Over the next few weeks I will cover some of the publicly owned companies which I had a part in, and what they achieved. I believe passionately in a hand’s-up economy. Where a good idea isn’t happening without state, or Local Government, intervention I always believe in taking that move after proper consideration. I also believe in public ownership of monopolies. If you disagree with this, then stop reading right away. I would recommend that you focus on Google or Facebook and see how your views in an untrammelled economy really go and who soaks up the profits.
This week I will write my memories about one public venture and the role played by the Christchurch City Council, and the organisations within its orbit.
The Pratt & Whitney Engine Centre:
I came into Local Government after working in Economic Development for a decade. I had worked with many Council’s around New Zealand and was excited to finally be at the decision makers table. When I was elected, I was appointed to the Board of the Canterbury Development Corporation, the then economic development vehicle of the City Council. I stayed on this Board until I left elected office.
As a City Councillor I learned what levers were available in Christchurch to support economic development and who were the business movers and shakers in the City. Peter Townsend was the CEO of CDC when I arrived and when he left to join the Canterbury Employers Chamber of Commerce, Chris Pickrill took his place. Chris was brilliant and surrounded himself with an incredible team. He was to stay throughout my time at CCC.
One day after I had become the Mayor, I was approached by Chris who said that the boss of the engine centre at Air New Zealand (ANZ) wanted to see me. Chris, Larry Podmore and I visited him and he told us that he could lose his job for what he was to tell us. But he didn’t care. He said that ANZ were planning to close the engine centre in Christchurch and shift it to Auckland. It was largely being driven by the commercial fact that they were rebuilding engines which would soon be outdated. He had started as an apprentice at 15 and his loyalty was to this City, and not ANZ and he was convinced that we needed to do something as a City to address this potential major setback.
We had a series of meetings deliberating over what was a new generation engine which the centre could rebuild. We settled on the Pratt & Whitney (P & W) V2500 engine. I can’t recall how things were managed at ANZ but we started talking to P&W and discussing their opening a joint venture in Christchurch. In 2001 we were making good progress when 9/11 occurred.
We put the plans on hold and waited. A couple of years later we took them out of the bottom drawer and started the project again. To say that ANZ were dragged to the table would understate things somewhat. Ralph Norris was their CEO at the time and I suspect that having everything in Auckland was firmly on his radar. When I look back now it really was amazing what happened next.
A new centre business was created. The next bit was identifying customers. The key player in finding customers was Jim Bulger, NZ Ambassador in USA at the time. Jim was our best salesperson and he worked diligently and convinced FedEx to entrust their engine rebuilds to this centre.
An engine was sent to the engine centre for rebuilding as a pilot. As it was being tested after the rebuild it blew up in a spectacular manner. This was hardly a great start to the venture!
With a good long-term customer signed up it was agreed at Christchurch City Holdings Ltd (CCHL) that the City would construct a new building for the joint venture which had been formed between P & W and ANZ. This investment by the City cost $30m. The tenant paid a commercial rent on this building and it opened in 2005.
With the building constructed and customers sending their engines to Christchurch the future seemed rosy for the City. CCHL got its rent monthly and everything seemed good. Hundreds of very highly paid engineers were beavering away at the engine centre. The airport company, which the City owned 75% of had a valuable tenant.
However, one morning, years later, I was told there was a very angry American on the phone for me. It turned out to be Ed De Santo, one of the bosses of P & W. He said that they were thinking of closing the Christchurch Centre because the staff were on a go-slow, and had declined the pay increase they had been offered. They were sick of the industrial action and he informed me that the Christchurch Centre was a small deal on their balance sheet, and that closing it would not worry them.
I said I had no idea what he was talking about, but asked him to give me time to check up. It was Thursday and I knew where the engineers drank on pay night so I went down to their pub and asked what was wrong. A summary of what they said, being polite, was that their boss was a cloth-eared arsole. They made suggestions of how they could do things better and he would say “at P & W we do it this way” and not listen. They had got so sick of him blocking their ideas and insisting that they did things the way that they had always done at P & W. I was told quite clearly that they were all against him and the industrial actions they were taking was their only way of getting their message across.
I rang Ed up and asked if he could come out to NZ the following week. He agreed to come the following Thursday. I then went and met the secretary of the Engineers Union and asked if he could line up two job delegates for me to talk to the following Monday. I met with these delegates and then rang and reported to Ed that I had never met better union people in my life. They were passionate engineers. They had very clear views on how the business could be more efficient, and make more money. They just weren’t being listened to.
I knew Ed was a Democrat and that he hated that Bush had taken them into a war which he thought was unnecessary. I said that I wanted him to think on the plane on the way out here about what happened to Americans who tried to impose their wishes on people who didn’t want their assistance.
On the Thursday morning I picked Ed up at his hotel at 7.30 am. We went to my office. I had lined up ANZ bosses from Auckland (who had been pathetic in my planning leading up to this meeting), union officials, CDC CEO, CCC CEO, bosses from the engine centre, and Ed. The meeting was pretty difficult for quite a period. Ed is of Irish/Italian pretty fiery stock, and so didn’t hold back. Neither did the union officials. Once the issues were laid out on the table, we dealt with them one at a time.
As a result, eventually it stopped being a litany of the deaf with those present talking past each other. People started to listen to each other and the issues became quite clear. They started working on solutions together. What was decided by the end of the meeting was:
- P & W agreed to shift their manager back to USA, and replace him with somebody who would be committed to working with kiwis;
- P & W agreed to supply $2m more capital;
- ANZ also agreed to supply $2m more capital;
- The union agreed that they would go back to their members and say that they Mayor had asked them to accept the pay offer which had been made to them.
I dropped Ed off at his hotel at 11.30pm. It was a long, but well worth-it day for the City and everybody involved.
In the next week all the elements of the agreement were honoured. P & W sent an amazing Scotsman to lead the site, and things settled down brilliantly. Six months later P & W took on 50 new staff.
It’s now one of the most profitable engine centres for P & W in the world. The company purchased the buildings off CCHL, and recently in the local Business Awards the P & W Engine Centre won a major award. I believe their turnover in the next year will be $1b and they are taking on 100 more, highly paid, staff.
It just shows if Local Government owns a large portfolio with the desire to take risks, and takes them, what can come of it. All it required was somebody to step out of line because he loves this City; an economic development agency which is tuned into future potential business growth in the City; and people to work together and support each other and look what happens. I have always believed in joined up Government. All it needs is people to all work together and leave their egos at the door.
Well done everybody! What’s our next opportunity?