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Bold thinking and low dollar could be saviours to local manufacturing

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

17 comments

  • However you want to spin it we have a problem and it is based in our culture. If Australia is to compete successfully, we must move upmarket in the quality sense. The simple fact is that our mindset is wrong. There is no longer room for 'she'll be right, Mate. If it ain't broke don't fix it.'. We need excellence in everything we do. People like Andy Bolt who try to denigrate the abilities of university educated intellectuals should be told to shut up and go way. His inverse snobbery is counterproductive and should not be heard. As far as Abbott is concerned - forget it ! We need a genuine approach to quality management, however I suspect that is beyond the capability of most Australian business leaders. As far as unions are concerned - 'continual improvement' depends on a decent level of industrial democracy. ' Authoritarianism stifles creativity.
    As far as Abbott is concerned - forget it ! - Most politicians have never had a real job.

    Commenter
    optimistic
    Location
    indi
    Date and time
    December 12, 2013, 7:12AM
    • What Peter says about controls on speculative capital flows is vital as these, more than anything else, cause the wild fluctuations in the value of the dollar that make manufacturing real products so difficult over the long term. Keating, when he de-regulated the currency, simply didn't understand what he was doing, or was unaware of the propensity of international currency markets to become vast casinos where tens of thousands of pimply faced kids were gambling on being able to force short-term changes to currency values as a way of making vast bonuses. These activities of course, not only have no real economic value at all, but are actually highly destructive of real economic activity. Mahathir proved that in Malaysia, but nobody was listening as they were all so wrapped up in their utopian ideologies to see the truth that was staring them in the face.

      Commenter
      Lesm
      Location
      Balmain
      Date and time
      December 12, 2013, 7:18AM
      • Peter, just a few problems here.
        1. You not gunna get any bold thinking from this Tory mob. The last bold thinker we had was keating and look what the Australian public did to him. Hypocrites ignoramus' we are our wealth has increased so much due to his reforms we now feel entitled to vote LNP, screw you I'm alright jack.
        2. You can't switch on and off large scale manufacturing due to a temporary low dollar. It is best that govt have effective industry policy to manage the Dutch disease rather than goad them into oblivion. A low dollar will usually mean cheap beer and hookers god tourists.
        I knew the Tories were really bad, but perhaps my expectations were inflated.

        Commenter
        Tadd
        Date and time
        December 12, 2013, 7:48AM
        • I have just heard Abbott telling lies again on the ABC radio. He said that 'even with the loss of the car industry Australia will still have sophisticated manufacturing industry.' There is minimal truth in that statement. We have lost our defence manufacturing capability, our aircraft and most of our ship manufacturing and now the car industry is going - where will the replacement be centred and on which technology will it be based ? Abbott's fancy and deceptive footwork will not change the ultimate outcome. Just because somebody says something, it does not make it the truth. Abbott must take responsibility for his actions, and act decisively to find a solution to the problem he has created - is he capable of doing that ?

          Commenter
          Less optimistic
          Location
          Indi
          Date and time
          December 12, 2013, 8:26AM
          • "Abbott must take responsibility for his actions, and act decisively to find a solution to the problem he has created - is he capable of doing that ?"

            In a word NO

            Him and Hockey only act decisively when they are trying to force 50,000 unionised workers into long term unemployment.

            Commenter
            havasay
            Date and time
            December 12, 2013, 9:13AM
        • The one thing I have always thought, we are a creative society and we can, if we put our minds to it, come up with some of the best ideas in the world. Our problem is we often don't have the resources to market these creations, someone else does it and reaps the rewards. I would rather see our auto industry handouts go towards this marketing
          One of the areas we should investigate and develop intensely is solar energy and storage thereof. If we could develop an electric powered vehicle system with "refueling" points that were powered by solar energy, we would get the world's attention. Our problem will be the existing vested interests of the petroleum and auto manufacturers trying to torpedo this technology, get on with it Australia.

          Commenter
          Cwagey
          Location
          Wallsend
          Date and time
          December 12, 2013, 8:50AM
          • If you have a well designed product and a business plan, you will always find finance. Would you prefer to produce it cheaply and avoid the legislative OHS and environmental bumps? Produce it offshore. The International Standards which are called as part of the Free Trade Agreements do not extend to anything other than quality which is 'fit for purpose (ISO9000)'. Product safety, manufacturing safety are not covered , and environmental factors are only covered by ISO14000 which probably does nothing. The playing field is not level, and the Yanks actively worked to prevent that situation in 1992 at Geneva when ANSI representatives cynically opposed development of an ISO for workplace safety. If the workplace is unsafe, it is reflected in the product. You will note that the details of the recent FTA negotiated by Andrew Robb with Korea are secret. It is in our interest to know the content of the agreement.

            Commenter
            optimistic
            Location
            indi
            Date and time
            December 12, 2013, 10:05AM
          • My partner works for a business which manufactures high quality solar 'technology' products. Engineering innovation is fostered and incorporated into the manufacturing process. The high Aussie dollar has adversely affected international sales of the products and the high cost of housing (for non-investors) precludes the addition of solar technology into the building of homes. Manufacturing's future in Australia appears bleak because of the Dutch disease and the current government is unlikely to remedy this situation anytime soon. Mining loves the high Aussie dollar afterall. The loss of car manufacturing is also the loss of engineering/intellectual innovation and skills. If my partner's employment is terminated because of dwindling sales we may have to consider moving to Norway where billions of dollars have been earmarked for development of solar technologies and where engineering expertise will be in demand. Gas and oil deposits are finite and Norway has already factored this in to the future direction of their economy with investment in sustainable technologies. Australia did have a similar opportunity but that has been stymied by our current 'government', which is not of the people but for the mining corporations. Santa may have to give my family a teach-yourself Norweigan CD set for Christmas.

            Commenter
            werdoomed
            Date and time
            December 12, 2013, 10:27AM
        • A lot of things often depend on 'critical mass' for success. Losing our car industry makes things that much more difficult for manufacturers of exotic accessories and components. Where is the skills base, if it is not exercised ?

          Commenter
          notso optimistic
          Location
          indi
          Date and time
          December 12, 2013, 8:50AM
          • Australia was, is and will continue to be difficult to influence its dollar and the exchange rate no matter what it does that is acceptable internationally, because the country's size and ability is just too small to have an effect.
            However, the idea to join forces with other car makers is a good one to keep some parts makers in Australia. Presumably, other policies such as car packaging can be used to support that as well.
            Further, to concentrate resources in one car makers to have a greater scale to reduce cunit costs and competitiveness may be another way to go.

            Commenter
            Lincoln Fung
            Date and time
            December 12, 2013, 9:42AM

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