How can it be that two states have become a false economy.
That's true, we have been subsidizing Victoria in particular since about 1948. Initially the government felt that it had military value having plants that could suddenly turn to churning out tanks and military hardware if war came again. probably pretty good thinking in post WW2 Australia, but I doubt that the argument holds water today.
I'm not against some financial encouragement to keep jobs and skills here, but at what cost does it become too high.
I suspect that there is a Chinese manufacturer willing to step into the plants that Holden will abandon, although the work place agreements and unionised labour force will take on a different look. It's either that or lose jobs and skills.
Just my hunch.
Any expressed market opinion is my own and is not to be taken as financial advice
I'm all for government support for key industries. Is the car industry one of them? I highly doubt it.
If you're going to support an industry you've got to think about: Why - What is crucial to the local survival? How much- How handicapped is the industry compared to foreign? For how long- When will it return a profit?
Why? There is no reason I can see why we need to have car manufacturing in this country. By that I mean specifically car manufacturing, rather than have the workers employed doing something else. Sure there is cost is changing industries but that can't be the sole reason not to change.
How much? By how much is Australia uncompetitive? Well I couldn't think of many countries in a WORSE position to make and sell cars than Australia. We have a small domestic market so we cannot compete on economies of scale. Our domestic market is not very closely aligned to foreign market tastes as we have different driving conditions, different taxes and different fuel costs > this means we are stuck making cars that are far too large and heavy to be market leaders overseas. It can't be sustainable to employ the most expensive labour in the world to make a 1.8 tonne item that needs to be shipped halfway around the world when we have no unique competitive or strategic advantage (absolutely none at all!).
When will it turn a profit? Ha.
The local car industry is a luxury we can't afford to keep supporting, especially when they only make cars for the 3rd most popular segment !!!! They don't even make cars people want to buy FFS !
The industry should have been taken off the teat 15 years ago. Spend the money on commercialising IP from our universities, or green tech or tourism !
To anybody working in that industry or looking to work in it - GET OUT NOW. You should have seen this coming 10 years ago, at the latest.
we really do have a disadvantage when it comes to manufacturing as our population is too small to feed it with internal demand and we are too far away to ship to europe or america compared to the competition.
I am the love child of Tony Abbott and Pauline Hanson
A TURNING point has come in Australian industry policy and the long history of car manufacturing. The Abbott government is heading towards the termination of the practice of throwing good money after bad and is set to burst the failing pretensions of the car lobby.
In the last election campaign, Kevin Rudd began - but did not pursue - the debate about what sort of economy Australia should be. Tony Abbott does not have the luxury of avoiding this issue.
Abbott may be attacked as the prime minister who shut the door on the car industry. But that is a false assertion. The truth lies elsewhere: Holden has made clear the cost of keeping its local operation is not worth the price.
Rarely have the arguments for more subsidies and more protection looked so weak. Rarely is a new prime minister given the opportunity for a tough yet responsible decision that is saleable into the community.
Joe Hockey is embracing a new framework: putting the interests of Australian taxpayers and a lower-cost economy before the interests of an uncompetitive automotive multinational. It is new terrain for a treasurer, but justified by the industry’s deterioration. This decision is less about cars and more about achieving a modern and competitive economy.
Abbott stands at a flashpoint. He can use the car industry decision to highlight the changed economic, fiscal and cultural mindset he seeks to engender in the nation. That means mounting the argument for change, not just in the car industry but in the wider economy.
Much of the argument is that because taxpayer assistance in Australia is less than in other nations, it should be continued. This is nonsense. The only valid argument is whether taxpayer assistance is fair for our society and efficient for our economy.
I’ve recently taken a quick look at some Aussie based auto parts manufactures and I can assure you that their future is dismal with or without the shutdown of Ford and Holden.
The basic problem with all these businesses is that their fixed costs are too high especially given the decreasing unit volumes. At existing scale they are unprofitable, yet perversely at increased size /scale they are even less attractive. Here the problem is the high acquisition cost of nearby land required for any scale expansion. And the high cost to import people experienced with factory automation.
From what I could see the only attractive option was to keep manufacturing at ever decreasing volume and jacking up the prices as much as possible. This is a truly #$%^ed up strategy for any supplier end manufacturer combination. It is JIT in reverse, manufacturer gets delivery uncertainty along with component price uncertainty just what a struggling Apex manufacturer needs NOT!
Unfortunately it is game-over for any manufacturing industry where key stakeholders find that deliberately creating supply uncertainty is their most profitable course of action. So I think it is immaterial what the gov’t does the Aussie auto industry has entered the self destruct stage, from here out it’s every man for himself.
IMHO we can look forward to the following:
1. Labor wage disputes.
2. Huge increases in critical car parts costs.
3. Sudden supply disruptions bought about by the domino effect of insolvencies spreading through a closed value chain.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
Australia's peak manufacturing body believes the Productivity Commission is being optimistic predicting just 40,000 car sector job losses.
Australian Industry Group (Ai Group) thinks the commission's expectation that 60 per cent of the car parts sector will survive is fanciful.
The new Productivity Commission report on the automotive sector seriously underplays the impact of the end of car making in Australia and should be treated with caution, Ai Group chief executive Innes Willox says.
"This isn't just another minor adjustment to the economy," Mr Willox says in a statement.
"It represents the virtual closure of an entire industry. This will happen within a relatively short span of time and it will affect a large number of businesses, employees and communities."
The commission says $30 billion of taxpayer assistance to carmakers between 1997 and 2012 had only delayed the significant structural adjustment now facing the industry.
Australian carmakers were unable to survive in the highly-competitive global and domestic market, with Ford, Holden and Toyota all announcing they will cease local manufacturing by the end of 2017.
"It is estimated that up to 40,000 people may lose their jobs as a result of the closure of the motor vehicle manufacturing plants and the rationalisation of firms in the supply chain," the commission report says on Tuesday.
Mr Willox said that assessment, based on job losses for 80 per cent of the carmaker workforce and 40 per cent of the component supply chain, seemed optimistic.
The Federal Chamber of Automotive Industries estimates up to 90 per cent of the industry would close or move offshore.
Mr Willox says the commission's assessment that 60 per cent of component makers would be able to move into exports or other industries with no extra government assistance seemed fanciful.
"These markets are already crowded and are extremely competitive, with many auto components suppliers already operating in them," he said.
The assessment that two-thirds of the 40,000 retrenched workers would find another job seemed to be based on the experience of 700 Mitsubishi workers retrenched in 2004.
"This time around, there will be far more displaced auto workers in a very concentrated geography and with far fewer local alternative employment options," he said.
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