Stop spinning the auto sector's wheel of misfortune

We should let the automobile sector fail.

We need to look beyond what will happen next week, next month or next year and next year and face the grim reality for the sector. We cannot compete on price and taxpayers should not be left supporting an industry with no future.

The past few days have seen a range of opinions shared on the automobile industry. But no matter how many opinions are shared or how many discussions are had, there is one inalienable fact: the Australian automobile sector will fail.

It might be next year, the year after, or in 2020 – but there will be a point in the not-so-distant future when Australia does not produce motor vehicles. So why wait?

The industry has consumed around $10 billion in government support over the past seven years and Holden is demanding subsidies of $200 million per year. That $10 billion could have been used to fund infrastructure investment or aid productivity; it could have helped fund the NBN or the NDIS. Instead it was used to support an industry that everyone knows is doomed.

Despite all the assistance, local car production and sales continue to fall with every passing year. We continue to make expensive cars that Australians do not want to buy. A Dick Smith 'Buy Australian' advert would probably have done as much to ensure the long-time survival of the sector (which is to say nothing).

The cost of Australian-made cars is around four times that of Asia and twice that of Europe. The higher wages of Australian automobile workers are not reflected in their relative productivity. High quality cars can be made in low and middle-income economies and Australians have voted with their wallets. It is time that advanced nations such as Australia leave automobile manufacture to those poorer countries, and focus on advanced manufacturing that takes advantage of the capital and talent of Australian workers.

Earlier today, Australian Manufacturing Workers Union vehicle division secretary Dave Smith recommended that the government forget about the Productivity Commission Inquiry into the motor vehicle industry.

‘Think about jobs, think about Australian workers and just get in there and support the industry,’ Smith said.

But if the union was actually interested in supporting its members then it would be trying to get those members out of the industry. They would be helping to direct them towards other jobs and other sectors that have a future.

That is the crux of the issue. If the industry fails, then people lose their jobs and that is always an undesirable outcome. I don’t envy employees in the sector; they are simply doing their jobs. But times change, and economies develop; the old manufacturing jobs are no longer as secure as they once were.

Hopefully these employees see through the spin of their employers and recognise the impending collapse of the industry. Employees need to get ahead of the curve, develop new skills and find refuge in a job that has a long-term future.

From the government’s perspective, they should consider the issue in terms of economic costs: either they suffer the costs of unemployment and retraining now or they subsidise the industry until it dies and people lose their jobs anyway. The first scenario will cost a lot less.

The government could even agree to support these automobile producers for a couple more years allowing them to slowly wind down operations, while simultaneously supporting workers and businesses that would be effected by the industries collapse. The government could ease the transition by providing incentives for other firms to take on displaced automobile workers.

This issue will continue to be debated by industry experts, politicians and even economics writers. But this is an issue that requires firm and unwavering leadership. We need to move beyond looking at next week, next month or next year and recognise the grim reality for the sector and then plan accordingly. Successive governments of all political persuasions have let the rort continue for too long and that should change.