The closure and loss of 40 jobs at Dunedin engineering company Milmeq only reinforces the need to create an engineering hub in the city, according to one of its promoters.
The Otago Chamber of Commerce, Enterprise Dunedin and Farra Engineering were aware of the predicament Milmeq had found itself in - with an empty order book heading into Christmas.
Farra Engineering chief executive Gareth Evans is promoting the city engineering hub, which in September secured $200,000 Government funding from the $3 billion regional development fund to undertake a feasibility study; with the conclusions and recommendations due in March.
While Milmeq was “on the mailing list,” it was not otherwise a key driver of the hub concept, Evans said.
Aside from the massive loss of jobs from the Hillside engineering, there have been company sales and consolidations and loss of foundries in the past decade.
“That's a bit of a shock, I'd heard things had been a bit slow,” Evans said when contacted yesterday.
“This reinforces the need for businesses to be collaborative and work together - so that when a market slows they have got more than one (type of work) option,” he said.
The New Zealand dollar had been low for the past four to five months, which had helped offset some of the decline. While smaller engineering companies were finding plenty of “jobbing work,” the larger corporates with their overheads were facing more challenging times.
Farra's buffer was maintaining orders from construction work in Australia.
The engineering hub of companies wants to target work from NZ and Australian defence contracts and sectors including rail, renewable energy and construction.
Otago Chamber of Commerce chief executive Dougal McGowan said the closure announcement was a shock, especially since Milmeq was a multi-finalist in the two-yearly business awards just two years ago.
“They had a lot of work on and there was a really good vibe about Milmeq.” McGowan was also concerned about forward work orders, not just in engineering but several sector, with a decline in residential and commercial consent numbers, but also in larger infrastructure work.
“While they are still making decisions, we're seeing less contracts,” McGowan said.
The Amalgamated Workers Union, union E Tu and the Manufacturing and Construction Workers Union represent the Milmeq staff. On behalf of them all, AWU's Stephen Scandrett said the closure appeared due to market forces external to NZ, and followed an earlier workforce reduction.
“The company has gone to considerable lengths to keep the business open for some time, but the inevitable has occurred,” he said.
Having a new US 25% steel tariff, which was not applied to Australia, the EU and five other countries, did not help New Zealand to be competitive, Scandrett said.
Enterprise Dunedin director John Christie said he had only just been made aware of the closure. Whenever a Dunedin manufacturing company was purchased by out-of-town buyers they invariably had to rationalise operations and staff - such as happened with Cadburys and Fisher & Paykel Appliances; with the loss of respectively 360 and 430 jobs.
However, he believed there was enough depth in Dunedin's engineering sector to maintain capacity and that it could grow in the future.
*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.