Holden was 'not that great' for trade
Prime Minister Tony Abbott discusses the benefits of a Korean free trade agreement and the Holden closure with Paul Murray on 2UE on Thursday morning.PT1M52S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2z87j 620 349 December 12, 2013
We're in danger of drowning under the bad news about Holden ceasing to manufacture in Australia from 2017 as the politicians try to blame each other, but not all of it is bad.
There's every chance the end of the Aussie-made Commodore doesn't also signal the end of the world. In no particular order, here's an attempt to put a little perspective into whirlwind:
- General Motors seems to be following the Ford model, so to speak. Manufacturing ceases but Australia retains "a global design studio". The Commodore platform developed here also is the basis for the Chevy Camaro. GM's new CEO (as of next month) is Mary Barra, currently global head of product development. Hopefully she has an appreciation of what we're capable of at the smart end of the industry.
- While Ford is losing 1200 jobs when it stops screwing nuts on bolts, it has said it will keep 1500. That puts the direct manufacturing task in some perspective. The greater value-add in manufacturing is just about everything except the actual manufacturing.
- Local parts makers dependent on local production have had plenty of warning to diversify and the smarter ones have been doing just that. Of course losing a key customer hurts, but there's a lesson here that there is only one market and it's global. No business can afford to be dependent on a single customer. Again, it's the "thinking" bit of manufacturing that's where the money is – the bits can be churned out wherever the quality/costs equation best works.
- The opportunity cost of spending government money to support an industry tends to be overlooked – but it's now up to the government to prove it can effectively invest the car industry assistance money better somewhere else.
- These have been very expensive individual jobs to subsidise. The industry likes to paint the subsidy as not-much-per-head of the Australian population – it looks much better than a-lot-per-Holden-employee.
- While many GMH employees on relatively high wages for manufacturing roles will find it hard to retrain and land jobs nearly as good, the unspoken reality is that many others at Holden (and Ford) will effectively be winning the lottery. The TV news stories always concentrate on the hard luck stories, not on the workers who were close to retirement or trying something else anyway and will now cop a rich and concessionally-taxed redundancy payment, some of them a hefty six figures. The usual line, "I've given the company 30 years and now they kick me out", is simply wrong. You've been paid well by the company for 30 years and now you're being paid especially well to leave.
- Pascoe's Law of Disaster applies: "If your house burns down, you're much better off if all the houses in your street burn with it." Because this is a headline-making closure with many people involved, there will be extra assistance given for retraining and local communities. Governments tend to get involved. Lose your job at the corner store and it's just tough luck.
- Remember the Newcastle experience: losing a major employer doesn't have to be a regional disaster. BHP closing its Newcastle steel works was billed as a catastrophe – now Newcastle wouldn't want a steel works if you gave it to them. (Clive Palmer tried to once in a typical bit of funny business with other people's money, but that's another story.)
- There's been a tendency to assume Toyota will surely go if Holden goes – it well might, but it's by no means certain if something near the current level of subsidies remain. Toyota tends to have a longer and more strategic view of its global business and production. The Australian dollar might be prohibitively high today, but it might not be in a few years. Don't count your closures until they're latched.
- We constantly underrate our ability to reinvent ourselves. Every Doomsday forecast ever made discounts mankind's ability to avoid or mitigate whatever the disaster might be. Most of the time, that's what we do.
- The way manufacturing is going, there will be fewer and fewer jobs in putting together cars anyway. Successful manufacturing of anything now is very highly automated.
- The touted number of jobs at risk sounds large, but is actually a small percentage of the 11.6 million Australians currently employed.
- Australia in 2017 won't be like Australia in 2013. Whether it will be better or worse, we're yet to find out, but we remain a rich, relatively well-educated nation with plenty of upside for doing whatever we do better than we do it now.There's not much point bemoaning the inevitable. Manufacturing cars in Australia simply does not add up – a small, extremely competitive local market with high costs and a stubbornly strong currency. For General Motors, Australian manufacture barely rates as a problem, it's just a distraction.
- Contrary to the knee-jerk reaction of politicians, no town or region is owed a living – industries and regions are forever in the process of rising and falling. Sometimes the freed-up human capital of one failing venture becomes an opportunity for another to start. Sometimes people just have to face the lack of opportunity in one place and move to where there is more. Spare me any attempt to manufacture nostalgia about South Australia's Elizabeth.
Michael Pascoe is a BusinessDay contributing editor.