you pay it smart and are prepare to take the odd risk here and there. Getting Blown up, getting shot at, doing peacekeeping etc, is probably not the way to do it. But it can be done

          The free market is never going to work, nor is a full on government intervention either. Its a 50/50 each way this way its keep everyone honest and when the market goes a little bit silly then the Government steps in. What I see in NZ now, in some ways it makes sad and angry, but i’m glad I got out while I did as some of my cohort are stuck in a rut in Hornby some doing better than others and some are …. can’t think of the right words.

          • ropata 9.3.1.1.1

            Unfortunately not everyone is smart or lucky enough to get good advice and help along the way. The game is rigged against working people.

            Of course everyone should work and take opportunities, but it’s deeply immoral that hard working people are stuck in poverty & paying too much in rent and expenses.

            • Exkiwiforces 9.3.1.1.1.1

              The funny thing the Uncles and cousins comments is that they are Tory voters that have turned.

              You are right the whole thing is rigged especially what I see in NZ since the free market clowns are running the show and it would be nice to get it back on a even keel.

              What I seen in Christchurch on my last visit was quite awful to say the least and it was the reason why I stay in the North Island this time round in Nov last year as visiting CHCH makes me sick in the guts. I’ve seen some shit in 3rd word countries but in a develop country like NZ only the States treats it lower economic people as bad as NZ does now and that’s a real eye opener especially in Sin City.

              • ropata

                Sorry to hear that. I lived in CHC for 10 years, left just before the earthquakes. Wages are generally pretty shit in the South Island, much better in WLG or AKL. CHC has a surplus of young idiots looking for trouble.

                I stayed in the eastern suburbs: Wainoni, Parklands, New Brighton for the most part. Didn’t hang around Hornby much, didn’t like it. The city is going to be rebuilding for a long time. Dunno what happened to King Gerry’s glorious plans for the CBD. Things are moving pretty slow. Didn’t help that National decided to act like a land banker to keep their mates property values intact.

                • Exkiwiforces

                  When I last visited CHC I was expecting a lot of cranes dotting the landscape, underground and above services getting repaired. But after seeing it for first hand NACT’s were telling porky pies, when Dad and I bump of dad’s old works mate from the City Council Water Dept the stories that dads mate was saying about the problems they were in counting out in the East Suburbs and parts the CBD, and being told to take short cuts to keep costs down due the pollies at National and Local level was like WTF. Anyway he said was glad to take his retirement because the pressure he was under to sign off work that sub- standard, was just morally and unethical he knew down the track it have be rip up again and be replace again due to a blow out, lost of pressure etc.

                  As for the land grab by the NACT’s again is morally wrong when within the four avenues you had over 100 plus landlords pre earthquake down to a handful and when you look at that handful they all NACT supporters so go figure.

                  What National did CHC is going to happen to the Coast, Wellington, Hawkes Bay and when a volcano goes pop again in Auckland the buggers will do the same again.

                  Its may understanding that since the CHC earthquakes that the Tories still didn’t restart the funding for EQC when they stop it back in 90 and mind you last Labour government can share some of the blame as well.

  10. ropata 10

    Teuila Fuatai: A more durable alternative to fly-in workers

    Great points in here about NZ's boom-bust construction sector. It lends itself to a short term approach and relying on contractors and migrants for quick-on and quick-off business structures. https://t.co/fQg0VYDH4j— Bernard Hickey (@bernardchickey) February 9, 2018

  11. Jack Ramaka 11

    The Free Market under Neoliberalism is a fallacy, the game is rigged, especially in the building supplies market ?

    Monopolies and oligopolies exist here in NZ and are encouraged and endorsed by Government.

    • ropata 11.1

      The “free” market is a myth as players will use power/information asymmetry to gain market advantage and conspire to rip off the public. We need the Commerce Commission and consumer protections and regulations to constrain the cowboys.

      A decent market can only exist with decent government and market participants who are relatively honest and uncorrupted.

      • Ad 11.1.1

        Especially in a small state like New Zealand’s, the government has usually been the prime creator of markets. Granted there have been a few exceptions, but the degree of structuring successive governments have had to do to actually get specific markets going, let alone ensure that they function even half-successfully, is right up there. Starting with the Treaty of Waitangi as the biggest, but even if we just sum up the 19th century, the government shapes whole markets including:

        – Immigration
        – Railways
        – Land and farming
        – Electricity
        – Water
        – Banking

        And then on to the 20th century, where as the scale, force,and ambit of the state quickly expands, so too do the kinds of markets it needs to form and regulate …

        …sometimes by force, but usually with simply excellent payments to a small set of the right people, time after time.

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