Car industry job losses: It will affect us all

by Cameron Edmond09 Jul 2013

A domino effect of job destruction is set to hit Australia if the lay-offs in the car industry continue, The Federation of Automotive Products Manufacturers (FAPM) has warned.

The rate of vehicle production in Australia is dropping, with projections of 215,000 vehicles produced in Australia for 2013, contrasted with the 407,000 produced in 2004.

The FAPM stated that for every direct job generated in the car industry, four-to-six positions in ancillary organisations such as automotive part manufacturers are created. If the current rate of termination continues, it is estimated 300,000 jobs will be wiped-out in the next five years.

“Make no mistake - people must realise that there are hundreds of thousands of further jobs that will be lost in Australia unless critical steps are taken now to alleviate the current crisis,” Richard Reilly, CEO of FAPM, said.

“Every car we make has 30,000 individual parts. The futures of all the people who make these components, right across the country, are in limbo right now,” Reilly said.

“In absolute terms, the sector has grown but its importance to our overall economic prosperity has declined dramatically,” Christopher Tipler, author of Corpus RIOS, told HC.

Tipler highlighted reasons in addition to the domino effect as to why a vibrant manufacturing sector is necessary in Australia.

In order for a strong defense force, basic weaponry must be developed here, as well as skilled professionals who can maintain the more sophisticated, imported equipment. “This is a threshold here; below a certain point we will not be able to maintain the required critical mass in heavy engineering, metal fabrication, electronics and other fields,” Tipler said.

The expense of importation is another concern for Tipler. The price of the vast array of imports Australians enjoy has risen, and while mineral exportation currently affords this, the mining boom may have peaked. “Broadening our export base around manufactured products is the only answer here, unless we are prepared to live with a permanent reduction in our standard of living.”

Education and skills are straddled by manufacturing. Tipler highlights the diverse range of abilities that are necessary in the industry, and that through acquiring the required skills young people are given a “truly interesting and worthwhile alternative to spending time on Facebook..

Finally, Tipler stated that the dignity and satisfaction that comes from making things is a reason in-and-of itself to support the manufacturing industry in Australia.

Tipler feels that a major problem is the lack of an effective industry policy in Australia. “The nub of our industry policy problem is that it is approached by policy makers almost purely from a theoretical economic perspective when it is largely a commercial matter,” he stated.

Tipler offered the government of Bavaria as a prime example of successful promotion of the manufacturing sector.

He highlighted Bavaria’s emphasis on its long history of craftsmanship, commitment to “family” ownership in which owner-managers rub shoulders with workers, long term vision, selling of niche products, innovative management approaches with cautious financial structuring and close work with universities.

Additionally, Bavaria features a ‘Job for life’ approach to employment, and harmonious industrial relations in which unions and business owners work together instead of at odds with one another.

Tipler feels the Australian Government can learn a lot from Bavaria. One Bavarian policy – Kuzarbeit – that Tipler highlighted involves the subsidising of companies that cut down on hours instead of staff.

Although governments can intervene, a heavy weight rests on the shoulders of HR to help organisations through this painful period. “HR professionals have to become the chief 'storytellers' for their organisations. They have to help the transitions by understanding the strategy of their business, translating it into a story that makes sense to employees,” Tipler said.

“In other words, they must play a high level role and not get stuck in tactical stuff such as negotiating with unions and outplacement. A much broader HR lesson has to do with imagination and innovation … how can HR professionals foster a culture of more positive attitudes and risk taking?”

 

 

COMMENTS

  • by Chris Golis 9/07/2013 7:50:47 PM

    Why should ordinary Australian taxpayers have to pay for the production of cars they are shunning as consumers?

    Should Australia have a car industry at all?

    Supporters of an industry – any industry – always come up with the same arguments: it is a major employer; it generates technological spill-over effects; and it is ‘strategic’ for Australia's defence (though the term is seldom defined).

    The closer you are to an industry, the more such arguments seem to make sense. After all, nobody likes to see a big employer disappear from one’s city or state. And of course there will always be a few successful or innovative parts of the sector. But do they justify keeping the whole industry alive at enormous costs?

    A dispassionate look from the outside may aid a more balanced view. The same arguments being made for keeping Australia’s car manufacturers alive have been made for Germany’s coal industry for decades.

    Since the late 1950s, German black coal could no longer compete with imported coal – much of which came from Australia and cost between a third and half the price compared to domestic deep-mined coal. For employment, technological and strategic reasons, German governments continued to subsidise mining for decades at a total cost of about $430 billion with no success in making the industry competitive with countries like Australia; subsidies are scheduled to be phased out by 2018.

    From an Australian perspective, it is obvious that Germany’s coal subsidies were a complete waste of money. All these years, Germany could have imported cheaper energy from Australia while saving enormous amounts of money – money it could have spent regenerating former coal towns.

    It’s the other way around for Australia: Instead of pumping in billions of dollars into the car industry, Australia could have imported vehicles from countries that are simply better placed to produce them on a large scale. Countries like Germany, for example.

    Australia's car industry is a bucket of wasted subsidies and transfer payments to foreign owners. Australia needs a car industry as much as Germany needs its own black coal mines.

  • by kevin 10/07/2013 1:52:41 PM

    What is missing in all of these is a sensible long term vision and plan for the future of Australian industries. With this a sensible transition plan could be developed. For example it is irresponsible to have a vision for a clean energy policy if there is no transition plan to give effect to this. To switch from one to the other without a transition plan would leave us all literally in the dark.

    Some leadership would not go astray.

  • by Joe 10/07/2013 5:29:50 PM

    Chris,

    Your argument while presented logically, has some basic flaws.

    If we compare apples with apples rather than mining vs automotive - the German government spends 5x the amount, per vehicle produced, that the Australian government does on subsidising it's car industry.

    The automotive industry isn't asking for excessive handouts to keep a dying industry alive. It's only asking for the playing field to be level set with every other country in the world that produces cars.

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