Urgently wanted: a manufacturing hero

There are measures that can be taken to help save the manufacturing sector – but Australia has just 10-15 years to move up the value chain before it's too late.

Productivity Spectator

The Australian Workers Union boss, Paul Howes, thinks that a lower dollar and lower interest rates can save Australian manufacturing.

The simple answer to this is that even if Julia Gillard or Paul Howes could arrange such events (and thank goodness they can’t) it would not save Australian manufacturing.

Yet vast areas of Australian manufacturing can be saved and Paul Howes and other union officials can play a major role in saving jobs.

But to save big chunks of Australian manufacturing requires much more than a change of role by Howes and the unions – it requires a totally different attitude by management.

Today’s contribution to the Kohler-Gottliebsen call to productivity action is from a manufacturer who has actually worked out how you do can make manufacturing prosper in Australia despite the interest rates and the dollar – Simon Poole of Finisar Australia.

As our productivity editor Jackson Hewett explains, Poole has started and sold a number of companies that produce optical technology. Finisar operates plants around the world but a big part of the business is in Australia.

At this point it is worth watching the video that sets this out.

In essence, saving manufacturing is about setting up your management and workforce to reduce costs every year by constantly improving processes and the way you do things.

If you have a rigid workforce and management that is also rigid (the two tend to go together) then you can’t do things in a better way so the plant is probably doomed irrespective of interest rates and the dollar.

Paul Howes has political ambitions so as plants close be will be able to blame the government and the Reserve Bank for what happened. And I am sure deep down Paul Howes knows that the key is flexible management and a flexible work force – which is something Howes can actually help bring about.

But actually doing something is much harder than blaming someone else where you have no power. Having said that there is no doubt that a lower dollar and lower interest rates would help but on their own they will not save plants in the longer term.

Today’s productivity call to action also has a sinister threat. We have about 10 to 15 years to move up the manufacturing value chain. After that it will be too late because China will occupy the space. Again, the investment required will only take place if the enterprise has innovative managers and workers (in that order), and that won’t happen in many companies.

One of the real success stories of Australian manufacturing is what has happened at the Whyalla steel plant, where both workers and managers understood that their jobs were on the line – and it looks like they have saved the plant from the scrap heap. (Secrets of saving Whyalla, March 9).

Meanwhile, too many managers believe that productivity is simply about cost cutting. I had a discussion with the Business Council boss Tony Shepherd on this point last week. Shepherd is a first class leader and he is right that there is a lot government can do to lift productivity but he was soft on the gaps in management and CEOs (KGB Interview: Tony Shepherd, April 13).

The Business Council needs to be prodded by Paul Howes but that is not going to happen.