Editorial: Job cuts predictable

21:22, Sep 09 2012

Let's not get in too much of a tizz about the news from New Zealand Smelters (NZAS).

Sure, the announcement that the plan to axe 100 jobs has been brought forward is not the type of news we like - it would be far better to hear 100 jobs were being created - but this possibly isn't the gloomy news it has been portrayed as.

Doomsayers are suggesting this is the start of the end for the smelter, which began operating at Tiwai Point in 1971 and has been an essential part of the national economy for more than 40 years. But you need to remember that a closed smelter versus a productive one - or a sold one - is of little benefit to majority owner Rio Tinto.

It's in the company's best interests to keep the plant going, even if it's just to sell. It would make no money from closing it.

This is simply a case of the world's global economic woes and a company looking to reduce costs. Demand for aluminium is down, thus simple economics dictate the price paid for the commodity must drop.

The high New Zealand dollar has been a thorn in the side of exporters for some time, and with 90 per cent of NZAS' output heading overseas there must be little surprise at the impact it's having.


So what does a business do when its revenues are taking a hit? If it can't make more money, it must cut costs. And when you're a big company - NZAS contributes more than $500 million a year to the regional economy - big cuts are required.

The site has already lost 35 jobs through attrition and had planned to lose a further 65 over five years. That timescale has changed so those jobs will go by November.

To the company's credit, it has made no secret of the trouble it is in and the efforts being made to ensure its survival.

Another big cost is the company's electricity bill - more than $320m annually. It uses about 15 per cent of New Zealand's generated power. So, understandably, Rio Tinto is keen to renegotiate the terms of its electricity contract with Meridian Energy.

No-one expects anyone to take one for the team. But in good times, when demand is high, prices tend to go up. In bad times, perhaps prices need to come down.

It's an interesting issue, particularly when the Government wants to sell Meridian as part of its asset sales programme. It's not going to be resolved over a cup of tea.

What's needed is some bold leadership to ensure a satisfactory outcome for everyone that ensures the survival of the smelter and those jobs.

The Marlborough Express