Battle ahead for Aussie car makers

Visit any city in Australia and locally made brands dominate the roads instead of the Japanese imports seen on New Zealand roads.

But that preference across the ditch for Australian-made vehicles is shifting.

Sales of locally made cars fell by 20 per cent in the eight months through to August, even though consumers purchased more vehicles overall, with large passenger models such as the Holden Commodore and Ford Falcon the hardest hit – down 23 per cent in the eight months through to August, figures from the Federal Chamber of Automotive Industries show.

Meanwhile, Ford is gearing up to close its Australian car production lines in 2016, despite nine decades of history in the country.

In May it said the locally made cars’ costs are four times those of its Asia divisions and that isn’t sustainable.

Car manufacturers in Australia receive subsidies from the government and during the past 10 years, Holden has received AU$1.8 billion (NZ$2b) – AU$150 million each year from a potential AU$2.17b pool – while Ford has obtained an estimated AU$1.1b.

Toyota will not comment officially on subsidies, but it’s estimated it has received about AU$1.2b in the past decade.

Despite this, Australia’s subsidies of AU$2,091 per vehicle produced are low compared to the US’ figure of AU$3,093.

Earlier this month Tony Abbott led the Liberal Party to victory, but this is set to cause strife for Australian car manufacturers as he went into the election saying he would cut $500m from the industries’ subsidy packages.

“What we aren’t going to do is what Rudd has done over the past few weeks, and basically run down the road after Holden waving a blank check at them,” Abbott said in August.

INDUSTRY NEEDS SUPPORT
In South Australia, Jon Gee, Australian Manufacturing Workers Union vehicle division state secretary, says Abbott could destroy the local car industry, which employs more than 40,000 workers, if he reduces the subsidy.

“Generally people want to see a strong automotive industry with heavy support from the government,” he says. “It has flow-on effects for their own industries and is all part of having a strong economy.”

Already this year there have been 500 redundancies at Holden, adding to a string of job losses in 2012 when Holden shed 220, Ford cut 330 and Toyota let go 350 people. Meanwhile, Holden workers across the country voted to accept a three-year pay freeze.

Gee says the industry provides vital training for other manufacturing jobs and the government must support it with taxpayer dollars.

“The industry provides massive training opportunities and fundamental skills.”

Jeff Murray, managing director of Holden New Zealand, says the marque needs strong support from the Abbott government for it to survive in Australia.

“Anything less and there is a fear that thousands of people will be struggling to find employment across the ditch for many years to come and we certainly don’t want that to happen.”

Even with Holden’s owner, General Motors (GM), opening plants in Indonesia and China, Murray says there are no plans to transfer some of Holden Australia’s production to these regions.

“Our focus is on retaining manufacturing of Holden vehicles across the Tasman and ensuring there’s a brighter future for thousands of Holden employees especially at our Elizabeth Plant in Adelaide.
“This will only be achieved with a serious buy-in from the Australian government.”

However, Murray is pointing to more job cuts in the horizon.

“While our market share is much less than it was 10 years ago, the general size of our organisation doesn’t reflect that reality so we must continue the process of bringing our costs into line with Holden’s current size,” he says.

IN THE WRONG HANDS
Many argue the auto industry in Australia is unsustainable, but prominent Australian economist Dr Nicholas Gruen believes it’s a case of the wrong owners.

“Holden and Ford have quite a valuable asset that needs to be taken seriously,” he told Autofile.

“As assets of a global automotive company in the hands of the American companies, they are seen as residual assets by minimising risks and maximising the extent money can being extracted from taxpayers in order to underwrite.

“They’re not making good money at all and they’re not in a situation where it makes sense for them and try to develop the industry in a unique direction.”

This is a sentiment echoed by union secretary John Geeb.

“They’re not tapping into the awesome capacity of the workers and bringing change to GM is like bringing change to an aircraft carrier – we’re missing an opportunity.”

Gruen says the key for the Australian industry surviving is attracting a Chinese carmaker to take over the production lines, and he believes the government isn’t getting a good deal from the American manufacturers in return for its subsidies.

“Australia is an obvious place in such a company’s global network, both as a source of strong design for a cheapish luxury vehicle.”

He says the politicians are behind the idea, but aren’t willing to put the work in to make it happen.

“It’s a politically risky transition,” says Gruen. “I’ve spoken to quite senior politicians and there’s nothing in it for them and they would make themselves unpopular with the incumbents. Plus there’s no guarantee it would be a success.”

Gruen predicts the Australian automotive industry will continue to survive for a while yet.

“It will take a long time for the industry to disappear. It’s a much larger market compared to New Zealand and manufacturers are still producing for export, and it’s likely Holden will be here until 2020.”

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