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the writing on the wall « Previous | |Next »
December 10, 2013

The signs are pretty clear. The Abbott Govt's position is clear.

There will be no more public subsidies for an unprofitable car industry that requires corporate welfare to survive in Australia. If it was to remain in Australia GMH would have to do so by relying on its own resources, not public funds. The Abbott Government is pulling the plug. So let the domestic car industry close. Hockey's argument is that Australia’s long-term economic prosperity will be best served by the efficient allocation of resources, primarily via flexible market forces.

The economic reality is the high Australian dollar, almost no tariff protection, large car sales have nosedived in the domestic market, and export markets have dried up largely due to the unexpected strength of the Australian dollar that has made imports cheaper and exports tougher.

PopeDindustrycar.jpg David Pope

If Holden goes in 2017, Toyota will follow it out of manufacturing in Australia, since the critical mass in the supply chain is lost. A network of suppliers would then collapse. So we have a declining manufacturing sector that is the unavoidable consequence of the resources boom. Does the decline in local auto manufacturing matter in an open, competitive, flexible economy?

Well, what isn't going to happen from an Abbott Government is a commitment to more specialised, highly skilled and knowledge-intensive Australian manufacturing sector. The future for manufacturing is one driven by high skills, knowledge-led innovation. That presupposes a highly skilled workforce. That isn't going to happen under an Abbott Government.

According to GM in Detroit, Australia was suffering a severe case of ''Dutch disease'' - an economic malaise by which a mining boom had pushed up the local currency and wages for industrial workers.Without government assistance, GM's head office in Detroit had decided that making cars in Australia no longer added up - to the tune of $3750 a car per year.

Devereux, the GMH managing director, told the Productivity Commission he did not have to eliminate the entire $3750 gap, just enough to keep his masters happy. What Holden needed was a further commitment of $150 million a year from the government through to 2020 - roughly $2000 a car built. With that, Mr Devereux could get the numbers to work. In return, Holden would continue making the VF Commodore and Cruze in Australia until 2017, and then commit to build GM's next generation global car in Adelaide until 2020.

GMH needed a public-private partnership over the long term to be able to be relatively competitive. They had brokered an enterprise bargaining agreement with the unions that enshrined a three-year wage freeze and won an extra 16 minutes of work time per employee a shift.

The Abbott Government refused to come to the table. Instead, Acting Prime Minister Warren Truss and Treasurer Joe Hockey launched an attack on GMH in parliament. Detroit pulled the plug. Their political strategy was to ensure that they were not seen as culpable for the decision and not on dealing with its consequences. The Coalition had no alternative plan in place to deal with either the political or policy fallout of the GM Holden decision with respect to the workers, the components industry which relies on the car manufacturers and the state economies in Victoria and South Australia.

| Posted by Gary Sauer-Thompson at 3:00 PM | | Comments (9)


The Abbott Government says it is opposed to handouts to Holden and Qantas. Their problems are their problems, not the governments. More specifically, a dominant group of MPs, known as economic "dries" and led by Treasurer Joe Hockey, are determined to cut off the funding for Holden and leave management to their own devices.

Yet the Abbott Government has no problem with large government subsidies to the fossil fuel industry or to agriculture. Why are the dries silent?

Holden is pulling out of car manufacturing in Australia in 2017. It's all the ALP's fault according to the Coalition in QT. They failed to address the "fundamental economic issues".

Mitsubishi pulled out of Australia in 2008 and Ford will end production in 2016. Holden’s departure makes it very difficult for necessary supply chains to continue for the single remaining manufacturer, Toyota.

The Coalition says good riddance to Holden. According to Hockey the GM’s American management has been playing the government, the workers and the Australian public for mugs. GM, Hockey says, had been treated as a privileged corporation, receiving billions of dollars of assistance. It was time to pull the plug and say good riddance.

Where will the jobs come from for the laid off auto workers in South Australia and Victoria?

GM are closing up shop because it is in their commercial interests. The sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world make it unprofitable for them to continue manufacturing in Australia.

Yes, there are the foreign exchange, local costs, small market etc. issues.

But there is also the fact that GM is abandoning the Chevrolet brand in Europe, which was sourced from S.Korea. That leaves surplus capacity in GM's S.Korean factories. Australia and S.Korea recently signed a free trade deal, which will reduce tariffs on cars and parts. That would be very timely if GM wants to use spare S.Korean capacity to service the Australian market.

It looks to me as though we are the victims of a multinational's global strategy, and that neither Australian political party has really understood what is going on.

"Where will the jobs come from for the laid off auto workers in South Australia and Victoria?"

Where will the employment in high value, high knowledge sectors will come from? Or does Australia face a future based on commodified service jobs in tourism, care services, retail and other services?

All we get at the moment is the standard verities about niches, innovation, strategic approaches, high labour costs and high expectations etc etc

And then of course there is the Abbott Govt's. recent decision to reverse the previous Govt's. tightening-up of Fringe Benefit Tax exemptions for cars. With Holden going, the FBT exemption is more than ever a subsidy to foreign manufacturers.

"Where will the jobs come from for the laid off auto workers in South Australia and Victoria?"

No problems. The workers in SA can all go and work for BHP at Olympic Dam according to Abbott.

He doesn't seem to realise that the Olympic Dam has been put on hold because the numbers don't commercially add up.