Give Holden's money to the parts makers

As the auto industry crumbles, Toyota will struggle to keep its local plant open. But supporting the component makers will give the sector a better chance of survival.

I believe there is a way that a significant portion of the motor industry can be saved in the event that General Motors leaves the country. But it will require a different approach from Canberra and the help of Toyota workers, plus a compromise from Toyota management.

Unlike General Motors, I believe Toyota actually wants to stay in Australia because it has erected here one of the most modern plants in the world. Its problem is that it has a bad labour agreement and even more importantly it fears that if General Motors shuts (as is likely after yesterday’s statement from Treasurer Joe Hockey) it will mean that almost all the component parts makers will become uneconomic and they would also have to shut. There is no way Toyota would want to assemble in Australia and import all the parts – that makes no sense.

However most of the big component makers are already discovering that their expertise can be used to make and export manufactured products outside the motor industry. In many cases they can also supply the international motor parts market. The latest fall in the dollar helps.

While they have started down this track, as things now stand, they would not be able to stand the loss of business from General Motors and Ford.

But I believe that if the money earmarked for General Motors – and perhaps a bit more – were transferred to the parts makers they could further diversify their markets and products so they would prosper on the basis of just one assembler – Toyota. And remember that GMH will suffer unprecedented market share decimation in Australia and most of the extra demand will go to Toyota, as the new face of the Australian motor industry, which will also help the parts makers.

The Abbott Government’s Direct Action plan in carbon is a really positive innovation because it links grants to performance. I believe it could be adapted for the component parts industry.

We would aim to end up with a highly efficient manufacturing sector, based around motor but not confined to it.

But there must be certainty. Toyota has been made a series of promises by successive Australian governments that were not honoured. This has left scars in Tokyo.

I do not know what they are thinking in Japan but I imagine they are very confused by what has been happening out here. In the case of the labour situation it is almost as though they are seeking a signal from their work force that, in all the Canberra confusion, at least they want to be employed and are prepared to help the company reduce costs and survive in Australia without cutting pay.

But as I will explain below I think Toyota management, in such a strange environment and in the light of the Hockey statement, should compromise in their worker vote, due on Friday.

To understand what is happening we need to go back into history.

There is no doubt that the last labour agreement signed by the old General Motors management was an absolute disgrace. The agreement gave unions far too much power and awarded benefits not linked to productivity – those days have gone and were on the way out when the deal was signed.

Tragically, Ford was forced by union strike action to embrace a similar deal, which became a significant nail in the coffin for Ford employees. The Ford executives in Dearborn saw that deal as a message that their Ford employees wanted the plant to shut.

In the case of General Motors, the new Australian management, led by Mike Devereux, took the unusual step of gaining worker approval to completely revamp its old labour agreement so that it was in line with the broader General Motor plants around the word, subject to Australian industrial relations legislation.

But the new agreement does not come into to action until General Motors has committed to a new model and, thanks to Joe Hockey, that seems unlikely. The old agreement currently stands and will be the agreement that provides the generous retrenchments should General Motors shut down.

Toyota’s agreement is not as bad as the old General Motors agreement but efficiency is affected by many clauses including union control over shifts.

At Toyota on Friday a series of changes to the labour agreement will be voted on which, among other things, will lessen the union role in the plant. But there are also changes involving holidays.

The Toyota plant is one of the more modern in the world and its main market is the Middle East. Holidays are currently concentrated around Christmas time, which is a time of high demand in the Middle East.

As a result Toyota must stock pile cars in the months leading up to Christmas and this, of course, creates penalty rates and shift allowances. Toyota wants holidays spread through the year and not concentrated at Christmas. And whereas Toyota proposes that wage rise agreements are honoured, GMH workers agreed to pay curbs.

Unlike General Motors and, unfortunately for the jobs of the Toyota workers, the unions are opposing this new arrangement. In my view, given that the looming exit of General Motors has put into question Toyota’s ability (not its willingness) to stay in Australia, management should now follow GMH and make the labour agreement changes conditional on the company committing to a new model.

It is rough justice to demand commitment from the labour side and not the capital, especially given the Hockey statement.

Nevertheless these are tough times and if the Toyota workers reject the proposals they are sending a clear signal to Tokyo that they do not want their jobs.

If most of the component industry were saved there would still be substantial labour loss as a result of General Motors closing but nothing like the 150,000 now envisaged including those attached to the component industry.

Many of the skills in the motor industry are similar to these in mining investment. These two tidal waves of unemployment will hit the economy in the 2016 election period.

Along with retail, they will to create unemployment problem of unprecedented proportions for Australia (Australia's five tidal waves of unemployment, December 9).

That’s why my plan to transfer the General Motors’ money (assuming it exits) to the component makers using Direct Action principles has an outside chance of winning.

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