WHEN ALCOA announced a review of operations at its Point Henry smelter it was not just the 600 workers at the plant who got the jitters.
Employees in companies dependent on Alcoa contracts also saw the threat.
How many workers might lose their jobs at, for example, Brockman Engineering, which fabricates and repairs pots for Alcoa at its Corio plant, or at IXL Foundry, which is a preferred supplier for Alcoa?
And what job losses might flow from laid-off workers cutting back on purchases of everything from food and clothing to entertainment?
The overall answer is up to 3000 in a region where some suburbs like Corio have an unemployment rate of 10 per cent and the regional average is 6 per cent, compared with a national figure of 5.2 per cent.
If the worst happened and the plant closed, the district could see unemployment jump from 7000 to 10,000, out of a workforce of about 110,000. And the impact could be felt even as far afield as Anglesea, where 110 people work in the power plant supplying 40 per cent of Point Henry's energy.
But the mood now in the manufacturing-dependent and AFL premiership-winning Geelong region is far from gloomy. This year is not a repeat of the early 1990s, when many businesses closed, the Pyramid and Countrywide building societies collapsed, and nearly one-third of Geelong's automotive workforce lost their jobs, pushing unemployment up to 16 per cent.
David Sykes, the general manager of Backwell IXL, which owns the IXL Foundry, told the Sunday Canberra Times that in this time of adversity he believed his company could maintain its position in the marketplace. This is a strong statement given that Backwell not only supplies Alcoa from its foundry, but also services Ford and Toyota in the threatened auto industry. But Backwell - best known for its four-globe IXL Tastic bathroom heating and lighting system - has demonstrated resilience and, by adapting to change, has grown steadily. In its 150 years in Geelong, it has seen the town move from one dependent on wool exports and the textiles industry, to a diversified economy. Sykes sees this continuing and, among other things, gives credit to government programs such as the Automotive Supplier Excellence scheme for helping make it happen. He says this low-cost scheme, which his company uses, ''has made a significant difference to our business''.
But can, or should, government assistance be provided to support Alcoa? And if so, what level and type of assistance?
Alcoa is the world's largest integrated aluminium company with plants in 31 countries. In January it announced a fourth quarter 2011 loss due to lower metal prices and the restructuring costs of the closure of plants in Italy, Spain, Tennessee and Texas. Over a year the metal price has dropped by 15 per cent in US dollar terms but 20 per cent in Australian dollars.
As it contemplates the future for its 50-year-old smelter at Point Henry, Alcoa is building a state of the art, fully integrated, aluminium complex at Ras Al Khair in Saudi Arabia. The Saudi smelter and rolling mill are scheduled to begin production in 2013.
Australia is the world's largest producer of bauxite - the best raw material for aluminium production - and Alcoa has major mines in Western Australia. But the key determinant of where to locate an aluminium smelter is energy cost. In the past Australia was an attractive location thanks to Tasmania's cheap hydro-electric power and Victoria's cheap coal power. Alcoa's Point Henry smelter benefited greatly from its initial contract, getting electricity at giveaway prices in a deal signed by the Bolte government in the 1960s.
Today power costs account for about 20 per cent of the smelter's production costs. While much has been made of the impact of the carbon tax, the state government could, if it wished, ensure the viability of the plant by again offering cut-price electricity. But to do so would not only cut government revenue, it would encourage the consumption of highly polluting, brown-coal-generated electricity.
The political pressure is on both the federal and state governments. By most measures, Geelong is a relatively disadvantaged region. According to comparisons prepared by the Parliamentary Library, it has a high proportion of one-parent families with dependent children and more lone-person households and more low income households. Fewer people have internet connections. At the micro level, more than 70 per cent of students at Corio Bay Secondary College are from families in the lowest socio-economic status quartile. Even worse, in Corio the proportion of young people who are neither working, nor studying, is considerably higher than the national average.
The region is also more dependent on manufacturing with 16 per cent of its workforce in the sector. Manufacturing has always faced international competition, a challenge new technology is now bringing to other sectors, such as retail and financial services. Today the high dollar, brought about by the resources boom and the Reserve Bank's high interest rate policy, challenges all sectors, except mining itself. Economic theorists can no longer claim that unemployed manufacturing workers can easily shift to tourism or financial services.
Despite all the competition, Geelong still has Australasia's largest carpet manufacturer, Godfrey Hirst, employing more than 500 people and producing not only Hycraft wool-blend carpets but also a unique eco-friendly polymer carpet derived from natural cornstarch. The region can also boast the largest olive oil manufacturer in Australia, and products as diverse as ugg boots manufacture, military pyrotechnics and hospital supplies.
Such diversified companies are essential if Australia is to avoid being vulnerable when the mining boom ends.
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