Make no mistake, General Motors in the US is not bluffing. If there is no new labour agreement with its Australian workforce within six weeks then Australian manufacturing will cease.
The only two questions to be decided by Detroit are whether the cessation announcement is made before or after the election and the actual date that production will shut. In my view, because the decision to close without a satisfactory labour agreement has already been made, the closure announcement must be made before September 14.
GMH Australia managing director Mike Devereux made it clear to the American Chamber of Commerce luncheon in Melbourne on Friday that General Motors was not bluffing and said he believed that Toyota and General Motors both need to make cars in Australia for the parts industry to be viable.
So if there is no GMH labour agreement in six weeks and General Motors shuts down, then Toyota may announce it is shutting soon after.
The big union bosses think General Motors is bluffing. But in any event many would prefer General Motors and Toyota to shut, along with the entire Australian components industry, rather than make precedent setting concessions.
And it’s not easy for the unions because GMH says that the Australian talks will not be a “negotiation”, rather they will be a “discussion”.
That’s exactly what General Motors did this year at the Bochum assembly plant in Germany. The unions said General Motors was bluffing and in March, after a "discussion", rejected the General Motors labour deal. A month later, in April, Detroit announced that the plant would shut in 2014.
The bulk of the General Motors Australian workers on the front line are at Elizabeth in South Australia. There is no certainty that they will go along with the union bosses in Sydney and Melbourne. On Thursday I described the General Motors labour deals in Australia as “workplace agreements from hell” because they give the unions the power to manage much of the plant (Dollar’s decline sends a clear warning, June 20).
Ken Phillips described how the Ford unions actually decided to strike to get a similar agreement to GMH. The Ford workers ‘won’ but for both Ford managers and workers signing that agreement was their death warrant (The union hand on the wheel that doomed Ford, June 19).
Workers at Ford have only themselves and their unions to blame for losing their jobs. But at Holden the remarkable feature of the workforce is that they do not enforce many of the more onerous provisions of their labour agreement and five years ago took a temporary pay cut to keep the plant going. Nevertheless, if General Motors managers want the plant to operate when it involves worker overtime, management now wants the power to make that decision – not the unions, as is now the case (there is no issue with penalty rates). Detroit insists that the Australian labour agreement must be consistent with its world plants, subject to the Australian labour laws.
Without warning, Ford simply dropped the guillotine on the jobs of their managers and workers. General Motors is giving the workers and managers a chance to keep their employment. There is at least a possibility that GMH workers will want employment rather than the dole and defy the union bosses.
And given that the Elizabeth area of South Australia is one of the more depressed areas of the country, most General Motor’s workers know what living on the dole is like. And their looming retrenchment comes as the big mining construction plants will be completed and the workers go back home to seeks jobs.
If General Motors and its suppliers shut, as is likely, South Australian unemployment will rise well past 10 per cent. Victoria is more affected by Ford than GMH but with returning mining construction workers, unemployment in Victoria will rise sharply.
But what worries the unions more than unemployment is that if the General Motor’s workers agree to a ‘sensible’ work place agreement and take a pay reduction then it may spread around the country.
But even if General Motor’s workers agree to abolish their work practices and powers, it does not save the company in Australia. There will need to be cost reductions over a wide range of areas, including electricity pricing, and finally the federal government will need to come to the party.
Mike Devereux says that every motor industry in the world receives some form of government help – it’s a globally competitive business. It’s unlikely that an Abbott government would help any company that had a “workplace agreement from hell”. “Get your house in order first”, it might say to General Motors (and Toyota).
It is possible to operate General Motors profitably in Australia because the latest Commodore will be exported to the US. Australia is a world leader in rear wheel drive cars and that’s how we can overcome the tyranny of scale. Toyota has similar plans for the Camry.