Federal polish needed for an invaluable auto shine

Automotive in Australia spends billions on parts and services, tops the R&D spend and is a mecca for skilled workers. But it needs globally competitive policy settings to survive.

Last Thursday marked a sad day for our industry as Ford announced it would cease manufacturing in Australia in October 2016. My sympathy goes out to all the hard working men and women at Ford who will lose their jobs – this is hard news to swallow.

Ford’s announcement is a stark reminder of how tough economic conditions are for Australian manufacturers. But it’s also a reminder of how critical automotive manufacturing is to this country.

I believe our local automotive industry can survive. The hard question becomes, does Australia want to keep its car industry?

That’s the future we’re contemplating – if we give up our manufacturing capability, we mortgage our future for the things we can’t even imagine today.

If we’re serious about being a ‘knowledge economy’, we need a strategic capability to build things. High-tech, value-added products like cars are the building blocks. Automotive production is the assembly of thousands of separately manufactured components.   

Car manufacturing matters. Over the past 12 years Holden has injected more than $32.7 billion dollars into the economy through supplier spend, R&D, direct wages, logistics and numerous other streams. Over that same period, Holden received $1.8 billion in federal government assistance.

This represents a return on investment of 18 to one.

During that 12-year period Holden received, on average, $150 million per year from the Australian government – $120 million of which was returned as Holden income tax revenue. In any one of those years we spent, on average, $490 million on capital, engineering and design investment, $490 million on wages and a massive $1.75 billion with Australian supplier businesses.

More recently, the three local car makers spent more than $3 billion buying parts and services from Australian suppliers in 2012 alone. This included $2.2 billion worth of products purchased throughout Victoria, $630 million from the southern, central and northern suburbs of Adelaide and $180 million of components from across the Sydney area. That’s just in one year.

Despite what some commentators would have the Australian public think, if automotive manufacturing leaves Australia this spend will go with it. This huge amount of economic activity will not transition to other areas of our economy – it will move to places like Thailand and Indonesia as parent companies shift their investment offshore.

Governments of car-making countries compete fiercely for this huge capital investment and our parent companies will have no problem finding a new home for it.  Local supply businesses will lose this critical spend and many would simply shut their doors in Australia forever.  

The logistics of automotive manufacturing alone are enormous. Holden moves half a million parts in and out of our plant every single day, of every shape and size, from right across Australia. Think for a moment on the amount paid to Australian transport and logistics businesses to transport those components.

The roots of automotive manufacturing spread deep throughout the Australian economy, far beyond the factory gates of Elizabeth, Altona and Broadmeadows. 

Manufacturing – more than any other sector – creates jobs. Not just downstream but also alongside in industries like packaging, telecommunications, mining and construction. 

The auto industry directly employs approximately 48,000 Australians and it’s estimated that for each of these jobs another four to six people are employed in supporting industries.

The automotive industry is also the largest R&D contributor in the Australian manufacturing sector.

Our industry is one of the biggest employers of industrial designers in Australia. Taught in world leading universities like Monash and RMIT, automotive provides a vital training ground for designers (who often become ‘live’ Australian exports).

Automotive manufacturing is the biggest customer of Australia’s tooling industry and maintains a critical mass of demand for these skills which are also needed by other sectors – particularly mining and aerospace.

We need tool makers, people who can turn a lathe, fitters and turners, boiler makers, tool designers, maintenance workers and fabricators. We can’t afford to lose these skills and job opportunities for young people who don’t want to go university or work on a mine site.

But the Australian automotive sector can only survive with clear, consistent and globally competitive policy settings. Government assistance should not be a dirty word; it’s the way the game is played across the globe and the payback to the economy is enormous.

Losing the car industry means walking away from exports worth $3.6 billion a year, 48,000 immediate Australian jobs and around 200,000 jobs in supporting industries. Billions of dollars in tax revenue and wages pumping into the economy each year and billions of dollars in R&D for many years to come will need to be found from elsewhere. The global auto investment that generates this economic activity won’t transfer to another part of our economy; it will go offshore to our competitor nations.

Research shows that contrary to some commentators’ rhetoric, Australian support for its auto industry is among the lowest in the world – just $18 per capita compared with $90 in Germany and $265 in the US (Source: Sapere Research, 2011).

We don’t compete on a level playing field; every car-making country in the world supports their industry. We’re not asking for handouts – we are asking for competitive and contemporary policy.

Nineteen of the G20 countries have automotive at their manufacturing core – it’s a sign of an advanced economy. More than that, Australia is one of only a handful of countries with the advanced capabilities to design and engineer vehicles, as well as build them. 

Right now Holden is launching the new VF Commodore, the most technologically advanced car ever created in this country and a showcase for how good Australian cars can be. 

VF will change people’s perception of Holden’s capability. The car virtually parks itself, warns you if you veer from your lane, alerts you if someone is in your blind-spot, uses lightweight aluminium for the first time on an Australian-designed car and is more fuel efficient than many small four-cylinder cars.

The VF is truly world class and will soon be sold in the United States as the flagship Chevrolet SS, proving you can export from this country if the product is good enough. 

Alongside the VF Commodore, we also build the only small car built in this country, the four-cylinder Cruze. Two of the country’s top 10 selling vehicles are built in our Adelaide plant. There is absolutely no doubt that Holden makes cars people want to buy and we will continue to do so.

In fact, the Cruze was the fourth best-selling car in Australia in April 2013 and approximately 60 per cent of all Holdens sold in this country last year were built in Adelaide.

Manufacturing is a core part of Holden’s, and Australia’s, DNA. Even though it continues to be a tough environment for automotive manufacturers, we are fighting to preserve our manufacturing capability because we are deeply aware of its long term benefits to Australia.

Mike Devereux is chairman and managing director of General Motors Holden.