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July 19, 2012
Ford Australia's recent firing of 440 staff from its manufacturing operations in Melbourne and Geelong primarily comes from its bad corporate governance. It is a failure to adapt to a changing market--rising fuel costs, the shift in consumer preferences for smaller, more fuel efficient cars, and the emergence of electric cars. Unsurprisingly, the Ford Falcon has had poor sales.
Why would you provide protection and subsidies for such a company? The shift noted above has been coming for many years and Ford Australia has been a dumping ground for second-hand technology by Detroit, which has not allowed its local subsidiary to be innovative. So Ford Australia continue to produce large, fuel inefficient motor vehicles, and they sell fewer and fewer vehicles.
Australian governments have compounded the problem because they have refused to introduce emission standards on Australian cars that have been in place for five to ten years in other developed countries. Secondly, the Australian car industry persists only because of industry protection and government subsidies designed to prevent industry collapse.
The Australian market is too small for car manufacturing. Nissan has gone. Followed by Mitsubishi. Is Ford next? Those that remain must innovate and export if Australia is to have a car industry.
The global market shift to low-emitting, fuel-efficient vehicles is going to make it difficult for the local car industry--- which produces predominantly large, high-emitting vehicles – to compete internationally. High emission standards mean Europe and parts of Asia no longer want locally produced cars.
Anna Mortimore rightly says:
Simply throwing money at the local car industry will not necessarily increase sales and save jobs. Funding should not be supported if the local car industry fails to make the necessary technological changes to significantly reduce emissions of its large vehicles to meet the government’s proposed targets. The industry must also introduce new fuel-efficient vehicles that consumers would rather buy.
Australia doesn't need an backward looking industry dependent on corporate welfare to survive. In a global market Australia needs an industry that expands the technology base--eg., ensuring that Australia is not left just with internal combustion production and R&D, but that it is centrally involved in designing and making alternative car power plants.
Update
An editorial in the Australian Financial Review entitled Car industry is not worth the price argues thus:
the problems of the domestic car industry are likely to become worse, with local car plants already operating at below optimal scale. ....Multinational car manufacturers are too accustomed to working the old political economy of Australian protectionism that delivers handouts from the government when they run into trouble, rather than becoming efficient enough to stand on their own two feet.....A fully fledged car industry capable of designing and producing a new model from concept through to on-road testing confers prestige, and has an innate appeal.....But that prestige is unlikely to be worth the annual price tag, estimated by the Productivity Commission at $1.6 billion a year in industry subsidies.
It concludes by saying that in the midst of a mining boom that is generating severe skill shortages, those funds would be better directed to pursuing our comparative advantage in resources and mining-related services, rather than throwing subsidies at an industry that is not market focused and does not deliver on promises it makes.
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"In a global market Australia needs an industry that expands the technology base ..."
And we can and could do just that all by ourselves without foreign ownership and control.
We have all the necessary requirements - knowledge of and availability of hi-tech [and, incidentally the NBN will be a help in this regard -and others[, skilled work force, ample capital just begging to be put to productive use, a screaming need for the manufacture of relatively low carbon using machinery and products, and not just in the automotive field, the physical infrastructure is already present, but underutilised.
So what is stopping us?
Intellectual and political inertia and unthinking subservience to the demands of overseas corporations who care give a .... about Australia.
Just like we copped out of the renewable solar boom and allowed our potential to escape overseas,we have adopted the same short sighted masochistic and inferiority complex attitude to manufacturing in general and the auto industry in particular.
Sad.