End of an era

By KELVIN DAVIS

(Kelvin Davis is the director of Greymouse, a cloud service-provider that supplies high quality, time-bound and cost-efficient services through its own facility in Fiji.)

Following confirmations that Holden will cease production after more than 60 years, the Australian car industry is all but dead. Given the long and proud history of building cars in Australia, this is indeed a truly difficult day for all workers at Holden and the Australian car manufacturing as a whole.
As painful as it is to say, building cars in Australia and exporting around the world, is just not sustainable.

http://tinyurl.com/news-holden-cars-loss-of-jobs

Out in the Cold
As thousands of workers in the car manufacturing will be left “out in the cold”, there is no conspiracy theory because the Australian car manufacturing sector had become so small, it has caused each company to rely on the other for survival.
The collapse of Ford, Holden and now Toyota was inevitable as all three announced their shut down within nine months of each other.

http://tinyurl.com/news-why-car-toyota-conked-out

Writing Long been on the Wall
- The industry has been transitioning for a while; it’s just that the pace of the transition became faster than people anticipated.
- Managing Director for Harrington Industries recently completed work on a new plant in Thailand as they have tried to work around the fact that they already knew the Australian auto industry was very vulnerable.
- Car parts maker MTM Pty Ltd also looking overseas, since Australia’s last recession in 1992. This supplier needed to reduce its reliance on local automakers and the boom/bust cycle they were enduring even back then.

http://tinyurl.com/smh-vulnerable-wall-car

Production Figures
As revealed in the report by Allen Consulting Group, commissioned by the Federal Chamber of Automotive Industries, the weakness of the industry’s position is stark.
- Australia now produces only 225,000 vehicles, compared with 407,000 in 2004.
- By comparison, China makes 15.5 million cars
- Japan 8.5 million
- Germany 5.4 million,
- Brazil 2.6 million
- and France 1.7 million http://tinyurl.com/theaustralian-end-handouts-an

So what’s Driving the Decline?
The Australian auto industry is under extreme pressure from imports and is suffering significant decline in market share as well as in the actual volume of cars produced.
- Even now, at its current level of the low $US90c range, the exchange rate is hurting the local car industry. (a critical important point).
- Stuck as they are in making mostly medium-to-large sedans, the local car companies are also at fault
- There is a strange failure by the industry to adapt to change in the local market and this failure must reflect adversely on management.
- Government policy, too, has failed to take up its role in effecting change because instead of offering a subsidy for production, the government could have been more forceful in shifting local production to match local demand.
- Many people think that private firms are nimble and highly adaptable, but the giant US car industry was almost brought to knees in the 1970s and 80s by a failure to respond to the small car, high quality revolution introduced by the Japanese.
- Personally I drive a Japanese Toyota Prius and enjoy the fuel efficiencies that it brings every week. (Prius is an Electric Hybrid vehicle)

http://tinyurl.com/abc-toner-car-australia

What are the Losses if Industry Fails?
Calling for the withdrawal of support for the car industry could bring about its demise, and with it, a reduction in average productivity in the Australian economy. If you shut the industry down because of policy indifference then you must expect the following:
- Reported impact of 50,000 job losses
- You end up cutting productivity per worker across the economy.
- The loss of an important part of Australia’s technological base because of the sheer breadth of technologies that are involved in the production of a motor vehicle.
- Metallurgy skills lost, such as complex casting of alloys
- Sophisticated machining centers
- Electronics and software into engine management and safety systems
- Robotics used in assembly and painting
- Chemicals and paints
- Sophisticated work organization and logistic systems
- The trade, technician and engineering skills supported by the car making industry.
The car industry closing will not send Victoria, South Australia or Australia into a recession. But the reality is the transition to the new and better jobs mostly won’t include those car workers.
And those who do find work in the services sector, are likely to see themselves working fewer hours, or taking home less pay, or having less certainty about their ongoing position. These workers will find themselves in new industries.
Welcome to the new economy.