More on bailouts

Fran O'Sullivan seems quite impressed with John 's willingness to consider bailing out F&P:

Key's activist approach is a far cry from the ministerial style used by some of his predecessors like (Labour) and Jim Bolger (National) when they were confronted with the prospect of major Government hand-holding operations and bailouts during the fag-end of the 1980s and early 1990s.

It would be hard to imagine either Lange or Bolger lapsing into banker-speak as Key did at his press conference when he precisely defined the impact of mark-to-market rules which had resulted in F&P's recorded debt blowing out to 43 per cent in January in response to exchange rate movements. Net debt is now forecast to reach $570 million.

It's true Key is very smart on issues of finance, but any intervention will set a precedent that we might regret one day.

I tend to agree with the Dominion Post editorial:

Prime Minister John Key should think very carefully before he acts on his inclination to use taxpayers' money to help Fisher & Paykel Appliances, The Dominion Post writes. There is a real it would be the first step on a very slippery slope.

And Fisher & Paykel executives should, if the offer is made, think very carefully about accepting it taking the Government's shilling inevitably means allowing politicians into your business.

And this is a real issue for F&P. you accept some Govt money, but you still need to cut some . However you know cutting jobs will make the Govt look bad, and they did bail you out. So then you don't cut any jobs and you need a further bailout, or you go broke. Govt money always come with strings. Do you want the Govt (as in the US) telling you how much you can pay your top management?

Fisher & Paykel has not gone to the Government for help, but Mr Key is clearly contemplating using public money to help it out as a last resort. The advantage of that is it stops the company being held to ransom by financiers taking advantage of the recession to offer unreasonable terms. The danger is in deciding where to draw the line. If it is justified to use public money to save 1600 jobs, what about 1000 jobs, or 100?

And think of the from any company you decide not to bailout.

Mr Key should not close off any options, but picking which firms deserve taxpayers' money should be very low on his list. He should look first at further moves that would make life easier for all businesses by reducing their costs, and removing red-tape barriers.

New Zealand politicians have a sorry record when it comes to picking winners. There is no reason to suspect they would do any better at picking survivors.

Very well said.

In the Herald, they report support for a bailout from EPMU's Andrew Little and opposition from the NZ Manufacturers and Exporters Association.

Will the EPMU now seek to join the new ? 🙂

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