Ken Phillips on the car industry

The article – filched from Crikey! is over the fold.

Have no doubt, further plant closures in Australias car parts manufacturing industry are much closer than anyone thinks. The rapid escalation of the Australian dollar has created a price competitive crisis. But theres more to the equation than just the exchange rate. The industry has largely given up on itself.
Over the last few years Australian car parts manufacturers have established plants in Asia designed to directly compete with their Australian operations. The plants have excess capacity and can supply Australia without delay.

Its well known in the industry that two of the domestic car companies are demanding they be supplied from these Asian plants.

The failure to progress labour reform through the industry to the extent needed to be internationally competitive is the big reason why industry strategies are against Australia. Car manufacturing mangers do not believe they can achieve the cultural workforce changes that could take the industry into a new future.
The industry workforce is skilled but heavily weighted toward post war baby boomers waiting for retirement packages. Industry restructuring is glacial because industrial agreements take too long to adapt and have incredibly expensive redundancy arrangements.

Governments in the car manufacturing states know these facts as do senior union officials. But no-one dares speak publicly and no-one can see how to break from the downward spiral.

This should not be the case. The Asia supply equation is changing. China is experiencing wage pressures. Skills shortages are appearing. Quality can be inconsistent. Shipping and additional stock holding costs result in marginal cost differences between Asian and domestically sourced car parts.
The Australian industry should have a future. But local manufacturers must achieve labour reform of a scale that occurred in the mining sector in the 1980-90s. State governments and unions have to allow this to happen.

This entry was posted in Economics and public policy. Bookmark the permalink.
Notify of
Newest Most Voted
Inline Feedbacks
View all comments
derrida derider
derrida derider
14 years ago

“Labour reform” – pah! Code for cutting wages. Of course if we did that then in the very next breath they’ll be asking for government subsidies to overcome “skill shortages” – ie no one wanting to work for those wages.

If Australian car manufacturing can’t compete except by paying below-market wages then they should close so that people can go do something more profitable. Once again we have poor managers blaming their tools – the production workers – for their own lack of foresight. Did they think the dollar was going to stay at 60 cents, and oil at $20 a barrel, for ever?

14 years ago

So where are the leaders – political, industrial or otherwise – to rationally analyse the situation, working to gain the confidence of all concerned parties to come up with reasonable solutions to their problems. Retool, retrain, renegotiate workforce transition in a fair and compensated manner with financial assistance from governments. Just fix it. What is there to lose? Oh yeah, the car industry.

Anyone familiar with the state of heavy industry at the outbreak of WWII? At least we had some, but it took a long time to gear it up sufficiently to meet the demand required by the war effort. Australia has to maintain some investment, public included, in the car industry. Who’s to say when it might be necessary, not just convenient? While our Hornets are running out of fuel and crashing into the ocean, we can eagerly await our next shipping import of vehicles to use by troops fending off the invading hordes.

14 years ago

Don’t worry, it’ll all be fixed when our carmakers are signed on to Kyoto emission targets and the Asian ones aren’t. People will want to buy green cars, not those awful, globally warmed ones. You just sort these problems out with sensible Industry Policy, when the individuals involved can’t see the big picture clearly like bureaucrats and mandarins or mandarin speakers.

14 years ago

All very well to claim that politicians and union officials know what needs to be done, however only the vehicle manufacturers themselves are in a position to re-shape their own employment culture. If there really are a plethora of baby-boomers simply waiting for retirement packages – something I find hard to believe, being a tailend boomer myself – then perhaps the big four need to gather up their gonads in both hands and give it to them.