ANALYSIS

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Holden blame game begins

The federal government and opposition are blaming each other for Holden's decision to stop making cars in Australia.

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Australia is a world leader in making high-end gearboxes for rally cars, it has cornered a niche market in rear-view mirrors, its design teams dream up parts of totally foreign-made cars from scratch.

The doomsayers warning that when Holden, Ford and Toyota go we will no longer have an automotive industry may be laying it on too thick.

"The doomsayers warning that when Holden, Ford and Toyota go we will no longer have an automotive industry may be laying it on too thick".

"The doomsayers warning that when Holden, Ford and Toyota go we will no longer have an automotive industry may be laying it on too thick". Photo: David Mariuz

But in order for Australia to continue to have an automotive industry when it no longer has a car industry a number of things will have to happen.

The Australian dollar will have to be much lower. For the past decade Australia's vibrant small-scale automotive export industry has thrived both in spite of and as a result of the high dollar. "In spite of" because they had good relationships with global firms such as General Motors that allowed them to sell their products globally. "As a result of" because the ramp up in the Australian dollar ensured only the really good ones survived.

One way to kick the dollar down might be to tax speculative capital as it comes into the country. Another would be to cut interest rates so low that other countries became a better bet for speculators wanting a location to park their money.

And governments will need to help Australia's engineering export industry by prying open doors in the way that firms such as General Motors used to.

Until last year Professor Roy Green served on the Prime Minister's Manufacturing Taskforce. He says Australia has up to 2000 small and medium sized engineering exporters. Each excels in a small field.

Another way to shore up the industry would be to entice a new foreign car maker to buy the Holden plant.

Nicholas Gruen, an advisor to Labor's John Button in the 1980s nominates China's Great Wall Motors. He says it might make sense for a relatively new mass producer to use a high-cost plant in Australia to create domestic loyalty while selling some of the products overseas as specialised vehicles that add depth and variety to its portfolio.

There's a precedent. In 1980 Mitsubishi bought Chrysler's Adelaide plant and continued making cars there until 2008. Bold thinking and a much lower dollar might just save the Australian automotive industry.

It's time to start.

Twitter: @1petermartin