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Recent key developments in MAKE│NZ
• Continuing on from last week – a glance at one of our members:
Shamrock was established in March 2000 being the merger of PECO Ltd & Rathgen Tool & Die Ltd.
The first OEM product Shamrock manufactured was a “PECO” Beef Quarter Boning Mechanical Assist Device.
This was for a NZ Abattoir, but it opened up opportunity for this product in the Australian market
In time, Customer feedback displayed that our OEM offering was market matured.
The Company responded by focusing on Contract Manufacturing (CM) whilst looking for new OEM opportunities.
Such OEM opportunity arose when Mace Engineering/Hydroworks ceased trading.
Mace Engineering had been the OEM for a suite of Pumpsets and Hangar Crane fitted to the ANZAC Frigates.
Shamrock took over this role thereby giving us entry to the Australasian Defence Sector and being a NATO registered (NCAGE) OEM supplier.
Leveraging off this has facilitated Shamrock now being an OEM &/or CM supplier to an Australasian Defence Sector “Prime” and an approved CM supplier to two other Primes, one of which has promise of significant new business from 2025.
Today, together with the Australasian Defence Sector, Shamrock has significant CM partnership in the Aviation Industry and is active in the Aerospace Sector, Medical Industry, “Hi-Tech” Manufacturing and supporting commercialisation of cutting edge innovation within NZ.
-Pat Foggarty, Managing Director of Shamrock Industries
• As mentioned last week, after a lot of work, including liaising with other business organisations, we have finally completed and submitted our response to the government’s consultation document on the proposed – yet another – Reform of New Zealand’s Vocational Education and Training System. You can access the document here, but in summary our comments were:
– First, and foremost, the proposal did not address, or suggest any changes to, the situation regarding the delivery of micro-credentials for those in work already: completely insufficient funding support, and administrative obstacles that almost completely block the delivery
– The document appears to primarily be aimed at reducing the government’s support for the Polytechs. To achieve that, it proposes to move funding from supporting work-based learning (apprenticeships) to support for the Polytechs, for example
– The proposed solution would – in all likelihood – shift the emphasis more towards online delivery of the actual Polytech courses, something we don’t approve of
– There are two proposals for the future delivery of work-based learning and associated issues. Neither of them is presented in enough detail to provide sensible feedback, but on what is in the proposal at least, neither of them would work (well) for manufacturing.
• Myth of the Month: “Myth” (/mɪθ/) – “a widely held but false belief or idea”
Every now and then (but not every month) we’ll comment on something that could / should be considered a myth. Such as “New Zealand’s is an agricultural economy”, or, as our PM put it many times, and many before him: “There is nothing more important than agriculture to our future” (interview on The Country, 7/8/2024). What is the basis for such statements? Normally, one looks at the contribution different parts of the economy make to a country’s overall wealth creation, measured as its Gross Domestic Product, or GDP (I realise some people don’t like this measure, but until someone comes up with a better approximation for how long it will take a person on a median income to get their cancer treated …) We’d call Saudi Arabia an ‘oil country’, because 42% of its GDP comes from the petroleum sector. And in New Zealand?
New Zealand’s is a real-estate economy; that sector contributes almost exactly twice as much to our economy as agriculture and the processing of its products together. When it comes to the Tradable Sector, and exports, agriculture and its products are indeed our most important contributor, but that tradeable sector is a much smaller part of our economy than most people think. However that’s a myth for another month …
But – aren’t we just like other countries with this picture? Well, if we go back to the country we looked at last week …
Recent key developments in New Zealand
• A country’s Current Account Balance is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). These balances vary quite a bit within years, and between years, depending on trade flows, but New Zealand has been a ‘bottom dweller’ for the last two decades, always in the red to varying degrees. Does it matter? Not necessarily, as long as things don’t get worse, but in a recent comment David Foo, a director at S&P Global and responsible for S&P’s New Zealand credit rating, expressed concerns: “New Zealand’s current account deficit must narrow further … if it doesn’t, that’s going to be probably a downside trigger for the rating.” He expressed concerns especially about the rising debt levels of local government “So New Zealand is running a very large current account deficit by international comparison… In layman’s terms, New Zealand is living beyond its means, and it’s having to borrow a lot from external, offshore investors.”
It is time, ladies and gentlemen, that we contribute to fixing this by increasing the exports of high-value manufactured goods. Wouldn’t it be nice if we got a bit more support and recognition for that?
Recent key developments in the World
• The question whether manufacturing companies are better off being run by engineers, or by accountants, is a matter of debate where probably everyone has an opinion. The issue has come to the fore again recently because of two rather prominent examples of manufacturing companies – and really big ones at that – experiencing a rather sharp decline
Remember “If it’s not a Boeing, I’m not going”, or when ‘INTEL Inside’ used to sell laptops?
Apart from those that don’t have a choice anymore, there are two people up in the air who might pick a different brand for space travel next time, and Boeing is in sharp decline – by reputation, sales and share price. An FAA audit after the January 2024 door plug blowout on a 737-9 MAX, revealed that Boeing failed 33 out of 89 product audits conducted by the FAA regarding the manufacturing of its aircraft, and in May 2024 the FAA announced an investigation after Boeing reported that it may not have completed required inspections on electrical safeguards of bonding and grounding where wings join the fuselage on certain 787 Dreamliner airplanes. In July 2024 Boeing agreed to plead guilty to a criminal fraud conspiracy charge and pay a fine of $243.6 million to resolve a U.S. Justice Department investigation into two 737 MAX fatal crashes in Indonesia and Ethiopia over a five-month period in 2018 and 2019 that killed 346 people.
And last Friday about 33,000 union members at Boeing in Washington State walked off the job last Friday after they overwhelmingly rejected a proposed four-year contract with the troubled aircraft manufacturer. The strike, the first at the company in 16 years, will virtually stop commercial airplane production.
Going through all the reasons for this development would go far beyond the scope here, but, getting back to the original question, just a couple of quotes:
“When people say I changed the culture of Boeing, that was the intent, so it’s run like a business rather than a great engineering firm.” -Harry Stonecipher, former CEO and President of Boeing between 1997 and 2005. Interestingly enough, Stonecipher is not an accountant by training – he’s a physics B.Sc.
“Those who cared too much about the integrity of the planes and not enough about the stock price were “phenomenally talented assholes”” – James McNerney, CEO of Boeing between 2005 and 2015 – a BA graduate with a ‘classic’ career – Harvard Business School MBA, McKinsey management consultant …
Fun fact – both of them come from the famous Jack Welsh school of management at General Electric.
For those wishing to dig a bit deeper: https://www.theatlantic.com/ideas/archive/2019/11/how-boeing-lost-its-bearings/602188/
Intel Inside– it used to be the name that came to mind when we thought about ‘chips’. Now the company’s total share value is less than its net asset backing.
What happened? Again, a detailed analysis of the root causes behind this decline is out of scope here. A quote from a recent article in the Economist “He [Pat Gelsinger] was brought back in 2021 to get the company back on track after a string of beancounter-bosses failed to spot big changes reshaping the industry.” Examples are not offering chips for the growing market in mobile phones, insisting on manufacturing its own semiconductors when ‘fabless’ competitors like AMD and Nvidia outsourced production to the likes of TSMC, but at the same time failing to keep up with the likes of TSMC in terms of its manufacturing technology.
Mr Gelsinger’s recovery plan was to split the company into two – a design studio and Intel Foundry Services [IFS], with the latter still being the major breadwinner. Whether IFS will be able to make up for lost ground in terms of manufacturing technology skills for the latter to succeed is still in doubt, at least in the eyes of investors. What should not be in doubt are Pat Gelsinger’s skills when it comes to securing government subsidies with the promise to “bring chips manufacturing back home” to the US – $8.5 billion in direct funding to Intel for expanding production in its four US manufacturing sites under the US CHIPS and Science Act. Intel is also eligible for up to $11 billion in low-interest federal loans and expects to benefit from a U.S. Treasury Department Investment Tax Credit (ITC) of up to 25% on more than $100 billion in qualified capital investments. And the German government is co-funding Intel’s plans to set up two semiconductor plants in Germany to the tune of € 10bn. Whether the company will be able to actually realise all of these investments is another question. For the record, Mr Gelsinger earned a master’s degree graduate in electrical engineering and computer science from Stanford University.
It used to be that in the UK and North America, the prevailing view was that a gifted leader can succeed in running a company in any sector, whereas on the European continent, and in Germany in particular, you couldn’t run a car company if you weren’t a Dr Ing (Doctorate of Engineering). We couldn’t find any rigorous analysis of the question whether a manufacturing company is more likely to succeed with an engineer at the helm, and the underlying complexity of the factors determining the success or failure of am manufacturing business probably makes this an untestable hypothesis anyway.
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