The Ford decision this week to shut down its manufacturing operations in Australia with a loss of 1200 jobs is deeply concerning, as are the implications for the many businesses and employees linked into Ford Australia’s assembly operations in Victoria.
As Ford has stated, the economic conditions in Australia are very tough for trade exposed industries and while the dollar has come off its highs somewhat over the past few weeks, we remain a high cost economy. The still-strong Australian dollar is part of this as are our rising energy costs and the continuing growth in domestic real unit labour costs.
While we welcome any support that can be given to the impacted employees, both directly and indirectly, a key part of this support should be assistance in reorientating the businesses in supply chains linked to Ford’s domestic assembly operations and in developing new opportunities, particularly in export markets.
The recommitment by Ford to maintaining and reinvesting in its domestic design facilities for product development and that it will keep a significant research and development presence in Australia is most welcome. Despite very tough trading conditions, over the past six years Ford Australia has spent close to $2 billion on R&D in Australia. Ford Australia’s commitment to an Australian centre of excellence highlights the depth of world-class manufacturing capabilities in this country.
Ford’s decision to continue to build on its domestic design and R&D capabilities points very clearly to major areas of strength upon which new Australian manufacturing activities can be built and existing activities transformed. Adding value through design, technological, product and process innovations is a core direction for the future of Australian manufacturing. The challenge is to nurture and to develop these capabilities and to link them to global opportunities.
Clearly, the Australian auto industry is worth fighting for and we still have competitive auto makers and parts manufacturers in Australia who are adapting and building export markets.
Beyond the auto industry, many Australian manufacturers are already exploring and indeed realising these opportunities and many more have the potential to do so. There is a role for policy to communicate these opportunities and to facilitate the transition, particularly among our small and medium-sized manufacturers. These policy directions are important not only for the individual businesses and their employees but also for the broader economy which has become increasingly exposed to resource exports and commodity price fluctuations. We need to build a balanced and diversified economy to address the risks in the current structure of the economy.
The recently-announced policy initiatives focussed in these areas are a step in the right direction. However, it is imperative that these initiatives are continued, refined and expanded over the next couple of years.
Innes Willox is chief executive of Australian Industry Group.