Take the car industry. It.....

[johnydep]

This quote goes with previous debates I've had about Australia not being capable of sustaining 3 automotive vehicle manufacturers. Our Government and industry need a better plan!

"Take the car industry. It directly employs only 46,000 workers, with perhaps 200,000 in total employed, directly and indirectly. (The total Australian workforce is close to 11.5 million and it is not uncommon to see 25,000 new jobs created in one month.) The plants are hopelessly sub-scale by international standards and the Australian public is increasingly reluctant even to buy the cars that are produced. Were it not for government fleet purchases, at least one of the manufacturers would have already quit the country."

Nothing new or green about rust-bucket industries

by: Judith Sloan, Contributing economics editor
From: The Australian

JULIA Gillard has told us that we are going to "build a new Australian economy". But if we are building a new economy, why would we worry about the old bits, such as the sub-scale and unprofitable car industry or the old technology, emissions-intensive aluminium industry?

It's hard to see what's new about these rust-bucket industries.

Take the car industry. It directly employs only 46,000 workers, with perhaps 200,000 in total employed, directly and indirectly. (The total Australian workforce is close to 11.5 million and it is not uncommon to see 25,000 new jobs created in one month.) The plants are hopelessly sub-scale by international standards and the Australian public is increasingly reluctant even to buy the cars that are produced. Were it not for government fleet purchases, at least one of the manufacturers would have already quit the country.

Let's face it, the Australian car industry has had many more lives than the average cat. First, there were those years of resistance to the removal of quotas and the cuts to tariffs. Then the hands shot out for transitional assistance -- read, enormous sums of taxpayer dollars. The budgetary assistance is currently running at $160,000 per worker per year, with total protection amounting to an average of $7000 per car.
Top 50 Business Marketing Placement

Now the pretence of temporary handouts has given way to the Orwellian term, "co-investment". Not that taxpayers will be receiving any equity in the operations. Nor can they hope for any financial return on the investment. Co-investment is just another term for large, open-ended subsidies.

The fact that we are still having this debate is extremely depressing for all those who fought the good fight during the Hawke-Keating years and which was progressed, albeit more slowly, under Howard and Costello.

Propping up industries in which Australia has no comparative advantage simply reduces per capita income below where it would be otherwise and sucks resources from areas where we can compete unassisted. It is about preferring one group of workers over others.

All this chatter of spillover effects and high multiplier effects is just rationalisation for these multinational companies having a lend of the Australian taxpayer. The numbers are just too small to justify the current level of subsidy, let alone the level of subsidy envisaged for the future. After all, the industry had assured us the degree of assistance could be phased down over time.

Now we are being told by the car companies that we will be on the hook for ever if we want them to stick around -- a form of industrial blackmail, if there ever was one.

We are now also facing the possible closure of the old-technology, energy-inefficient aluminium smelter at Point Henry, just outside Geelong. It is easy to see the closure of Rio's smelter at Bell Bay in Tasmania being not far behind.

But surely that should be OK with the government? After all, we are not only building a new economy, we are going clean and green. It is hard to see how aluminium smelting can fit these descriptors.

It is estimated that Alcoa Australia has received a total of $4.5 billion in subsidies for its plants at Point Henry and Portland. The current electricity subsidy arrangements are coming to an end in 2014. There are no reasons why aluminium smelting should occur in Victoria; in fact, there are strong reasons why it should not.

In the case of the Point Henry smelter, there are 600 direct employees and possibly the same number again in indirect employment. These numbers are very small, even when judged in relation to the Geelong labour market.

Yet, the local Labor federal member of parliament is talking about "no stone being left unturned". But why? The intention of the implementation of the carbon tax is to reduce the relative importance of emissions-intensive economic activities and there are not many more intensive than aluminium smelting.

Why not start with the closure of Point Henry? It could make a big contribution to the bipartisan target of a 5 per cent reduction in emissions by 2020. The Treasury's modelling envisages a significant shrinking of aluminium smelting as part of the government's "clean energy future".

Now, many people will be able to appreciate the merits of allowing companies to compete without recourse to taxpayer subsidies, but will naturally worry about the fate of the workers who lose their jobs as part of the transition away from industry protection.

The evidence is actually quite hopeful on this score, particularly if certain steps are taken. Indeed, the experience of the 1970s and early 80s was that the number of jobs in highly protected industries continued to fall, notwithstanding the high tariff wall that existed at that time. There is actually quite limited scope to prop up employment in highly subsidised firms -- the Australian car industry has been a case in point.

When the Mitsubishi factory closed its doors in Adelaide, workers had been given a long period of notice and were assisted in the processes of retraining and job search. Both the state and federal governments were involved. Many workers remained in the area and a high proportion secured alternative employment, including the setting up of businesses. We need a political leader to state the obvious, just as Paul Keating did all those years ago -- "People have found better jobs. I mean, did we ever hurt anybody liberating them from the car assembly line?"

There is no reason to think that the workers from old industries who are displaced to make way for the new economy cannot handle the transition. The government should be concentrating its efforts on this front, rather than handing out cash and other incentives to see companies limp on for a few more years.

We should be supporting the Prime Minister's vision for a new economy which, in her words, "will be more adaptive, flexible and able to seize new opportunities than ever before". It will be a case of out with the old and in with the new, so the structure of industry actually reflects our true comparative advantage, rather than relying on the generosity of the taxpayer.

http://www.theaustralian.com.au/news...-1226270122823

[Gobes32]

A bit of a green slant in that article, however, where are all the jobs that will replace the existing ones? Who is investing in Victoria for instance?

[johnydep]

Originally Posted by Gobes32

...where are all the jobs that will replace the existing ones? Who is investing in Victoria for instance?

Same place the ones for the Mitsubishi workers came from. There was also the Bridgestone factory closure.

Like the article says; at the moment all three manufacturers are shrinking their work force. How long can it go on for?

I beleive that we can have a car industry, but not all three.

[Iggypoppin']

My old man says sometimes, "Australia has no place making cars anymore." I hate agreeing with it but sometimes I think he has a point...
A difficult time we live in.

[prydey]

Originally Posted by johnydep

I beleive that we can have a car industry, but not all three.

if we can't support 3, then how can we support less??

if one goes, that is a third less parts that need to be made. no company can afford that, so if one goes, surely the whole industry goes with it! otherwise you end up with local manufacturing that gets most parts from offshore anyway.


i don't think the 'anti auto industry' is justified. if the govt don't want to keep handing out money, then protect it in other ways and increase the tariffs again.

[johnydep]

Originally Posted by prydey

if we can't support 3, then how can we support less??

The following figures are not correct, this is an example only.

Three car manufactures build and sell a combined total off 6,000 cars per month; 2000 each.

One closes up shop, the other two manufacturers take up a percentage of the vehicle sales. Both manufactures sell a combined total of 5000 vehicles; 2500 each.

Only one manufacturer remains in operation, total vehicle sales is 4000 per month.

It's all in the marketing, and building the right type of vehicle.

Can it work, who knows?

Can we continue to go the way we have since the 1970's? All the facts and figures show us - no. We started with Leyland, Chrysler, Nissan, Mitsubishi, Ford, Holden, Toyota; we have only tree left, and they're all struggling. All three manufacturers have a shrinking work force, all three keep asking for hand outs.

It's not if, it's when.

[prydey]

this assumes that when one closes buyers will flock to one of the other 2. it doesn't always work that way.

if holden and toyota left, there's no way i could see ford doubling its local sales. same with the other scenarios. if ford and toyota left, would commodore go back to selling 6000/month? i doubt it.

if they changed to building mainly small cars, sales may increase but i'm led to believe there is much less profit in the small car segment.

instead of blaming the industry, it needs protection. we can't compete with offshore manufacturing.

[johnydep]

Originally Posted by prydey

this assumes that when one closes buyers will flock to one of the other 2. it doesn't always work that way.

if holden and toyota left, there's no way i could see ford doubling its local sales. same with the other scenarios. if ford and toyota left, would commodore go back to selling 6000/month? i doubt it.

if they changed to building mainly small cars, sales may increase but i'm led to believe there is much less profit in the small car segment.

instead of blaming the industry, it needs protection. we can't compete with offshore manufacturing.

I think that this quote was pointing towards Ford - "Were it not for government fleet purchases, at least one of the manufacturers would have already quit the country". And with Ford pushing the Mondeo, which is in direct competition to the Falcon, the quote has some merit.

As for picking up the sales from the other manufacturers; as I mentioned, it depends on the marketing and the type of vehicles.

Small cars are now starting to become more profitable than large ones, just look at how the Yank Ford and GM are pushing the Focus and Cruze with all the options.

Market research has shown that people are downsizing, but they still want all the nice bits; the leather, climate control, SatNav, etc.

The money is now in the small to medium market. The Focus and the Cruze are actually well thought out vehicles, they are 'big' small cars, and so overlap two segments.

The industry has know that changes were coming, the Governments have told everyone and released numerous reports, budgets and everything else since the 1970's. In the 1980's and then the 1990's massive changes were brought in by Government, as in dropping tariffs, but they also have been compensating the industry ever since.

The industry has either failed to act, or have not implemented the right strategy.

Hence my call for the Governments and industry to sit down together and come up with a comprehensive plan. The only down side to this is that Government will have to pick a winner.

Protection? The industry has been protected with Government funds for R&D, upgrades, etc. And with Governments buying their vehicles solely from them.

If this is not protection, I do not know what is.

As the article points out; even with heavy tariffs, those protected industries fail. Look at the old Soviet Union - massive protection to every industry in the country.

Besides, how will the Australian public handle new and used vehicle prices increasing 20, 30, 40%? Because that's the type of tariff protection required to get people back to buying local in large numbers. Bring the price of a Hyundai up to $45,000, then that $39000 Falcon looks really good. But hey, then the local seller thinks he can squeeze a little more because there's $6000 fat between the two makes. And on it goes; the buyer says stuff this and hangs onto his Falcon a bit longer, thus pushing up the price of used Falcon's, etc.

Sorry, no easy answers here.

[jpd80]

You guys know I'm normally up beat... but what I'm hearing from both sides of the fence is worrying..

At the moment, it sounds like buyers are not interested in Commodore or Falcon, sales are very slow....
I think you could make them both $29,990 drive away and still struggle to get buyers...


Time for the rum.....

[Bossxr8]

If Alcoa and Ford shut up shop Geelong would be a basket case.

Maybe we can all get jobs making windmills, cause they keep pushing this green jobs crap that barely exists and will never result in any serious job numbers. Such a joke.

[tranquilized]

Go through history and there are hundreds of trades, jobs, and professions that were big employers in their day but now just a distant memory.

If the auto industry cant survive in this country, as looks to be the case, life will go on. Anyone working for the local auto industry who can see past tomorrow would be taking steps right now, re-training to make the transition easier.

[phillyc]

Originally Posted by jpd80

You guys know I'm normally up beat... but what I'm hearing from both sides of the fence is worrying..

At the moment, it sounds like buyers are not interested in Commodore or Falcon, sales are very slow....
I think you could make them both $29,990 drive away and still struggle to get buyers...


Time for the rum.....

Which is why Ford needs to advertise the merits and the tech of the locally made Falcon and Territory. They made some great ads for the new SZ Territory with emphasis on tech and economy. The FG2 gets the same tech and will get that economy hit with EcoBoost but advertising is limited.

FG Falcon with EcoBoost = large car with better than Mazda 3 economy.
FG Falcon with smaller turning circle than most small cars.
FG Falcon with fold down rear seats in a sedan body. The only car in its class.
FG Falcon with 8" responsive touch screen (which shames the 7" slow touch of the VE)
FG Falcon with EcoLPi with the lowest running costs versus Corolla and Mazda 3.
FG FPV Falcon with hmassive grunt and better efficiency than rival HSV.

[babyf6]

Originally Posted by phillyc

Which is why Ford needs to advertise the merits and the tech of the locally made Falcon and Territory. They made some great ads for the new SZ Territory with emphasis on tech and economy. The FG2 gets the same tech and will get that economy hit with EcoBoost but advertising is limited.

FG Falcon with EcoBoost = large car with better than Mazda 3 economy.
FG Falcon with smaller turning circle than most small cars.
FG Falcon with fold down rear seats in a sedan body. The only car in its class.
FG Falcon with 8" responsive touch screen (which shames the 7" slow touch of the VE)
FG Falcon with EcoLPi with the lowest running costs versus Corolla and Mazda 3.
FG FPV Falcon with hmassive grunt and better efficiency than rival HSV.

Yet more people still go for the Lion.
It amazes me how 2 years of advertising a chevy changes how people see fords

[jpd80]

Originally Posted by phillyc

Which is why Ford needs to advertise the merits and the tech of the locally made Falcon and Territory. They made some great ads for the new SZ Territory with emphasis on tech and economy. The FG2 gets the same tech and will get that economy hit with EcoBoost but advertising is limited.

FG Falcon with EcoBoost = large car with better than Mazda 3 economy.
FG Falcon with smaller turning circle than most small cars.
FG Falcon with fold down rear seats in a sedan body. The only car in its class.
FG Falcon with 8" responsive touch screen (which shames the 7" slow touch of the VE)
FG Falcon with EcoLPi with the lowest running costs versus Corolla and Mazda 3.
FG FPV Falcon with hmassive grunt and better efficiency than rival HSV.

You can advertise till the cows come home, buyers for Falcon and Commodore just aren't there...

[big_landau]

problem is australians dont support australia,they tend to buy overseas products and thats whats doing us in.look at a lot of the countries in the world they take pride in what they make and usually support it by buying there own product.aussies on the other hand now tend not to,they want heinekein insead of a vb,they buy imported prawns over australian caught prawns even though the overseas prawns and fish like basa are fed hunman sh#*t and live in filth and they thrive on foreign cars.
sure i know you may pay a little more for a local product but i bet the quality is just as good if not better and we all benefit in the end,unfortunatley this is all an end of an era so we better get used to it.maybe i see the world different to most i dont know and to be honest i have lost the desire to care which is a real shame as this country deserves better but you can't keep flogging a dead horse with jockeys that have thrown the race.

[rev]

General Motors in the US had its main Key Performance Indicator (KPI) as market share ( from memory they wanted 29% of market share and it drove all their thinking). In attempting to reach their target they went bankrupt and had to be bailed out by the taxpayer via a loan. Ford on the other hand were more focused on profit and didn't go broke. Simplistic but you get the idea I hope.

I realise that market share and profit are correlated but I become concerned when people focus on more on market share that the profit. I would rather know the profit made each year/month than the proportion of market share or cars sold. If the company cannot make a profit it will not exist for long no matter how many cars they sell.

[jpd80]

The problem is that Falcon and Commodore sell mostly to fleets and they have gone off the bite...
I blame the two speed economy and changes to FBT regarding Novated leases. A lot of buyers
have rolled over existing leases for 12 months rather than taking up new vehicles,
this hurts Ford and Holden big time.

[1TUFFUTE]

i certainly cant speak for holden but some of fords products of late are so good its A DAMN SHAME that ford usa dont pull the dollars and export our awesome products like territory and fg falcon into the american or other markets. I mean aus is a very keen motoring country for its size...ford aus espescially has world dominating skills in designing and building cars and utilities. Would almost seam cruel for ford aus not to step up and give the aussie products a big chance. Ahh well its always sooo much harder in real life tho

[jpd80]

If Falcon continues to sell this badly, don't be surprise if that 2014 update gets amended or put on hold.
We will be lucky if Falcon survives for another two years, let alone arguing over a 2016 car...

[prydey]

its a bit harsh to make all these dire predictions on the back of a hail affected short month. if its still not picking up by mid year they might worry a bit more, but you have to give the new cars a chance.

[babyf6]

Originally Posted by 1TUFFUTE

i certainly cant speak for holden but some of fords products of late are so good its A DAMN SHAME that ford usa dont pull the dollars and export our awesome products like territory and fg falcon into the american or other markets. I mean aus is a very keen motoring country for its size...ford aus espescially has world dominating skills in designing and building cars and utilities. Would almost seam cruel for ford aus not to step up and give the aussie products a big chance. Ahh well its always sooo much harder in real life tho

Ford US would not do this as they already have the taurus and explorer etc. have a look on the website. Would be a good idea though

[EB#]

Then the hands shot out for transitional assistance -- read, enormous
sums of taxpayer dollars. The budgetary assistance is currently running at
$160,000 per worker per year.....

The article makes some very good points....
Surely the above figure could be better channeled into assistance, re-training
and job investment for displaced workers ?

[Nikked]

Originally Posted by phillyc

FG Falcon with EcoBoost = large car with better than Mazda 3 economy.
FG Falcon with smaller turning circle than most small cars.
FG Falcon with fold down rear seats in a sedan body. The only car in its class.
FG Falcon with 8" responsive touch screen (which shames the 7" slow touch of the VE)
FG Falcon with EcoLPi with the lowest running costs versus Corolla and Mazda 3.
FG FPV Falcon with hmassive grunt and better efficiency than rival HSV.

All of that is nice...but you can buy cheaper cars with enough features that people want...


Look at all the chery's and Great walls getting around.

People want more for less, and when they are spending more, they want most.

[EB#]

Originally Posted by jpd80

....We will be lucky if Falcon survives for another two years,
let alone arguing over a 2016 car...

Agreed. Surely Ford have already (long ago) made the decision on a successor to
the FG ? My guess is that they are not pumping 100's of millions of development
dollars into the next Falcon..... It doesn't stack up.

[SB076]

Hate to point out the obvious, but the issues this country face wont just affect the car industry. We are now seeing job losses in the retail and financial industries. At the end of the day - we are all competing with overseas workers and they will work for a lot less (not saying we should work for less) But i am suggesting Australia is in an intresting time at the moment.

Unemployment is tipped to rise and if the car industry were to shut up shop the loss of jobs and flow on affects of the loss of jobs would be quite devestating for our economy.

FYI I was informed and will see if I can find some facts but last year the governemnt purchased 21,000 vehicles from overseas - so its not as if they are supporting the local industry.

[SB076]

Originally Posted by EB92

Then the hands shot out for transitional assistance -- read, enormous
sums of taxpayer dollars. The budgetary assistance is currently running at
$160,000 per worker per year.....

The article makes some very good points....
Surely the above figure could be better channeled into assistance, re-training
and job investment for displaced workers ?

Add all jobs depending on what article you read the actual number of jobs supported by the industry is 100,000 - 200,000.

The biggest problem is that if you take even say 100,000 jobs out of this country - this will have flow on affects to other industries which in turn will snowball. The people that work in the automotive industry support other industries (tourism, retail, construction, financial and so on)

[joolz]

Was thinking about this last night. What if the Australian car industry was to shut down and we were dependant on imports. What is stopping the current cheap imports to rise say 100% as they know we have no choice. Its kinda like undercut the opposition and when you have the monopoly put up the prices.

[Polyal]

Originally Posted by jpd80

You can advertise till the cows come home, buyers for Falcon and Commodore just aren't there...

So if its price thats the issue cant Ford try a very very low finance rate?

Take the XR6 for example, at $35k if someone deposits $10k then they get a better rate again?

Because if Ford have gone through the effort of upgrading the powertrain to meet what consumers want thats great, but if they cant afford it in the first place then it doesnt matter how good the engineering is. This to me is why Holden sell more commies and Cruzes.

Maybe thats why smaller cars are selling well, because generally they are cheaper to buy in the first place and a little bit better on fuel. Im sure if you worked out the fuel consumption difference over a year (Ford I6 vs Mazda 3) then it would be a little bit but not the end of the world.

The clincher is $35k vs $22k....its tough times for most people at the moment..not just the car industry

[Kryton]

The real problem with the Auto industry in this country is solely the price of Petrol.
Knock that back to $1 a litre and you wouldnt be able to keep up with demand for new large cars.

[Polyal]

I thought we were doing alright by world standards.

The greens will kill that idea, even though you could argue it might generate more revenue through increase fuel consumption..maybe??