The future of manufacturing in Australia looks particularly bleak.
General Motors sought an extra $80 million per annum for the seven years from 2016 to 2022, this was in addition to the $40 million promised under the Automotive Transformation Fund and the $275 million over seven years which had already been committed by state and federal governments. This additional $80 million per annum would have resulted in a total of $1.1 billion assistance to Holden over a period of seven years. If the company shut down before 2023, the extra $80 million would have had to be repaid. This request was made at a meeting on the 2October 2013 in Adelaide attended by Federal Industry Minister Ian MacFarlane, South Australian Premier Jay Weatherill and South Australian Manufacturing Minister, Tom Kenyon and Holden Managing Director Mike Devereux.
Meanwhile, Australian components manufacturers, unless they can tap into the replacement parts markets, post Holden, will battle to survive with only Toyota remaining in the country. Alternatively they can try to rise above the cripplingly high Australia dollar and secure export orders. One company that appears to be bucking the overall gloom is Dayco Australia, based in Wagga, NSW. It’s expanding its modest workforce, but is US owned since Precision Parts sold out to the US-based Dayco last September. Also last September, ocally owned Futuris, who successfully supply General Motors and Ford in China and Thailand with car seats and interiors, fell to US private equity company Clearlake Partners. Meanwhile, L & L products, another US owned company has developed a market supplying acoustic insulation to BMW from its Dandenong South factory.
These largely foreign-owned components suppliers are the exception and, according to Richard Reilly, Chief Executive of the Federation of Automotive Parts Manufacturers, most companies in the automotive supply chain can’t afford to spend the necessary time overseas to establish new export market s and will, therefore, be unable to make the necessary transition. Furthermore, the multi-national component makers who are currently in Australia will now be reviewing their operations here. The small number of Australian-based manufacturers who can exploit the export market have already done so and the rest have probably, literally, missed the boat, according to Mr Reilly
Read more: Australian Financial Review, Friday 13 December 2013
Christmas and the New Year can be a time for stocktaking and reflection – a natural pause between our artificial division of time; the calendar year.
For Australia, 2013 has been pretty turbulent, seeing no fewer than three prime ministers, a new federal government which is, after its first 100 days, looking and sounding more like an opposition, and not enjoying the traditional honeymoon period, the waning of the mining boom and the continuing erosion of the country’s manufacturing base. As if to emphasise this litany of negativity, we saw the last sitting week of federal parliament coincide with the Treasurer Joe Hockey and Prime Minister Tony Abbott challenging General Motors to pull out of Australia and the car maker responding by announcing that local manufacturing of Holdens would cease in 2016.
Now, an Aussie icon such as Holden can give rise to a fair amount of emotion but let’s be a bit more rational. Holden were ‘Australian’ in name only; the decisions were always made in Detroit at GM’s global head office. As with so much of the contemporary Australian economy, we are the marionette that dances to the puppet masters in New York, Tokyo, Singapore, London, Paris or even Auckland. The original Adelaide coach makers, Holden and Frost, became Holden Motor Body Builders in 1918 merging with GM early in the 1930s Great Depression. Does anyone stop to consider that if Holden had not merged with GM or Lloyd Hartnett, who left GM Holden as MD, to set up a new Australian motor manufacturer Hartnett, at the behest of Prime Minister Ben Chifley, had been able to raise the necessaries here, we may well have had a truly locally owned car maker headquartered in Australia? It’s a similar story with Toyota. Whether this company stays or closes its Fishermans Bend operations will be ultimately decided not here but at head office in Tokyo. This list goes on; Ford, Mitsubishi, Nissan and, for those of us with longer memories, Nuffield/Leyland who at one stage, like Holden, dominated the local commercial and passenger vehicle market. And this steady, inexorable erosion of local manufacturing is not confined to the motor industry. How often do you hear the lament, “we no longer make anything here?”
And why does this matter? If someone else, somewhere else, can produce the same widget for less, then why would we purchase, normally for considerably more, the local equivalent, assuming you can still do so? There are two very fundamental reasons why Australia needs a strong manufacturing sector with majority local ownership and, hence, control. Firstly, those who can recall the darkest days of WWII may also remember how local factories were placed on a war-footing and, cut off from our traditional great and powerful friends, we switched from consumer products to a vast array of the essential war materials needed by an isolated nation. In the 1940s we had those factories and’, perhaps more importantly, the requisite skilled workforce. Today, the automotive industry is an essential building block for the high-tech skills we would require if any future external crisis disrupted our drip-dependence on foreign manufacturers.
The second reason is that once the manufacturing infrastructure and the attendant skilled workers are lost, they are gone for good. History demonstrates and economics confirm the unlikelihood of large scale manufacturing operations, which can take decades to develop, ever being recreated in this country.
The year also ended with the new Coalition government rejecting the US owned ADMs takeover of Graincorp but smoothing the path for Canadian owned Saputo to swallow-up one of the last remaining dairy co-ops, Warrnambool Cheese & Butter. Even something as basic as canning our own fruit and vegetables is in the hands of two foreign owned companies, Simplot and McCain who nevertheless bleat that, without government assistance, they cannot compete with cheap foreign imports. Meanwhile, in Orange the last domestic whitegoods manufacturer, Swedish owned Electrolux, has announced that its shutting down.
The so-called ‘level playing field’ is economic nonsense and Australia is criminally naive to continue to support such a fiction.
What do you think?
Do you think it matters that Australia no longer makes anything?
Will we and future generations just bumble through by importing everything we need?
Is it ok to say “no” to foreign takeovers of our local companies?
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