AUSTRALIAN MANUFACTURING by Peter AbetzNews Weekly
How Australia can rebuild its car industry
, August 2, 2014
Western Australian state Liberal parliamentarian Peter Abetz (brother of Tasmanian Liberal Senator Eric Abetz) argues that Australia still has the capacity to develop a flourishing car industry.
Peter Abetz MP
I believe that the decision to allow the car industry in Australia to come to an end will have very serious implications, not only in the short term for employment, but also for the future well-being of our nation.
Over the summer holidays I read Bob Worth’s book, The Battle for Australia: A Nation and its Leader Under Siege (Macmillan Australia, 2013), which recounts much of the internal goings on of the Curtin government during the Second World War.
In this book, we read that Churchill was of the view that the first priority of the war was to defeat Hitler; that the Japanese advances in the Pacific were a secondary issue; and that if Australia were to be invaded, then so be it. Churchill was able to convince Roosevelt that the defeat of Hitler had to be the top priority of the Second World War.
At the time, Australia, even though it had a population of around seven million, had very limited capacity in manufacturing.
We were totally dependent on the goodwill of Britain and the United States to provide us with aeroplanes and military vehicles. Britain declined to make available any military supplies to Australia. Nor did America, initially.
The only reason Australia was not invaded was because the Japanese supply lines were so stretched that the Japanese decided that to invade Australia would be one bridge too far — although part of the Japanese military was keen to invade.
The lesson learnt by the Australian community at the time was the importance of having a sound manufacturing base. As a result, the postwar government encouraged General Motors to establish a motor vehicle manufacturing facility in Australia, which in turn helped to develop our engineering and manufacturing capacity.
Subsequently, other car manufacturers set up here. Ford already had an assembly plant in Geelong prior to the Second World War; but after 1945 we really began to develop our capacity.
We made Chamberlain tractors at an ex-munitions factory in Welshpool, Western Australia, and produced the Nomad aircraft. Australia deliberately developed very considerable skills in the engineering manufacturing field.
If our nation were ever to fall on bad times — which today certainly does not loom on the horizon, but one never knows what lies beyond — one can only wonder what the consequence will be if we enter a period of hostilities and have lost the expertise and manufacturing plants that could produce military hardware.
We only need to remember that the Russians, after the Germans began to invade in 1941, were able rapidly to convert their Stalingrad tractor factory into producing tanks. If we have no car manufacturing left in Australia, we simply will not have such a capacity.
It is often said that the Australian car industry is so inefficient that we simply cannot compete on the world market. While this is often repeated, it is actually far from true.
It is, however, true that our manufacturing plants have been so heavily unionised that we have too many very inefficient and very high-cost work practices in place. The reality is that the Australian car industry, according to the Australian Society of Automotive Engineers, is one of the least subsidised motor vehicle industries in the world.
Let me give you an example. In Germany, because of the country’s over-reliance on renewable energy, the cost of electricity has escalated to a point where many industries are looking to move out of Europe. To assist the motor vehicle industry, and to assist it in being competitive, the German government has decreed that car manufactures pay the cost of electricity at a rate equal to the cost of producing it from coal-fired power stations, which is the very cheapest available electricity.
This amounts to a multi-billion-dollar subsidy to the German motor vehicle industry. The Australian motor industry enjoys no such energy subsidy.
Or take Japan. The Japanese motor vehicle industry is heavily protected by the country’s corporate law, which prohibits any car-dealer selling more then one brand. Furthermore, no director of a company that sells a particular brand of vehicle can be a director of another company that sells a different brand of vehicle.
The result is that Japan has a very limited range of brands available on the market. This scheme very effectively protects its motor vehicle industry.
Here is another example of subsidies in other countries. When Ford Australia had plans in hand to begin producing the Ford Focus Sedan in Victoria for the Southeast Asian market, the Thai government approached Ford in Detroit and offered free land for a new factory and no taxes for a number of years. It was a no-brainer as to what Ford did. Thailand offered a far more attractive proposition.
To what extent is the Thai motor vehicle industry subsidised by government? Perhaps it’s not an overt cash subsidy. Rather, it’s a subsidy in free land with an exemption from taxes for a number of years, and so on.
It’s noteworthy that Ford has a development team in Geelong. That team has to tender with all other Ford countries to develop new cars. The Australian team is able to develop new motor vehicles as competitively as any other Ford development centre in the world.
The Australian team was awarded the contract to develop a new four-cylinder sedan for the Indian market. Why? Because Australia could develop this sedan more cheaply than India’s engineers.
The Australian team is involved in developing the new Ford Transit van for the world market. This van will be built in China, but the development work is being done in Australia. Why? Because it’s the cheapest place to do it, even though we have high wages.
It indicates something of the teamwork at which Australians excel and the level of expertise found amongst our engineers.
The other concern I have about allowing the automotive manufacturing industry to disappear from our shores is that it will have a flow-on effect to other manufacturing industries, including the aviation industry and other engineering-related businesses.
Australia has always been a comparatively high-cost country, but the subsidies that are offered by other countries are often ignored by those who talk about Australia’s industry being inefficient.
A further concern I have is this: In many ways, the demise of the Australian motor vehicle industry has been brought about in large part by the purchasing choices of Australia’s federal and state governments.
When Ford developed dedicated LPG vehicles, these were found to be cheaper to run than a small four-cylinder sedan. Our federal and state governments bought very limited numbers of these cars, but then ceased to buy them, because they lacked a five-star safety rating. This was because the LPG system was not responsive enough to facilitate stability control.
Ford invested in developing a direct-injection LPG system, then began to market it. Now we have an LPG Ford, that is five-star safety-rated. And how many cars did the federal and state governments buy? Virtually none.
If you go to Europe, it is very evident that governments purchase cars and vans that are built in their own country. But not in Australia!
We can look in our own backyard in Western Australia in the remote Aboriginal communities. Nearly every government worker there is supplied with a Toyota Landcruiser or Nissan Patrol.
Yet their job description is very clear that they only drive on roads, and certainly some of those roads are stony and at times muddy.
But an all-wheel drive Ford Territory Diesel — which is half the cost of a Toyota Landcruiser and uses at least 40 per cent less fuel — would do the job admirably.
How many Ford Territories do we find in the outback with government number-plates on them? None. Somehow, our government purchasing officers think that buying imported cars is a better option.
The demise of Australia’s car industry has multiple causes: inefficient work practices promoted by the unions and tolerated by the manufacturers and the government, and the motoring public not buying our cars. We only have ourselves to blame for the demise of this industry.
The question we need to ask ourselves is how little manufacturing can we do in Australia and still retain our standard of living.
The notion of a service-based economy is a fiction. We need to manufacture goods. We need to export from our primary industries.
But it is value-adding by manufacturing that generates sustainable employment. Unless we replace our motor vehicle industry with a strong alternative manufacturing industry that creates significant employment, I fear for the future of our nation’s economic well-being.
Peter Abetz MLA is Liberal member for Southern River, Western Australia.