EDITORIAL: by Peter WestmoreNews Weekly
Mitsubishi closure a blow to our manufacturing
, February 16, 2008
Australia, if it wanted to, could build a substantial car manufacturing industry, boost car exports and cut our soaring import bill.The closure of the Mitsubishi car manufacturing operation in South Australia has been threatened for years, but the decision to wind down the local manufacturing operation is a shock for Australia, and represents a serious blow to local manufacturing in this country.
But it could be a catalyst for renewal of the industry.
While some have claimed that the cause of the closure is the small size of the Australian market (one million vehicles sold per year), only about 19 per cent of cars sold in Australia were manufactured here, and about 81 per cent are imported.
This level of Australian production is far lower, on a per capita basis, than in most comparable countries.
Craig Milne from the Australian Productivity Council has pointed out that in the year 2000, if Australia had matched the production of the UK industry (the worst performing industry in Europe), local output would have been 542,000 vehicles.
Mr Milne knows what he is talking about. The Australian Productivity Council provides consultancy services to most parts of the motor vehicle industry, including the assemblers, component-suppliers, retailers, repairers and insurers.Other countries
He added: "Had we managed to equal the French output, we would have produced 935,000 units, the German 1,214,000, Canadian 937,000, Swedish 876,000 and the Japanese 1,268,000 units. The mean per capita production equivalent of this group of countries would, if matched by the Australian industry, give us an annual output of 960,000 units."
While size is an important issue in motor vehicle manufacturing, Sweden has a strong and viable industry with a population far lower than Australia's.
The three remaining manufacturers in Australia - Ford, Toyota and General Motors - produce family-sized sedans. All other vehicles, from small cars to SUVs, are manufactured overseas. There are, however, over 200 Australian manufacturers of components used in locally and imported vehicles.
In all countries where a motor vehicle industry has been successfully established, it is because it has the strong backing of government. As this has diminished in Australia over recent years, the proportion of locally manufactured cars has fallen sharply. The result is that imports have grown to over $20 billion a year.
Unless the new Federal Government gives a lead, there will be more closures, and the import bill will rise even further, worsening Australia's serious current account deficit, and manufacturing industry will fall below critical mass.
What can be done? When the motor industry faced what seemed to be a terminal crisis in the 1980s, the last federal Labor Government introduced a plan to ensure the continuation of motor vehicle manufacturing in Australia.
At the very least, there should be an urgent inquiry into proposals to ensure the continued future of this industry, as an essential component of Australia's manufacturing sector.
There are people with detailed expertise in the industry who have given urgent consideration to this issue.
The Australian Productivity Council has already put forward such a plan. It has proposed that Australia should aim to manufacture as many cars as are sold in this country. Whatever is not sold here should be exported overseas.
The House of Representatives inquiry into the auto component manufacturing industry in 2006 recommended that the Federal Government review the Automotive Competitive and Investment Scheme this year, to assist the Australian industry to be globally competitive.
The Society of Australian Industry and Employment, in a submission to the parliamentary inquiry, pointed to a number of ways to build a viable car manufacturing industry.
One suggestion was that the Federal Government should "facilitate a steady enlargement and restructuring of the domestic industry into a form that would build a wider and more diverse range of vehicle models and sizes".
It added: "While this industry could still comprise a number of firms, or 'prime contractors', to use an aerospace term, they would share between themselves three or four different sized vehicle platforms."
It suggested that Australia should facilitate a shift from an industry formed around the four multinational companies, operating with quasi-vertical integration and dominant party relational contracting with suppliers, to encourage an Australian-owned manufacturer, using horizontally connected component and system providers.
"This model would build on a number of supplier firms concentrating on the various automotive systems: engines, transmissions, electronics, braking systems, steering and suspension components, with other firms pressing metal, welding body structures and completing assembly work for different brands."
It said that this would enable a proliferation of brands, sizes and models, with a high level of differentiation, thus maximising the prospects of increasing the domestic market share by driving off imports. In the absence of any alternative, this plan should urgently be put on the table.- Peter Westmore is national president of the National Civic Council.