Fears job losses will stem from Fletcher Building's fall

by RNZ / 15 February, 2018

$600m in losses will see Fletcher Building focus solely on the 16 big projects left on its books. Photo / Getty Images

Fletcher Building's losses could have wide-ranging implications for the industry.

Unions fear Fletcher Building's decision to quit bidding for big new construction projects will mean job losses, and say using subcontractors is a big part of the company's downfall.

The country's biggest construction company announced yesterday it would stop bidding for any new work and would focus solely on completing the 16 large projects still on its books.

It made the decision after a review showed it was expecting $660 million in losses at its building and interiors division, about $500m more than previously thought.

E tū union said it had not heard from Fletcher Building yet about the jobs of the roughly 120 members it has at the company, but it fears the worst.

Its industry coordinator for construction, Ron Angel, said everybody knew things were bad at the company's building and interiors division but nobody thought they were this bad.

"We're just absolutely gobsmacked that they're not taking on any new work. I mean, they're an iconic New Zealand company, they built half of New Zealand when you think about it."

An unknown number of union members working as sub-contractors could also end up out of work as a consequence of the company pulling out of bidding for any new work, he said.

The sheer number of sub-contractors used by the company was a major part of the reason it is forecast to lose $660 million from the projects currently on its books - including Auckland's convention centre, Mr Angel said.

"They've lost control of the projects they were building when in the past they would be their employees, their project managers and they would only bring in sub-trades to do specific work like the roofing.

"But what they've been doing is bringing in sub-trades for everything and our members have been in a situation where they've been going around and most of their work is fixing up the work of the sub-trades unfortunately."

'People keep telling me it's that top level where they're struggling to get good people'

One of the union organisers, who had the job of talking to members on Wednesday about what their futures might hold, was Paul Johnston.

He is based in Christchurch, where Fletcher Building lost $156m on the new Justice and Emergency Services Precinct due to what it now admits was incompetence.

"The plans would come in, they'd do the work, then a week later they'd change it. They would get a different variation from the architect and some of that work had to be pulled down and rebuilt."

Mr Johnston, who has spent 30 years working in the sector, said there was a shortage of people in top positions with a background in construction.

"People keep telling me it's that top level where they're struggling to get good people. They haven't been in the trade, they might have come out of university or doing a course or whatever, but they're not actually tradesmen themselves, they haven't worked up through from the bottom."

Workers will be redeployed - Fletcher chief executive

Fletcher Building's chief executive Ross Taylor told Morning Report Fletchers has been a net employer which meant the company's overheads had been going up.

For example, the Auckland Convention Centre team had increased from 60 to 120 in the last month.

People would be redeployed into other Fletchers' projects or into other parts of the construction business as the projects ended, Mr Taylor said.

"As the projects finish, we're very busy across our other construction divisions where we do big infrastructure projects or roading projects through Higgens or work through the South Pacific, and therefore we've got the same issue there so we need people."

Mr Taylor said currently the contract conditions imposed by clients were very onerous and the expected margins did not reflect that.

There were a number of reasons for Fletcher's current situation, Mr Taylor said.

"Part of it is the contractual terms, part of it is the margins were very low, part of it was we took on a whole lot of large projects very quickly and didn't have the size of teams we needed to manage all that effectively.

"And another part of it was the contracts changed from just building it to design and build and we didn't have the skills the design to our budget."

Govt partly to blame - Building Industry Federation

The Building Industry Federation, which represents the makers of building materials, said the government had to take some of the blame for requiring the company to take on all of the risks associated with getting large buildings completed such as increasing labour costs and expensive design changes.

"If I walk away, my competitor will get the job. Now in this case where perhaps there was a tendency to go for every project that was available in New Zealand, the difficulty becomes that you become a little bit hostage to the procurement system," its spokesperson Bruce Kohn said.

With Fletchers now out of the picture, there were no New Zealand-based companies with the scale needed to take on large infrastructure projects here, meaning the search for contractors would have to head overseas, he said.

E tū will be meeting with Fletchers management next week to discuss the job prospects for its members once the company completes its current projects.

This article was originally published by RNZ.

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