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Then there was one….

Posted: July 9th, 2013 | Author: | Filed under: Auto News, General Motors, Holden | Tags: , , , , , , | Comments Off on Then there was one….

Then there were two...As Holden talks of cutting costs,production and jobs, the once mighty motor-car makers CEO Mike Devereux has warned of more pain on the horizon for the company’s embattled workers, pay cuts and more job losses, saying the car maker must radically and quickly reduce costs to survive in Australia.

The company says it is facing unprecedented challenges and is now asking its workers to help it make significant savings to ensure its Australian operations remain globally competitive. Last week, a warning from executives about the company’s future triggered a surge in employees wanting a voluntary separation package.

Ford’s talk of factory closures have flared fears for the future of Australia’s automotive industry. Australia’s auto industry is in such disarray that terms like “everything’s on the table” are being bandied around. A high dollar, cheap overseas labour and a global market are putting pressure on Australia’s manufacturing sector, and the car industry represents the malaise like no other.

There was a time when Australia had five car companies successfully making and selling cars locally. But those days are long gone – there has been a slow and steady decline in the industry since the early 1980s. Nissan closed its doors in 1992, Mitsubishi followed in 2008, and now Ford has announced it will stop production in Australia in 2016. The remaining companies, Toyota and Holden, have cut hundreds of jobs in the past two years, both are intending the slashing to continue, with odds on even that neither will be making cars in Australia within 5 years ::::

Then there was one...

Mr Devereux says “everything’s on the table,” ranging from salaries to the cost of materials, logistics and even to the number of light bulbs used.

“We are laser-focused on reducing every single part of the eco-system of cost in making a car,” Mr Devereux said. “It’s material cost, it’s logistics costs, it’s everything. It’s this building, it’s how many light bulbs we use.”

He says says cars cost too much to make in Australia, with every car costing $AU3,750 more to make compared to elsewhere in the world.

“The cost is driven by the tyranny of distance and logistics… driven by labor costs and lower scale, and then driven by the higher cost of buying components from local suppliers,” Mr Devereux said. “What we are trying to overcome is operating a plant that loses money. There are a lot of different slivers of cost, we are going after every one of them as intelligently as we can. Labor isn’t the entire story, it is part of the story and it needs to stand the same scrutiny.”

Holden has agreed to appoint an independent expert to review the company’s manufacturing operations. Former thinker-in-residence for the South Australian Government, Professor Goran Roos, is to make a month-long investigation of Holden financial data and manufacturing work. The review was one of the demands in a seven-point plan put to Holden last month by the Federation of Vehicle Industry Unions.

Union official John Camillo said he was looking forward to getting Professor Roos’ views.

“This person has been heavily involved in helping and supporting companies right around Australia, he’s a person that can look into the books and find out where the cost cutting will be,” Mr Camillo said.

Hundreds of Holden workers have been briefed at the car maker’s Elizabeth production plant in Adelaide’s northern suburbs about the future of their jobs, as redundancies are finalised. Representatives of the Australian Manufacturing Workers Union spoke with workers about redundancy offers distributed last Friday, which are aimed at removing about 400 staff. The workers voted in favour of a resolution urging a greater Federal Opposition commitment to the car manufacturing industry and calling for Holden general manager Mike Devereux to develop a plan for business growth.

Holden employee Lynton Stuckey said he felt sad about his job prospects.

“Holden’s make a damn good car, two damn good cars, and we all believe that dropping the tariffs have ruined our industry because all this rubbish comes in from around the world,” Mr Stuckey said. “I hope they can come up with something to keep us alive because most of us love working here.”

Just weeks ago, employees at the car plant were faced with the prospect of a pay cut to help ensure a future for Holden manufacturing. Mr Camillo said the workforce remained keen to know more about Holden’s long-term plan for Elizabeth.

“Workers can do a 10 per cent wage cut, give Holden all the flexibility they want but the situation is that the $1 billion that Holden is putting on the table, if they don’t get co-investment, regardless of what the workers will do, Holden has indicated quite clearly to us that the Elizabeth operation will close,” Mr Camillo said.

Investment Plan

Mr Devereux says the Australian auto industry cannot exist without some form of Government assistance.

“For many years Australia has had a competitive approach, some of it was tariff-based, some of it was industry assistance based, every country does this,” Mr Devereux said. “Whether it’s the United States with a 25 per cent tariff on pick-up trucks, whether it’s China at 35 per cent, India at 60, the European union at 10 per cent, people sometimes think we have big tariff barriers and walls in Australia, we don’t. We have high input costs, we have some of the highest wages which means a great standard of living for the country. I understand this is a fantastic place to live but you can’t have all these things being the highest costs in the world, have some of the lowest tariffs in the world, and have no Government policy that recognises what every other Government in the world does. There has to be a balancing of all those pieces of the puzzle.”

Exports the Key

Auto-parts maker Hirotec is stuck in the middle of a fast shrinking industry. the company supplies Holden with its doors and bonnets and also does some work for Toyota. Hirotec’s human resources manager Alan King says employees are living in fear.

“Our workforce have got skills that may not necessarily be transferrable to other industries, so they’re caught in a catch 22 situation: Do we stay here or do we move on?” Mr King said. “If the volumes of Australian manufactured cars continues to go down, if there is a situation where maybe Holden decides to leave Australia, then I don’t think there is an industry in the future.”

The reality is that Australia is now part of a global car market, gone are the days when a family simply had to choose between a locally-built Ford or Holden. More often than not Australians are buying small cars sourced from Japan or Korea. The Australian speciality – large six-cylinder family cars – are no longer in demand locally. Australian car makers and auto parts manufacturers need to export to survive.

Evan Stents, the head of HWL Ebsworth’s Automotive Industry Group, says Australia “will never be able to compete or have a sustainable business model just to build cars for the Australia market because of competition”. It’s all about exporting. Holden and Toyota both have export plans, but it’s hard to carry them out when the dollar is where it’s at.”

Government Support Questionable

Australia’s Federal Government has been supporting the Australian car industry for years. Many argue that is simply a waste of money. Research strategist Thomas Barlow is one who questions the logic of that financial support.

“Why the car industry?” Mr Barlow said. “Why do we pump literally billions of taxpayers dollars into the car industry, rather than, say the medical devices industry? If you want to invest in innovation as a government, why not take that billion dollars and stick it in fundamental research at universities? We support our failures rather than our successes.”

The Federal Government and car industry chiefs have pledged to continue working together to guarantee the survival of Australia’s automotive sector. The parties met earlier in June, in the wake of Ford’s decision to end local production.

Ford announced in May it would cease production at its Victorian vehicle-making plants in 2016, sparking concern about the future of the car components industry. The decision to pull out of its Geelong and Broadmeadows manufacturing operations is expected to affect 1,200 jobs directly in the automotive components sector.

Australia’s ousted Prime Minister Julia Gillard met with representatives from Ford, Holden and Toyota, as well as components suppliers, the Victorian Government and the Australian Council of Trade Unions. Ms Gillard told the meeting Australia’s automotive industry skills base must be maintained. Car makers and union bosses attended the meeting, along with the Victorian Government.

No major initiatives were announced

Too Little…

Way back in January 2012, in the midst of Australia’s government handing Ford and Holden hundreds of millions of dollars to keep operating downunder, questions were being asked of the viability of a local auto manufacturing industry.

Sales of the Australian made large cars – Holden Commodore and Ford Falcon – have dropped alarmingly in recent years. The Commodore’s 15-year run as Australia’s best-selling vehicle was ended abruptly in 2011 by the Japanese manufactured Mazda3, while Ford Falcon sales plummeted to fewer than 19,000 units in 2011.

In March 2012 we asked …so exactly How Much does it cost to keep auto makers in Australia? This past week the Australian Government has answered the question by handing General Motors Holden more than $AU275 Million.

It’s unlikely  any government, state or federal, will hand the foriegn owned auto makers any more cash, it’s also unlikely that Australia will have a local car maker much past 2017, except perhaps for Tom Walkinshaw’s Elfin Sports Cars?


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