Is the glass half empty or half full for Australia’s ailing automotive industry?
Workplace Editor for The Age
Marc Newson designs beautiful tableware. He’s done a fine dining range for Noritake, drinking glasses for Iittala, a salt-and-pepper set for Alessi.
What does that have to do with Australia’s $5 billion car manufacturing industry?
To find out, take a drive down Warrigal Road, to an unassuming service road and an anonymous brown-brick factory in Moorabbin, next door to a used car lot.
Robert Wilson’s Victorian company Palm Products has been reducing its reliance on the car industry. It now also makes designer drinking glasses. Photo: Angela Wylie
Here, since he bought the business more than two decades ago, Robert Wilson has perfected the manufacturing of high-quality car instrument lenses, brake parts, and many small mouldings.
Today, coming out of similar state-of-the-art machinery as the engine pulleys for Ford’s Falcon and Territory models, you will also find unbreakable tableware – designed by Marc Newson.
It’s a success story for a small company – and it could signal the way forward for the other 2600 Australian manufacturers who currently supply parts to the ailing local car industry.
Ford has already announced it will stop building cars at Broadmeadows and Geelong in three years. If Holden and Toyota follow suit, which is looking increasingly likely, the car makers will take with them 12,000 jobs directly – and threaten another 33,000 jobs among their suppliers.
On Friday, Prime Minister Tony Abbott responded to reports that Holden had already decided to quit, calling on the company to clarify its intentions. ”At the moment they have got everyone on tenterhooks,” he said.
When Robert Wilson bought Palm Products in 1990 it made plastic parts for Australia’s heavily protected car industry. Guarded by high tariffs, there was certainty an automotive industry would be here forever.
His firm originally concentrated on making dashboard instrument panels and electrical componentry casing. But Wilson always hoped to branch out into consumer products.
Wilson saw a decade ago, when prices of imported vehicles started tumbling thanks to tariff reductions and a rising dollar, that signs were ominous for the local car industry, and, accordingly, for the thousands of small component makers.
He realised branching out was essential for survival and launched headlong into a plastic drinkware range, using the expertise he had in making plastics for cars.
Today less than half his work is auto plastic moulding; another quarter is parts for water heaters, gas meters and doors and the remainder is a growing line of consumer products, such as his Marc Newson range available in David Jones, and some more affordable homewares that sell in Coles and Big W.
He appeared this week before a Productivity Commission inquiry into Australian car making, whose initial findings, due in a fortnight, will help determine whether Australia will continue to make cars.
Wilson and others argued the existence of a car industry gave them a base to develop other products. They argued passionately, because they face an increasingly uncertain future. ”Once this industry is lost it is unlikely to ever return,” Wilson told the inquiry this week.
For the inquiry, and the government, the crucial question will be whether propping up the industry is worth continuing: is the $1 billion-plus in combined assistance taxpayers hand the motor vehicle industry each year a worthwhile investment?
The money shovelled into the auto industry over the past decade is indeed enormous: Holden got more than $2 billion in direct payments; Ford more than $1 billion.
These vast sums of money have made Australia one of just 13 countries on the planet capable of taking a car from the concept stage to the showroom floor. Automotive parts makers argue this assistance is tiny in comparison to that in other countries. Sweden’s government, for instance, gives manufacturers $US330 ($365) per citizen, America $US260, France $US150 and Canada $US100. By comparison, Australia gave car makers $US18 per person.
Manufacturers argue the industry has massive spillover benefits, providing skills to the aerospace, defence and mining sectors, and as a conduit to new technology. In recent years this has included carbon fibre and 3D printing.
Debate around the future of the nation’s automotive industry has bubbled away since the 1970s, when the first reductions began on the high taxes applied to foreign vehicles.
Back then, the industry was booming: in 1974, half-a-million cars were made in Australia, at a time when virtually all cars on the road were made here. In the 1980s under industry minister John Button’s car plan, tariffs were slashed and other forms of protectionism reduced.
It paved the way for an influx of cars manufactured overseas. A proliferation of brands and more than 300 models now gives us more choice than the US.
By the turn of the century, of 800,000 cars sold a year, half were made in Australia. Today, of the 1.1 million new cars sold annually, only 220,000 are made locally.
In opposition, Tony Abbott’s industry spokeswoman was Sophie Mirabella. She and Abbott pledged to cut $500 million from the car industry’s key funding program, the Automotive Transformation Scheme.
Few foresaw Mirabella’s defeat, but her decline made way for Ian Macfarlane, industry minister under John Howard, who is more supportive of continuing the current level of funding. He appears to have had little success convincing Finance Minister Mathias Cormann or Treasurer Joe Hockey that there should be any consideration of reversing Abbott’s pre-election promises. On Friday, Abbott held firm to that promise.
Victorian Premier Denis Napthine has also weighed in this week, his government arguing strongly to the Productivity Commission the federal government must not cut funding for at least a decade.
A third of automotive parts makers are in Victoria.
Victoria warned Canberra not to underestimate the effect of the industry’s departure, which would cause major job losses, particularly damaging to outer-metropolitan and regional communities.
And the cost of these job losses would be borne by the Commonwealth.
Victoria would feel the car industry’s departure hardest, as it has 25,000 of the nation’s 45,000 associated jobs.
Bob Graziano, chief of Ford Australia, is American and knows better than anyone how competitive Australia’s car market is.
He has worked in South America, Africa and China too, and says Australia is the most fragmented he’s experienced. Graziano says the importance of a country being able to make a car independently is crucial, because there are flow-on benefits to other technological industries.
All three car makers argue taxpayer funding of the automotive industry in Australia is relatively minor by international standards – and returns huge dividends for the business and jobs it creates.
Both Toyota and Holden this week told the Productivity Commission the money they spent in Australia would simply be shifted overseas if it was not spent here. Toyota said for every $1 of public funding it got, the company spent $20 more.
Locally made cars also, despite constant claims that no one wants to buy them, remain among the best selling in the nation. The Australian-made Holden Commodore, Toyota Camry and Holden Cruze are in the top 10 (Toyota Corolla, Mazda 3, Toyota Hilux and the Hyundai i30 are the top four cars; these are imported).
Industrial agreements between the car makers and their workforces have long been a sticking point for the companies; Holden threatened to leave Australia unless its workers agreed to downgrade their employment conditions, while Toyota is going through a similar process.
The head of the union representing car workers, Dave Smith, was among a slew of industry players this week to warn the Productivity Commission of what the reality for thousands of auto workers would be if their stable, well-paid jobs went. ”Sitting around the house waiting for the telephone to ring at 6pm that night, waiting to find out if they have work the next day,” Smith said. The departure of Australian car makers would ensure massive unemployment, he said.
For parts maker Robert Wilson, the possibility of the car industry’s demise would not, he believes, end his company. But he would employ fewer people. And many other parts suppliers would immediately sink.
Recently, Wilson came back from marketing his Marc Newson range in Europe, where he hopes he’ll be selling more in 18 months than he does in Australia.
Wilson too asked in his presentation to the Productivity Commission whether Australia needed an auto industry. ”Ask any knowledgeable person, in any comparable country, they would say ‘Of course’,” he said. Ask the same person whether to shut down Holden or Toyota by cutting funding? ”They would shake their head.”