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Thread: Australia auto industry

  1. #1
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    Default Australia auto industry

    Hey BigFella, you must be up on this stuff, is the Oz auto manufacturing disappearing?

    http://www.smh.com.au/business/era-o...523-2k48f.html

    Industry leaders have warned the closure of one big car maker would likely result in the industry shutting down. In frank comments last month former global Ford chief executive Jac Nasser, now BHP Billiton chairman, said the end of car manufacturing appeared ''inevitable''.

    Read more: http://www.smh.com.au/business/era-o...#ixzz2UxdhHRXu

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    Default Re: Australia auto industry

    There's been suggestions that it is (disappearing). One of my guys has been corresponding with Jac, so I might have to leave it at that.

    I'm not sure I've made up my mind whether it'd be good or bad yet.
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    Ford has flagged it's exit in a year or three, economies of scale will probably mean the demise of many small parts suppliers as Toyota and GM are not a big enough market to sustain them. I think, unless a government decides to finance a manufacturer for strategic reasons, they will all go.
    The local saloon racing scene is quite strong but has been fuelled by the rivalry and the supporters of GM or Ford cars. Bathurst being the yearly culmination event. The competition will look quite different without the factory teams and the privateers supported by the big rivals.

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    Default Re: Australia auto industry

    Quote Originally Posted by The Bigfella View Post
    I'm not sure I've made up my mind whether it'd be good or bad yet.
    Y'all should give it up, concentrate on what you do best. . . . . . . . digging up your precious mineral wealth and selling it without regard to who or without adding any additional value to it. <sigh> If only that Spitfire thing could have come through for you. . .
    Last edited by Paul Pless; 06-01-2013 at 06:38 AM.
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    Default Re: Australia auto industry

    That's a fair analysis Paul, and I can't see it changing soon. Oh yeah, and we're flogging our agricultural land off to the Chinese as well these days, vertical integration of the food chain doncha know. Before them it was the Brits, then the Yanks, then the Japanese so it's a process we're used to. And all those shiny new buildings going up? Chinese money, sometimes Chinese labour, but she'll be right, both our major political parties say so.

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    Default Re: Australia auto industry

    Quote Originally Posted by Paul Pless View Post
    Y'all should give it up, concentrate on what you do best. . . . . . . . digging up your precious mineral wealth and selling it without regard to who or without adding any additional value to it. <sigh> If only that Spitfire thing could have come through for you. . .
    Sure beats specialising in Walmart-style retail.

    There's not a 40 year old in Oz who's ever gone through a recession during their working life... except those who worked in the USA, UK, etc, etc....
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    Quote Originally Posted by The Bigfella View Post
    There's not a 40 year old in Oz who's ever gone through a recession during their working life... except those who worked in the USA, UK, etc, etc....
    Enviable. There's similar periods in many other economies, including the United States, most recently circa 1939 - 1974. The questions are, what are you doing with your wealth to make your economic growth sustainable? Are all segments of your population sharing in your wealth, indigenous peoples, women, immigrants, other minorities? Is your environment compromised by the extraction of your mineral wealth? Are you setting aside money and resources and investing in skills now, to overcome future environmental issues if and when your resources become either supply or demand compromised?
    Last edited by Paul Pless; 06-01-2013 at 08:25 AM.
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    Default Re: Australia auto industry

    Quote Originally Posted by Paul Pless View Post
    There's similar periods in many other economies, including the United States, most recently circa 1939 - 1974. The question is, what are you doing with your wealth to make your economic growth sustainable? Is your environment compromised by the extraction of your mineral wealth? Are you setting aside money and resources and investing in skills now, to overcome future environmental issues if and when your resources become either supply or demand compromised.
    Hell yeah, we were doing lots of good stuff... up until "we" elected a government in 2007 that decided to open our borders to all comers, to write cheques to everyone to buy flat screen TVs and to export our carbon production (ie manufacturing jobs) to China. We've got that down pat now. Ford's just the latest in the queue
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    The now extinct Pontiac GTO was a Holden wasn't it? Really a neat idea. Mid sized sedan with a corvette motor.
    The suspension was crap, but that's easy enough to fix.
    Wasn't a big seller here in the US. Some complained it was too understated, though to me that's a good thing.
    Fight Entropy, build a wooden boat!

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    Default Re: Australia auto industry

    Quote Originally Posted by Reynard38 View Post
    The now extinct Pontiac GTO was a Holden wasn't it? Really a neat idea. Mid sized sedan with a corvette motor.
    The suspension was crap, but that's easy enough to fix.
    Wasn't a big seller here in the US. Some complained it was too understated, though to me that's a good thing.
    Anyone who'd driven a decent car didn't want one.... but as a car for the masses, it was OK, if a bit wasteful of resources. Just a pity that the gubbies had to throw in $30k of "support" every year, per car manufacturing employee. There's a few reasons for that.
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    So the ride wan't akin to a luxo-barge then?
    Quote Originally Posted by Reynard38 View Post
    The now extinct Pontiac GTO was a Holden wasn't it? Really a neat idea. Mid sized sedan with a corvette motor.
    The suspension was crap, but that's easy enough to fix.
    Wasn't a big seller here in the US. Some complained it was too understated, though to me that's a good thing.

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    Default Re: Australia auto industry

    Quote Originally Posted by The Bigfella View Post
    I'm not sure I've made up my mind whether it'd be good or bad yet.
    What'd you decide?
    Simpler is better, except when complicated looks really cool.

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    Default Re: Australia auto industry

    What other Australian industries does the collapse of auto manufacturing put at risk?
    Simpler is better, except when complicated looks really cool.

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    Default Re: Australia auto industry

    Quote Originally Posted by Paul Pless View Post
    What other Australian industries does the collapse of auto manufacturing put at risk?

    It'll probably boost the coal export trade a bit... the Chinese, Thais and Koreans will need some more cheap energy. Funny thing that.... we used to have competitive energy costs... I wonder what happened there?
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    "we used to have competitive energy costs... I wonder what happened there?"
    We sold it. At present energy consumption is falling, but to keep up the (private) shareholder returns the companies keep putting up the supply charge. Of course not all states are playing this game, yet. The Feds are not amused. It's ideological of course.

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    Default Re: Australia auto industry

    Should the government allow the automakers to disappear to make room for a new industry manufacturing robots or some other product that will create quality employment for future generations ?

    when do you kill a legacy industry ?

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    Quote Originally Posted by slug View Post
    Should the government allow the automakers to disappear to make room for a new industry manufacturing robots or some other product that will create quality employment for future generations ?

    when do you kill a legacy industry ?
    interesting thought, australia has a lot going for it: highly educated workforce, abundant natural resources, well developed capital markets. . .

    curious that they can't support any type of advanced manufacturing
    Simpler is better, except when complicated looks really cool.

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    Default Re: Australia auto industry

    Maybe they're following the US model, Paul!
    There's a lot of things they didn't tell me when I signed on with this outfit....

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    Default Re: Australia auto industry

    We dodged the GFC but the chickens are coming home to roost I fear. BF and the right will tell you it's the Unions, but the exchange rate has had more to do with it. It's ideological.
    The left? Emasculated by their own internal conflicts and a leader not in control of his own party appointments.
    We'll just have to get used to it.

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    Default Re: Australia auto industry

    With an effective minimum wage around $20 an hour (and I imagine a minimum award wage in the car industry well above that) and no real economies of scale, it isn't possible to compete. Locally made car sales have been falling for years, mostly in favour of foreign four wheel drives, which are essential kit to drop the kids off at school.

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    Quote Originally Posted by Phil Y View Post
    mostly in favour of foreign four wheel drives, which are essential kit to drop the kids off at school.
    i feel your pain
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    Default Re: Australia auto industry

    Quote Originally Posted by Paul Pless View Post
    interesting thought, australia has a lot going for it: highly educated workforce, abundant natural resources, well developed capital markets. . .

    curious that they can't support any type of advanced manufacturing
    I dunno, it seems that manufacturers prefer a poor workforce that will accept whatever they are given.
    If you cant make it accurate, make it adjustable.

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    Default Re: Australia auto industry

    Quote Originally Posted by Paul Pless View Post
    interesting thought, australia has a lot going for it: highly educated workforce, abundant natural resources, well developed capital markets. . .

    curious that they can't support any type of advanced manufacturing
    We do have a defence based manufacturing industry which does some really clever things. Tiny though by world standards, and of course it's 100% government subsidised. For a whole lot of reasons defence based companies are simply unable to compete in the commercial world.

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    Default Re: Australia auto industry

    A car manufacturing industry in Australia is possible at between A 65 and 80 cents US, that seems to be about it. For a few reasons that I do not understand the A dollar remains about 10 cents higher than it should be but in the long run this thing called globalisation will see the third world manufacturing capacity being imported into every first world nation and first world manufacturing industry as we know it disappearing altogether.
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    Default Re: Australia auto industry

    I doubt its viable even there Peter. Just not sustainable without ongoing massive subsidies. What do you reckon the hourly wage rate is in Thailand, Vietnam, China, Korea?

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    Default Re: Australia auto industry

    Michael Porter summed it up pretty well with his Five Forces model about 35 years ago... and its still valid. The difference with the Aussie auto industry as it stands now is that government has finally realised that all its meddling is only providing a benefit to a small section of the population... and to some foreign shareholders... at an unreasonable cost to all Australians. The issue, as Paul alluded to.... is how far does the auto industry reach within the economy?
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    A reasonable analysis of the situation....

    AND then there were none. Late in May last year, Ford announced it would cease its vehicle assembly and engine production in Australia in October 2016; just before Christmas, General Motors Holden followed, with its closure due to occur by the end of 2017; and last week was Toyota’s turn, with its manufacturing operations also set to close by the end of 2017.

    However, the pain won’t end there, as the parts producers, who account for around three-quarters of the industry’s employment, struggle to adjust. And with overall unemployment rising, the pressure on governments to “do something” will only increase.

    But if there is a lesson to be drawn from the industry’s prolonged agony, it is that governments are far better at postponing the inevitable than at changing economic realities. Yet government after government offered false hope to the industry’s workers, while throwing taxpayers’ dollars at ventures that could never pay their way. And the risk now is that rather than learning from that failure, we will see the mistakes repeated, not merely in manufacturing but in areas stretching from aviation to drought relief.

    That the car industry’s manufacturing operations are unviable is scarcely news. Along with high input costs, the small scale and fragmentation of the local market meant those operations could survive only if they were heavily protected; once the tariff walls came down, and assistance was provided as subsidies with a visible and growing budgetary cost, the writing was on the wall.

    But that the industry’s end was a death foretold does not mean nothing was done to bring it about. On the contrary, the rising likelihood of demise seemed to trigger a process of self-destruction similar to the kind that evolutionary biologists have analysed in plants.

    In that process, a parasite that is symbiotic to a plant’s growth while the plant is healthy unleashes a feeding frenzy once it goes into decline. The gains from co-operation having been exhausted, the parasite turns on its host, extracting as much as it can before the host’s collapse, thus making that collapse all the quicker and more certain.

    That the mechanics of the industry’s end are more complex than that analogy implies is obvious. Yet it is also clear that as the industry entered its last act, its costs spiralled out of control. International comparisons of competitiveness are fraught; but the US government’s Bureau of Labour Statistics finds Australian car producers’ overall compensation costs (expressed in US dollars) increased far more rapidly than those in other high-income countries. Simply blaming that on the appreciation of the Australian dollar would be facile.

    Obviously, a rising exchange rate meant even unchanged Australian labour costs would translate into a greater amount at world prices; but what made Australia distinctive was that the pressure that created on the industry led to so little offsetting response.

    After all, Australia is hardly alone in having experienced rapid currency appreciation: since the collapse of Bretton Woods in the early 1970s, large gains in the value of the currency have occurred at least once for every significant car-producing country. Moreover, Germany, Japan and South Korea have each gone through sustained exchange rate appreciations, challenging their firms’ ability to compete domestically and internationally.

    Faced with that challenge, firms in those countries secured far-reaching wage moderation and greatly increased efficiency.

    Take Japan: in 1970, its unit costs of producing cars were 30 per cent below those in the US, thanks largely to lower wages. But that advantage disappeared as the yen’s effective exchange rate nearly doubled. So the Japanese producers reacted by putting a lid on wage growth and raising product quality, while increasing productivity nearly three times as rapidly as their American competitors.

    The result was that by 1984 the Japanese producers’ cost advantage was even greater than it had been before the yen soared.

    Much the same can be said about Germany, not only immediately after the end of Bretton Woods but also more recently. From 1999 to 2010, a period that saw a substantial rise in the euro, German unit labour costs, expressed in US dollars, increased far less than those of the other European countries, thanks to greater wage moderation and more rapid technical advance.

    But there were few signs of such adjustments here. Rather, while estimates are not available for the car industry alone, multi-factor productivity (which measures output per unit of input) in Australian manufacturing was actually lower in 2011-12 than a decade earlier.

    Yet wages growth in manufacturing accelerated (even exceeding the growth rate of wages in mining), dramatically worsening the effect of the rising dollar.

    Whether the assistance the industry received encouraged that process or merely accommodated it will always be controversial. What is certain, however, is that public largesse allowed it to go on for much longer than it otherwise could have.

    Over a period of years, the industry was therefore able to attract the employees whose futures are now threatened.

    True, most will eventually find jobs in other activities. Yet studies of the closure of Mitsubishi’s operations find that well more than half of those retrenched suffered a decrease in income, an outcome entirely consistent with similar studies overseas. That finding is telling, not least because it contradicts the claim that the industry’s high wages merely reflect its workers’ ability to secure well-paid employment elsewhere.

    Far from developing skills that are especially valued in the economy as a whole, and hence deserving of public support, much of the industry’s employment is relatively low-skilled, and while skills are acquired on the job they are rarely highly portable.

    But as well as being telling, those significant income losses are also worrying, for the danger of hardship now extends from the assembly sector to the much greater numbers employed producing parts.

    No doubt, some parts producers will survive. However, the production of auto parts is very closely tied to the designs and specific requirements of individual assemblers; and it is difficult for component suppliers to operate without tight, ongoing links to the firms that put vehicles together and take overall responsibility for their quality.

    As a result, while 75 per cent of the value added in a vehicle comes from components the assemblers purchase, the component suppliers are far weaker than those in say, computers, where design and branding are only partly under the assemblers’ control: “Intel inside” means something to buyers of PCs, but “Delphi inside” would never sell a car.

    Once the assemblers shut down, the local component firms will therefore be stranded, and only a handful can remain viable through export sales or by diversifying their product range. The job losses announced so far are consequently likely to multiply.

    Unfortunately, there is little reason to believe adjustment packages, such as those implemented to assist workers and communities in earlier shut-downs, would do much to ease the pain.

    While the evidence is mixed, the Productivity Commission’s recent report on the industry is right to question whether those programs are effective, much less provide value for money. Nor is pessimism about those programs surprising.

    The fact of the matter is that once people have been attracted to an unviable industry, and communities have come to depend on them, public policy does not have a magic wand that can turn back time. At Holden, the average career has lasted 17 years, at Toyota, 13; turnover is likely to be higher in the parts industry but there, too, many workers’ human capital will now be hard to change.

    Unable to make everything right, governments should therefore accept that policy failures, such as those that have scarred our auto industry, have costs that are as high as they are enduring. And that should caution against interventions that lure resources into traps from which exit is painful and laborious.

    But history shows that the political pressures to intervene, and to keep ill-judged interventions in place, are not about to disappear. Paul Keating, for example, played an important role in starting the process of removing protection, with the then opposition’s strong endorsement; but once John Hewson suggested the future of the car industry be left to market forces, Keating didn’t hesitate to reverse course, launching his 1993 election campaign with the promise that “We will make sure that Australia keeps its car industry.”

    Now, Labor lacks any credible plan for ensuring the industry’s future; but that won’t stop it attacking the government for facing the facts. Yet Labor’s opportunism cannot be an excuse for perpetuating past errors, much less extending them to new areas. The car plants being prepared for closure, and the families preparing to lose their livelihoods, surely prove the stakes are just too high.

    As cabinet members consider Qantas’s request for loan guarantees, and Barnaby Joyce’s proposal to scale up assistance to drought-affected farmers, they should therefore have Ford, Holden and Toyota firmly in mind. The embodiment of lost hopes and lost opportunities, they are the legacy of other good men and women who once sat in those chairs. Their intentions were honourable; their results will haunt communities for years to come.
    "Travel is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome and charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime" Mark Twain... so... Carpe the living sh!t out of the Diem

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    Default Re: Australia auto industry

    Quote Originally Posted by The Bigfella View Post
    Michael Porter summed it up pretty well with his Five Forces model about 35 years ago... and its still valid. The difference with the Aussie auto industry as it stands now is that government has finally realised that all its meddling is only providing a benefit to a small section of the population... and to some foreign shareholders... at an unreasonable cost to all Australians. The issue, as Paul alluded to.... is how far does the auto industry reach within the economy?
    $17 per person per year as I understand. Not a lot really, a coffee every 10 weeks ?
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    Default Re: Australia auto industry

    For those that dont know, all car making in australia is set to close by 2017. At present we have Ford, GM (Holden) and Toyota. Ford is to close in 2016, Toyota and General Motors is to close in 2017

    Why is complex,

    high australian dollar, high wages, low production volumes, free trade agreements, low tarriffs, unions not willing to comporomise, very diversified car buying culture in Oz (people buy all sorts of different cars, making economies of scale difficult).

    There were/are subsidies to car makers, but apparently these were not enough, I think there is a general 5 percent import tarriff, though with more free trade agreements with more countries this is getting less. Then there is the direct assistance. I think next one of the rank is a free trade agreement with Korea.

    Funny thing is that many people that want an australian car industry drive and imported car. Farmers drive Toyota Landcruisers, tradesman drive Mazda BT50 utes, housewives drive susuki 4wds, idiots drive Subaru WRXs, rich youngsters drive minis or bmws. Who buys an australian built car anymore, take out taxi drivers and government fleet buys and you find very few.

    Australia's economy is still very strong, last quarter we had a trade surplus, wages are very high, work at a supermarket and you earn 20 US dollars an hour as a casual, how many other countries have such high wages. Then there are specilast fields, minining industry, train drivers etc, tradesmen, generally earning well over 100,000 dollars a year, (well over 90 thousands US dollars a year). Add to that a ten percent superannuation which goes on top, add free health care. If you get sick and need to go to hospital, wont cost you a cent. Need an operation,,, costs you nothing.

    So I think in longer term australia was just too small to support car making, the economies of scale just are not there. Add to that our high labour costs,,, and it just does not make sense.

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