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Mitsubishi: writing is on the wall « Previous | |Next »
May 22, 2004

Mitsubishi Motors states that it will use a $5.7 billion package to expand its Asian operations rebuild its market in the US and repair its brand in the Japanese market. It plans to slash its global workforce by 30%, reduce production capacity by 17% and trim debt by 40%. This is a company in big trouble. As part of the restructuring the Lonsdale engine plant in Adelaide is to close.

Yesterday's editorial in The Australian on the winddown of Mitsubishi's manufacturing plants in Adelaide was pretty harsh. It said:


"The Howard Government must hang tough and promise no more public money for Mitsubishi. As reported in The Australian yesterday, the Government is considering more assistance if the crippled car company decides to shut its Adelaide plants...Mitsubishi has received about $300 million in loans and grants from the state and federal governments in recent years. To empty another bucket of public money over its 3,500 workers would be an act of highway robbery against every other Australian taxpayer. And it would not even secure the workers their jobs."


Now there is little point in the state or federal government propping up a run-down Londsdale engine plant that has declining orders. It may well be the case that Mitsubishi has no long-term future as a manufacturer in Australia, even though a further $600million will be invested in Tonsley Park assembly plant for the launch of the new model Magna next year. Mitsubishi may well pull out by 2011 at the end of what was considered the viable lifespan for the new Magna.

But should not something be down about the workers of the Lonsdale engine plant to prevent them from being thrown onto the industrial scrapheap? The Australian did not think so. It says that:


"If Mitsubishi does decide to close the Adelaide plants, it will not be the fault of the workers. They will be the victims of the company's global bad business plan...Certainly the loss of the Mitsubishi plants would be a cruel blow to the workers, plus people in companies that supply components. Estimates of the flow-on effect put total job losses at anything from 8,000 to 20,000. But whatever the number, it would not be the end for South Australia. A survey of the state's exporters this week found that about two-thirds expect orders and staff numbers to increase in the coming year."


That is true. But would the displaced workers be able to pick up those jobs without extensive retraining? The Australian is not interested. The editorial ends by saying:

"Nor does it matter if Australia loses the weakest of its four car manufacturers. In the globalised car industry, using taxpayers' dollars to keep a dying company alive will never succeed. The Howard Government should let nature take its course and leave Mitsubishi to live, or die, as its own strength dictates."


The workers have to make their own way in the marketplace. Too bad if they cannot pay their mortgages or do not have the appropriate skills to find a new job. That is their problem.

The Howard Government thought otherwise. It announced a federal government injection of $50million to help the sacked workers and create new industry jobs in South Australia. The $50 million is for structural adjustment and job creation in South Australia.Of the $50million, $10million is set aside for job training, while the rest is to help attract new manufacturing investment to Adelaide's southern suburbs.

Nick Minchin said it was a good news day. What needs to be said is that keeping the Lonsdale assembly plant open is a stay of execution. Exports have been part of the rationale for keeping the plant alive, but export line has been canned. And the company still has to make a decision on the regional R&D project in Adelaide. Since Mitsubishi's next Magna now relies heavily on a diminishing band of Australian buyers prepared to buy a tainted product, I cannot see Mitsubishi Australia making a buck from here. The writing is on the wall.

South Australia needs a new industry policy. One that will lead to a growing and diverse manufacturing sector based around research and development. Why not start with renewable energies?

| Posted by Gary Sauer-Thompson at 10:56 AM | | Comments (7)
Comments

Comments

Renewable energy would be an excellent start, but I think we have a lot more to offer. R&D needs a huge boost, from which new and unthought-of ideas will flow. Unfortunately this needs courage and faith in the long term, two things that have been lacking in our business and political leadership. There are however, some positive signs with the state government's new strategic plan - let's hope this gets implemented unlike previous plans out of North Terrace.

Jock,
Renewable energy is really pie in the sky unless you radically alter the constitution of the marketplace ie carbon/resource taxing. This would give an economy the incentive to begin to take the economic lead in this area, as well as ameliorate some of the structural adjustment pain, that's inevitably coming.

As for handouts to Mitsubishi workers and the like- Why not an Ansett type levy on the outputs of Holden and Ford workers, or a Supermarket levy on Coles and Woolies to assist small retailers, etc, etc? Oh yes, the Observa would like a legup too in his business, as another worthy cause. Still, if I owe the bank a $1000 and can't pay, I've got a problem, wheras if it's a $mill, they've got a problem. That's politics I suppose. Some of us thought Centrelink was the answer, for those who occasionally run into major potholes, along life's bumpy economic road.

Observa,
all you need to do is to increase the MRET (Mandatory Renewable Energy Target)target from 2% to 5% then to 10% over the next decade.

That amount of sourcing of electricity from renewable energy would enable the development of a green manufacturing industry in SA.

Observa,
two points.

1. regional development. There does need to be an emphasis on developing a regional economy in a global world.It was one that should be facilating the development of a knowledge economy not subsidising the sugar industry.

2.Centrelink is there for the uenmployed. But there needs to be retrainign and reskilling not just waiting for the market to create new jobs.

Gary,

cannot agree more - knowledge based industries are the way forward and are just what SA needs to prosper. This cannot happen if its just left up to the market - it may work in the large markets of the US and Europe - but we are small and have a very risk averse business culture. That is why we need to invest in education, R&D and high-skill training so that a knowledge based industry can develop.

I fear I am in a gloomy mood today. I do not think even the development of knowlege based industries can do much to prevent our state's inevitable decline. The thing is that such industries require a great deal of investment in education and yet are unable to employ large numbers of people. How many of these new industries can really employ people by the thousands in the way that Mitsubishi did?

One part of leadership is in managing expectations- and I think we are doing a poor job of that- the govt's strategic plan wants us to have the lowest unemployment of the states in a few years time. I think we have to accept that double digit unemployment is to be our lot in the future. Many people simply aren't cut out for the intensive training required for the new industries.

Now the only real contribution economics has to provide in all of this lies in the marginal analysis behind those supply/demand curves. The one thing they tell us is that you can control the quantity or the price, but not both, or you get black markets. My criticism of the green movement, is they come down heavily in favour of quantity controls like MRETs. The logical extension of this quantity control preference, is to mandate certain purchases of things like Mitsubishi cars(particularly for govt purchases). Where does this sort of command quantity inevitably lead? To the Dept of Cars producing grey Trabants. You only have to peruse The Greens policy website, to ascertain how they want us all to travel.

One inescapable fact presents itself. We are running down fossil fuel reserves and must face reduced usage. You can raise the price to do this, or invoke quantity rationing, with its inevitable black markets.

Fossil fuels coupled with the computerised distribution, extends the reach and concentration of the megacorp. It is anathema to regionalism and localism. Welcome to the globalisation phenomenon, that has been gathering pace and sophistication, since the printing press and steam engine. We let this continue, by allowing capital to use 'cheap' fossil fuels ie the private cost to capital is way below the social coast. Then we levy income taxes and payroll taxes to raise labour costs to uneconomic levels to compete locally(here the privately cheap fossil fuel enabled supply chain, enables cheaper labour from faraway places like China) In doing this it has increased the overall fossil fuels used in transport.

This constitutional 'free' market we inherit from the science of muddling through historically, is but one of many we could implement. We could have another, which does not levy income or payroll type taxes, but taxes resource use/consumption. Lower the price of labour cf capital and classical economics will describe the inevitable result for you. It would also raise the cost of doing business from far away- ie reverse globalisation. Isn't this what the green movement see as desirable?

Now Jock raises the furphy about knowledge economies. This is all very fine if you can lead the pack, by trading knowledge services for real goods(resources and fossil fuels) from faraway places. It suffers from the fallacy of composition, that somehow we could all do this, in some magical, environmentally free way. In actual fact we want to decrease the use of fossil fuels and hence rely more on human physical output. It is a pipedream to think knowledge alone, can achieve this.

The problem for this market green, is that while I and most of the population, share the ideals of The Greens, I part company with these communard, control freaks, on the means to that end. Have no doubt, The Greens will gather increasing electoral support. However, their problem comes, when they are in a position, to implement their control agenda. The electorate will reject this, the moment they wake up to the means on offer.