Janet Wilson is a freelance journalist who until recently worked in public relations, including a stint with the Fletcher Building in 2018 and with the National Party ahead of the 2020 election. She writes a weekly column.
OPINION: If there’s one company that fits Oscar Wilde’s description of a fool as “someone who knows the price of everything and the value of nothing”, it’s Fletcher Building.
After securing a monopolistic 94% share of the plasterboard market, it is now holding the rest of the building and construction industry to ransom with a Gib shortage that has seen builders go bankrupt while waiting for supplies.
What started as a shortage last September has turned into a crisis and is now turning into a meltdown. On Monday, after months of headlines detailing the lack of supply, the Shareholders’ Association and Simplicity KiwiSaver called in an open letter for the resignation of Fletcher Building Chairman Bruce Hassall.
The letter then called for independent reviews of the company’s culture “based more on pride than humility” and its risk assessment process.
The NZSA and Simplicity may be waiting a while, if ever, for this to happen. Sorry has always been the harshest word for your average Fletcher leader, at least publicly. There is no doubt an in-house lawyer lurking in the background, warning of the greater financial liability they will face if they do so.
* GIB and competitive issues of plasterboard
* Is there a gold mine of building materials in your garage?
* Due to shortage, builders are buying the Gib board for six times the retail price on Trade Me
* Home building boom could soon peak due to shortage of materials and workers
* Construction projects come to a halt as overbearing Fletcher freezes Gib’s orders
* ComCom clears Winstone wall panels
On Wednesday, Fletcher’s pride was in action again. Chief executive Ross Taylor told investors the shortage would be “short-term” and the market would return to “equilibrium” by October. He blamed the shortage on last year’s record 50,000 building permits and builder stockpiling.
If anyone could be accused of this, it’s Fletcher Building. Three weeks ago, a builder filmed stacks of Gib panels piled up outside Fletcher Living’s Greenstead development in Lincoln, south-west of Christchurch, in direct violation of what he asked builders to do. Fletcher Living, a subsidiary of Fletcher Building, issued an apology, calling it “an error and miscommunication”.
But it is not only hypocrisy that Fletcher Building can be accused of. There is a bully tactic of a market dominant to consider. Having been aware of a potential shortage since last August and having rationed Gib in February, then demanding that builders not order Gib until it was ready for installation, Fletcher Building had the audacity to subvert builders to researching plasterboard in other markets by dropping specific colors of plasterboard.
His desperation to maintain his dominance in the market caused him not only reputational but also political damage.
Building and Construction Minister Megan Woods stepped in, writing to the company about its brands and convening a task force. With the task force including Naylor Love boss Rick Herd, Registered Master Builders chief David Kelly and Simplicity Living chief executive Shane Brearley – who has been particularly critical as the crisis has deepened – it has the potential to be the disruptor the plasterboard market badly needs.
Crisis experts will tell you that it’s not the crisis that’s the problem for many companies, but how they respond to it that causes the most reputational damage, which could be said for Fletcher Building.
Lacking the risk assessment capability to infer that there would be a shortage until it was upon them, the company escalated the crisis by doing little to address the problem. As builders cried as their projects bogged down, Fletcher Building instituted an “allowance model,” another word for rationing, starting in July.
Additionally, Fletcher’s subsidiary, Winstone Wallboards, will only increase production by 7-8% from July to September, an increase Brearley described as a “drop in the ocean” for industry needs.
This debacle puts the spotlight on the Trade Commission’s draft report on building materials, which is due out in July. A 2014 commission report on Winstone wall panels does not inspire confidence that change will happen soon.
The commission investigated Winstone’s alleged exclusive agreements with merchants, its rebates and its alleged practice of undercutting other vendors, but cleared the subsidiary, finding no violations of trade law.
Since then, more and more competitors have deserted the market, including world leader Knauf and USG Boral, leaving only Elephant Plasterboard, which holds a miniscule 3% of the market.
Aiding and abetting Fletcher Building dominance are advice across the country, risk averse to the leaky building crisis, demanding Gib and not allowing substitutions. Earlier in June, the New Zealand Construction Federation and industry body Branz met with officials from the Department for Business, Innovation and Jobs to allow councils to approve the substitution of foreign products.
And if the changes Fletcher Building is instituting will only increase supply by 10%, as Taylor told investors this week, that suggests the company is happy to dominate the market but not take on the responsibilities that accompanying it, namely ensuring security of supply so that the building industry is not brought to its knees. As it is now.
A little less hubris, a lot more action, would go a long way to restoring confidence in Fletcher Building’s reputation. If it’s not the case ? There could be forced changes as builders buy other plasterboard products that councils will eventually approve.