More than 200 employees of council-owned infrastructure company Infracon will only be paid up to next Wednesday as the central Hawke's Bay company is placed in liquidation.
The roading contractor owned by Tararua and Central Hawke's Bay District councils has lost $7.5 million over five years, and its bank pulled funding two weeks ago, interim chairman Roly Ellis who is mayor of Tararua, said.
Infracon bid $2 million below others in a tender for work four years ago, it has old machinery and its generous employment agreements make its labour costs 15 per cent higher than competitors, he told Radio New Zealand.
The company had to be placed in liquidation because it would be trading while insolvent.
The councils say in a statement at least 210 employees will be affected in Hastings, Waipukurau, Dannevirke, Woodville and Palmerston North.
"Advice to the shareholders from the interim Infracon board indicate that the long term prospects for Infracon remain extremely difficult and forecasts indicate continuing losses for the next two years," the councils say.
Attempts were made to restructure the company after the bank withdrew support but they were not successful.
Staff will be paid until next Wednesday and it will be up to the liquidator what happens after that, Mr Ellis said.
The court process for liquidation is expected to take about two days and the council will talk to the liquidator after that.
The councils are also trying to maintain essential services in their region.
The company fixes roads, lays pipes, protects rivers and prepares new subdivisions.
source: newshub archive