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Metalworking industry to suffer if car makers leave

By: Kalon Huett, IndustrySearch Editor
22 August, 2013

Australia's metalworking industry has been through some tough times over the past decade or so, with strong competition from low-cost labour countries such as China, coupled with our over-valued dollar.

Thankfully sanity has set in on exchange rates, but the industry could be facing a far more serious problem with the prospect of Australia losing its last two car makers.

Ford has already announced it will no longer make cars here after 2016, so what if Holden and Toyota up stumps and leave?

Paul Philips, managing director of Benson Machines says the closure of Toyota and Holden factories would have a devastating effect on our metalworking industry with companies to close and jobs to go.

"The critical mass of car part suppliers is a major issue, that's where the value add is for Australia, the manufacture of all the parts of the car. Holden and Toyota are really just assembly plants.

"The problem is if the car industry was to close, it would never come back. The skills would be gone forever, and that would have a cascade effect on other manufacturing industries, making it harder and harder for them to survive.

"And it's not just technical skills, like most other suppliers in the metalworking industry, we have learnt a lot from the car makers, which we pass on to other industries.

"For example, we have learnt about process capability and the way the car industry maintains quality. We are now teaching that to our other customers.

"This is just one small example, there are thousands of others out there of ways the car industry benefits Australia," he said.

Philips points to the upcoming closure of ACL Bearings in Tasmania as a key example of losing expertise. 

"The company has developed considerable amount of knowledge in powdered metallurgy technology here in Australia – that will all be gone soon."

Philips says to ensure we have a viable car industry we need to level the playing field, and have reciprocal tariffs on imported cars.

"I'm a free marketeer, I don't like to see import duties, but if other countries have higher tariffs, then we should impose the same. We don't need to make martyrs of ourselves.

"For example, if a country has a 28 per cent import duty on cars then we should have a 28 per cent import duty on their cars. It should be tit for tat," he said.

Philips welcomes the federal government's recent move to force all Commonwealth departments to purchase locally made cars, but says all levels of governments – state and local – should also do the same.

"Of course if someone needs a 4WD or a luxury car, then okay, but really it should be part of all governments' purchasing policies," he said.

Buy local cars

Tony Sprague, director of CNC Machinery Sales Australia, agrees, saying all our governments should be buying 100 per cent locally made cars.

"To me it's ridiculous for a government department to buy anything but an Australian made car.

"There should also be a level playing field for our car makers, the present system where we only put five per cent on imported cars and other countries impose something like 20-25 per cent is crazy.
 
"Our car industry is one of Australia's major manufacturing sectors and is a strategically important part of the Australian economy.

"And it's not just the actual car makers themselves; it's all the component manufacturers as well."

Sprague points out that while Australia has three car makers at present (Ford to close its Geelong and Broadmeadows assembly plants in 2016) there are over 200 companies directly linked to them, employing around 250,000 workers in total.

"If Holden and Toyota were to go, it would have a major impact on our industry.

"While we don't sell machines direct to the car makers, we do to many of the suppliers to the car industry, big ticket items like machining centres and CNC lathes.

"If the car makers were to close it would be one more nail in the coffin of manufacturing.

"It's vital Australia has a manufacturing industry, we shouldn't have all our eggs in one basket," Sprague said.

Skills lost

While most companies in the metalworking industry would be severely impacted by the closure of Holden and Toyota's manufacturing plants, Kemppi Australia's managing director David Green believes the closures would have minimal impact on his company.

"That might sound strange, but a lot of our business comes from the after-market, from the repair shops and the body shops.

"The car industry uses a lot of robotic welding, where we are big, but not in the automotive welding robotic space.

"But for those players who have a large business with the actual manufacturing of motor vehicles, the robotic welding power source suppliers, they would be severely affected.

"While they have already sold the machines, it's the consumables and guns that are replaced on a regular basis that will impact them," he said.

While it is clear many of the skills learnt in the car industry will be lost, Green says there is a clear global trend in the increase in robotic and automated welding power sources compared to manual welding machines, which are contracting world-wide including countries like China.

"The first reason is productivity; there is a lack of skilled labour around the world, even in China.

"In Australia we have a severe lack of qualified skilled welding labour, and not just in automotive.

"For us, who manufacture manual welding machines, we are having to produce machines that can make average welders, great welders," Green said.

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Fred Stanvic | Friday, August 30, 2013, 12:46 PM
Quote "Tony Sprague, director of CNC Machinery Sales Australia, agrees, saying all our governments should be buying 100 per cent locally made cars. End quote Once the Government gets involved the numbers and economies get skewed - this ends up bad for Australia. I agree with the tit for tat on tariffs though.
Warwick Cuneo | Friday, August 30, 2013, 10:55 PM
Who does Machinery Sales and Kemppi reckon they're kidding? Our machine tool manufacturing effort went down the tubes YEARS ago, well before any ructions in the car industry. Does MS and Kemppi assert that their products, like Austrlian cars, are made in Australia? Assembled, maybe, but made here? Yeah, right...... Agree entirely on the tariffs, though. Level playing fields? My eye. We start the 'fix' by corralling the unions, then electing COMPETENT governments, of whatever colour.
Mark Wilson | Sunday, September 1, 2013, 6:13 PM
I wrote a similar article in my blog last year http://lathemillmechanical.blogspot.com.au/2012/06/state-of-engineering-in-victoria.html
Hedley | Monday, September 2, 2013, 8:30 PM
Our problems go far deeper than just losing the spin-off from a pending loss of car companies. I subcontact my services to the car and rail industries. I am amazed at the loss of engineering know-how at these places over the last twenty years. On a broader scale we lost the ability to make a difference when our society broke the chain that linked the semi-skilled people to the trades-skilled people to those with a diploma and then the degree in engineering. That loss was when the Technical Schools were wound up. That was when the kids with no interest in an education, but with brains, lost their second chance at life. Little chance after that for any of them to discover the wonder in actually making something with their hands. Then we had the Dawkins plan with the HEX fee financing for anyone to go to university. That drained most of the bright kids from applying for an apprenticeship. To put the icing on it, for the University Industry, the minimum age of seventeen was introduced before kids could leave school. So, first accept that the employee feed for apprenticeships has been damaged by government policy. Then understand that it is not just the low labour cost in the third world countries that take our manufacturing industries from us. These countries also have no Environmental legislation costs, no superannuation costs, little if any annual leave and no leave loading, and their office staff pick up training from our expatriates that accompany the transfer of our manufacturing businesses, and then our gullible public service accept Free-Trade Agreements without an understanding of what it does to the rest of us. The chain has been truely broken that once linked the Australian ideal of a Fair Go to the rest of us. Well, what are we going to do about it? There are plenty of jobs in manufacturing if our society is prepared to learn from our mistakes.
Lloyd Joseph | Thursday, September 19, 2013, 6:08 PM
As a country we no longer appreciate manufacturing. I remember Bob Hawke saying we were the clever country. Unfortunately people believed him. What we were was lucky that earlier politicians had put in place tariffs allowing the creation of a great manufacturing base. Industry was developed during and after WWII and the leaders at the time said we should never let our industry be in such a poor state again. We were 'clever' but only because we had great opportunities for training and an outlet in industry where we could build on our learning. Now our industries are slowly dying as tariffs are removed and our ability to educate is dying with them. One example in the '70's was plastic machinery. We had more than 12 injection moulding machinery manufacturers or assemblers. The Productivity Commission (equivalent) decided to drop tariffs saying 'the strong would survive'. Now we have none! Many service people were apprentices in these companies. Where do they come from now? (457 visas) The scary part is we haven't learnt from history. I am sure many readers have their own examples. What's that? You say our neighbour Malaysia has a thriving auto industry and no tariffs? Yes, we signed a 'free trade' agreement with them last year. Our 5% tariff no longer applies to their exports. However their import permits prevent meaningful exports from Australia and they still apply a tariff to a Holden Cruze until 2016. After that it may not matter because Holden may not be here. Now we have Ian MacFarlane to support us again. His latest words give me no confidence that he has learned from history. All he is saying is how good he was in the past!
Hedley | Friday, September 20, 2013, 4:03 PM
To put our national interests to the side for a moment, we could see this as an opportunity for those of us left in the real world. For mine, I accept that the TAFE system has been effectively downgraded by the university take over. Their product (apprentices) will not improve. The kids will still come to us for the real stuff and we will change our refund-of-school fees policy as the university introduces their HECS fees of $20K for the three year course. That's going to upset a few. For mine, I am presenting an alternate for my business group at out October conference: In summary it moves to a closed shop on knowledge of any new type. It moves to apply "intellectual property" rules to this knowledge. It moves the group into a serious business model to gain size in our market and to get a competitive edge. It moves into a secure internet-based supplementary training scheme for our key people. It moves the group up the market further into the higher dollar value work and with it higher wage structures to retain the key people. The group will move to become a stronger participant in the market. That is, if I can sell the concept. You can rest assured that I am not waiting for politicians to fix the problems affecting my industry. Nor should you wait for them to fix yours.