Give grants for growth
Cash for research and development is money well spent, writes Rod Oram.
THE GOVERNMENT is absolutely right to help fund research and development by Core Builders Composites. A world leader in advanced materials technology, the Warkworth company is already bringing benefits to local boat builders and other users.
Yet various critics have slammed its support. Giving money to a company owned by Larry Ellison, a very wealthy American, ‘‘is playing a sick joke on the public,’’ says Jordan Williams, executive director of the Taxpayers’ Union. It is ‘‘corporate welfare’’.
‘‘If I worked for that company, I would be feeling really embarrassed now and I’d be thinking about giving the money back,’’ says Labour MP Trevor Mallard.
Worse for some people, the government is ‘‘supporting the enemy’’, since the company built the Oracle Team USA boat that beat Team New Zealand to win the 2013 America’s Cup.
All these critics, though, are ignorant of the vital role Core Builders is playing in our economy, and the crucial role government funding plays in R&D worldwide.
Three reasons why companies get taxpayer support for R&D are: Some challenging technologies can take a lot of time and money before they’re commercially viable; small companies can need help to master complex technologies; and R&D is often a key to competitive success so governments compete to bolster their local companies.
The need for government help is particularly acute here. Even our largest companies are small by international standards. They struggle to fund enough R&D to be competitive. Even with the current levels of government support, NZ business expenditure on R&D is far below the OECD average.
The economic benefits of government spending on R&D are well proven here and worldwide.
The support for Core Builders’ R&D is particularly important to New Zealand for two main reasons: To help our boat builders keep up with their competition on materials and manufacturing technology; and to help spread that technology widely across the economy.
Composite materials are light, strong, long-lasting, virtually maintenance-free and economic. Worldwide, their use is expanding rapidly in aircraft, cars, bridges and other infrastructure, buildings, energy projects and in other fields.
Core Builders is already making, for example, composite platforms for rotary milking sheds. They’re longer lasting, and corrosion and wear resistant, compared with concrete and steel platforms.
Once our boat builders were leaders. In the mid-80s Richard Downs-Honey developed the technology to make the first America’s Cup boats from composite materials. Designed by Bruce Farr, the most famous was KZ 1, the Big Boat, which lost to Dennis Conner’s catamaran Stars & Stripes at San Diego in 1988. For 20 years Downs-Honey remained at the forefront of materials technology. But ultimately, scale and resilience proved elusive for his company, High Modulus.
Today, our superyacht builders have an even more fundamental problem. While they are held in high esteem worldwide for their quality work, they are too labour intensive and thus expensive. They are struggling to get orders.
Their biggest black hole is the way they largely hand-make the moulds on which they form composite materials to create hulls and superstructures – slow and expensive work, particularly since each yacht is custom designed.
Core Builders, however, is a world leader in digital design and manufacture of those moulds using novel materials.
In 2012 it got an NZ Trade & Enterprise grant of $435,631 to help it buy a large dimension computercontrolled machining centre to make moulds and components.
The Callaghan Innovation Growth Grant, which has triggered such outrage, will reimburse up to 20 per cent of its R&D spend over the next three years. Much of that will be focused on the new materials and processes. This is for the benefit of all boat builders in New Zealand. By making moulds this way for them, Core Builders will be helping them to take a big technological and economic leap.
The company shares opportunities in other ways too. It developed the AC45 catamarans for the precursor racing series leading up to the 2013 America’s Cup, sharing the boat building work among a number of Auckland companies.
The next America’s Cup will have a standardised hull design, with the teams competing instead on design and technology of the foils, steering systems and wingsail controls. Core Builders is heavily involved in the hull design. It expects to build boats and wingsails for a number of teams, and again spread the work around locally.
Tim Smyth and Mark Turner, two Kiwi boat builders, founded the company in California in 2001. They have built all Ellison’s racing yachts since, and he bought the company. In 2010, Smyth and Turner moved the company to Warkworth, having persuaded Ellison and his America’s Cup team leaders – first Chris Dickson then Russell Coutts – of the economic and practical benefits of doing so.
Ellison has invested heavily. In return it has exported some $30 million of boats and equipment since it moved here five years ago. It expects to export a $20m more over the next 18 months.
This is a company very worthy of government support, for the benefits it is bringing to its sector and the wider economy.
The need for government help is particularly acute here.