The end looms for local car manufacturers?

[gunner]

The Sydney Morning Herald just posted this story. I don't agree with everything the author says but the last couple of paragraphs are interesting. Your thoughts?

http://www.smh.com.au/business/dumpi...203-1afg2.html

Dumping green car fund throttles industry
February 4, 2011

The government should be helping local car manufacturers that make more sustainable vehicles.

The death knell may have been sounded for Australian car makers, writes Ian Porter.

It has been said that politicians in both major parties wished the local car manufacturing industry would wither and die - they just don't want it to happen on their watch.
Advertisement: Story continues below

Now the floods have finally ushered in what decades of carping and criticism by the Productivity Commission could not; the final act.

The scrapping of the Green Car Innovation Fund will remove the central pillar of the government's industry policy, such as it is, and almost certainly bring investment by the three car manufacturers - Holden, Ford and Toyota - to an abrupt halt from 2011-12.

This means the myriad parts makers which support the three assemblers will also have no reason to invest. (Scrapping of the cleaner car rebate scheme will not be missed. It was not going to help local manufacturing, in any case.)

The green car fund has helped make the local car industry one of the more active and innovative in the few years since oil prices drove a dagger into the heart of the Australian six-cylinder car.

Since then, and despite the global financial crisis, local manufacturers have introduced Australia's first hybrid car (Toyota's Camry Hybrid), and committed to introducing a new small car (Holden's Cruze) and the release of a number of new, more fuel-efficient engines, including the country's first diesel engine (soon to be in Ford's Territory) in more than 25 years.

The traditional Australian family car is not dead yet. The Holden Commodore has been the nation's bestseller for 15 years.

Holden has already released a Commodore with a smaller, more efficient V6 engine and Ford is about to release a Falcon with an imported turbocharged four-cylinder, which will bring big economy and emissions gains for a large car.

The green car fund helped the Ford project get over the line, thus giving the Broadmeadows plant in Melbourne a much longer horizon.

Perhaps the most startling success of the fund was the decision by Toyota to build an entirely new engine plant to make four-cylinder engines for its local Camry range, including the engine that acts as a generator in the Camry Hybrid.

The Minister for Innovation, Industry, Science and Research, Kim Carr, has often noted that this is possibly the only new engine plant that any manufacturer has committed to anywhere in the world since the global financial crisis.

The fund has been an astonishing success, especially as the car makers have plenty of other governments around the world trying to attract their investments, and often fund them. Under the green car fund, car and parts makers can only receive up to a third of the money to be invested.

For years economists have insisted that Australia should dismantle its tariff barriers and get rid of any sort of assistance for car makers. They fail to note that Australia already has the lowest levels of assistance offered by any of the 15 countries around the world that can produce an entire vehicle, from the concept to the finished product.

The big difference between Australia and the other 15 countries is that the others are large enough to be able to ''manage'' imports from other countries in ways that do not break the rules of the World Trade Organisation.

Either that, or they ''manage'' their currencies to make imports too expensive in their home markets. Or, as Australia found with its trade deal with the Association of South-East Asian Nations, tariffs might fall, only to be replaced by stiff sales taxes.

The green car fund helped local producers through one of the most difficult periods of readjustment following the plunge in sales around the world caused by the financial crisis. Local production volumes were cut by more than a third, and could have prompted struggling overseas parent companies to make the hard decision to abandon manufacture in Australia.

Given that General Motors went bankrupt, Toyota slumped to its first loss ever and other manufacturers also had to shut many plants around the world, Australia can count itself lucky (or smart?) to have come through the crisis with its three assembly plants still in operation.

The automotive sector also occupies a strategic position in the Australian economy, and not just because it employs 60,000 people. The importance of the car industry to the manufacturing sector as a whole cannot be underestimated. It drives much of the innovation in materials like plastic, glass, textiles, electronics and metals.

It also provides the impetus, and often the means, for parts suppliers to be more efficient, and gives valuable base-load work to suppliers of equipment like robots and press tools, as well as logistics services and a host of other requirements.

The trade implications of Australia's appetite for imported vehicles often goes unnoticed. Since the tariff wall was dismantled, the share of the market taken by imported cars has rocketed past 80 per cent.

That adds more than $16 billion to Australia's trade bill every year, one that has persistently been negative in recent decades because, overall, we import more than we make. Australia is still running a trade deficit, even after a trebling of commodity prices in the past decade.

That means we are sending our accumulated wealth offshore or, worse, borrowing to fund consumption. Looked at it in its simplest terms, Australia exports iron ore at about $250 a tonne to Japan, China and other countries, and then imports it back in the shape of cars at the rate of $20,000 a tonne. That is not a sustainable business model.

Even if exports by local makers have dropped sharply since the financial crisis, cutting the car industry's export earnings, maintaining local production at least eases the trade deficit burden imposed by our insatiable desire for new vehicles.

Australia has to produce manufactured goods, to add value to its raw materials, if it is to make a living in the modern world. If it can't do that, it will become just another Pacific island. The car industry is still a great way to multiply the value of material and labour inputs to create wealth for a country.

Australia is risking a lot in order to save $401 million (and a few marginal Queensland seats?) in the years 2012-20.

The car industry was encouraged by government policy after World War II as a means of moving the economic base from primary industry to secondary industry. Value adding requires education, skills and investment. It provides relatively high-wage employment, tradeable goods and a stimulus to the supply sector.

To move backwards towards reliance on primary industry (agriculture and mining) by abolishing the main pillar of Australia's industry policy seems a shortsighted decision that will cost the country dearly in decades to come.

Ian Porter is Melbourne automotive journalist.

[bobthebilda]

Ian Porter is Melbourne automotive journalist

Like the article says, he is an automotive journalist. Whilst we may elect unknowledgable politicians to head up financial portfolios, they tend to be backed up by public servants who have some knowledge of Finances. I would tend to think that Ian Porter is not one of those trained financial experts, nor would he have any knowledge of manufacturing.

The fact is, the story is so full of holes, you could probably drive his australian car manufacturers sponsor cheque thru it.

They fail to note that Australia already has the lowest levels of assistance offered by any of the 15 countries around the world that can produce an entire vehicle, from the concept to the finished product

If we import half the components for the falcodore (and its going to be 70% for the cruze), how can it be said we produce the whole vehicle. Its like slapping a rego sticker on a corolla and saying it was made here.

Local production volumes were cut by more than a third

And yet car sales have been travelling at record rates. The local cars have just been replaced by the imported cars that people want.

The automotive sector also occupies a strategic position in the Australian economy, and not just because it employs 60,000 people

And some of these people sell, transport and service the 86% of the cars we import, who jobs will still be there.

The importance of the car industry to the manufacturing sector as a whole cannot be underestimated. It drives much of the innovation in materials like plastic, glass, textiles, electronics and metals.

Oh please Mr Porter, 90% of the textiles in aussie cars come from Thailand. A Tier one supplier importing parts, assembling them and then sending onto the car manufacturers is not innovation. Its called box opening.

Looked at it in its simplest terms, Australia exports iron ore at about $250 a tonne to Japan, China and other countries, and then imports it back in the shape of cars at the rate of $20,000 a tonne

What a poor basic understanding of economics. We export the copper used in the car ($10,000 per tonne), we export the coal used for the steel making, we export the gas for electricity generation, we export the nickel ($27,000 per tonne), and we pay the workers in these industries on average $100,000 per year, compared to the $50,000 per year in the auto industry (on the downward slope of competing with those overseas of $2 per hour, with 6 day weeks).

Mr Porter would do well to rally his own employer to support workers in the australian paper industry, and buy locally made paper, before he starts to preaching to others.
http://www.adelaidenow.com.au/news/s...-1225995683890

[fairBA]

Top effect bobthebilda. that reply would have take a while to type!

[BroadyFord]

I'm sorry but I have to disagree with you bobthebilda.

At least Porter's standing up for the local industry whatever way you read it. It's a welcome change from the so-called "journalists" who almost seem happy writing about the imminent death of the Falcon and other locally produced vehicles. I'm sorry but I think the majority of Porter's points are valid.

If locally produced vehicles (not just cars) are so unpopular to the Aussie buyer, why has IVECO announced a several million dollar investment at its Dandenong plant this week that will facilitate the significant ramping up of production of trucks? I suppose cars and trucks are two different markets but if you produce what people want they will buy it regardless of where it's made. Ford just hasn't seemed to have grasped that concept yet.

[Chilliman]

I think most people would be surprised to learn how other governments 'protect' their auto industries. From the obvious tariff protection, to more subtle 'hold-ups at the ports' and the more contensious grants and subsidies.

Japan for instance has bankrolled its Auto industries R&D for years - when Ford was developing the Fusion Hybrid they purchased Toyota's technical development notes to fast track the Hybrids. In discussions between the engineers, a Toyota Engineer let it slip to his Ford counter part that the Japanese Govt basically paid for all the Research and development during the genesis of their Hybrid system.

[Brazen]

bobthebozo never willing to accept counter arguments, the sign of someone with an (obvious) agenda.

Every one of your counter arguments are laughable and dont make sense, what a mining job disappears if the metal goes into a domestic car instead of a foreign one? Huh?

[phillyc]

Originally Posted by Brazen

bobthebozo never willing to accept counter arguments, the sign of someone with an (obvious) agenda.

Every one of your counter arguments are laughable and dont make sense, what a mining job disappears if the metal goes into a domestic car instead of a foreign one? Huh?

It was either Ross Palmer or Andrew Forrest who are both mining billionaires who said that Australia should build a railway across from WA Pilbara to the Bowen/Surat basins and have a massive steel production facility on both ends / sides of Australia. The trains load up with ore in one direction and coal in the other. Both sides have access to plenty of gas to power the plants. That is the very least of value adding that should be done in Australia. Ie raw materials $150-300/tonne turned into $1,000/tonne as steel.

The auto industry is a non-level playing field. We need tariffs and other measures to help the locals survive. Vehicles are highly value added and help drive innovation and are good for the country.

The idea that we as Australians can be primary producers and consumers only is crap. We need manufacturing to thrive not maintain a steady decline.

[nstg8a]

Originally Posted by phillyc

We need tariffs and other measures to help the locals survive. Vehicles are highly value added and help drive innovation and are good for the country..

trouble is the free trade agreements put a stop to excessive tariffs to protect the local industry.

slap tariffs on imports and the corresponding country will just slap tariffs on australias exports.

[Jesmol]

For my $0.02 , as a person with 20 odd years experience in the automotive manufacturing industry I'm thinking at most 5 ~10 years is left.

We really aren't that clever when it comes to building cars.

[fte50]

Originally Posted by Jesmol

For my $0.02 , as a person with 20 odd years experience in the automotive manufacturing industry I'm thinking at most 5 ~10 years is left.

We really aren't that clever when it comes to building cars.

Bit of a short sighted view from 'someone within the industry'.

On a global scale, Australia has some of the worlds best engineering, R&D, and manufacturing know how, not to mention the innovation and expertise that come with it.

Do you really not think our manufacturers could build an M3 eater - performance and in quality ? It all comes back to the market segment they are based in, and that is their limitation. Everything is relative to cost.

I bet alot (huge amount) of international folks would crave our performance offerings, irrespective of manufacturer.
THATS HOW GOOD WE ARE AT BUILDING CARS - TO ITS RELATIVE MARKET

[jpd80]

while we do have brilliant design and development engineers in this country,
they can do only so much to make large cars and mid sized SUVs viable.
It is to their credit that they have held entry level Falcons to the mid $30Ks
for the past 15 years or so, that's how much the market has slipped.

While Ford and Holden were defending their ever shrinking large vehicles sales,
the other brands were selling cars that the remaining 80% of buyers wanted...

There's a huge message in that for companies purporting to be full line manufacturers.

Ford cannot look at Falcon/Territory and just change this or that and make it all better,
they need to get out there and sell the whole range:
New Fiesta, (here)
New Focus, (later this year)
New Escape (next year)
New Mondeo (here)
New Ranger (soon)
New Ranger SUV (still a way off)

^^^^^ Poor sales or lack of products filling these categories is what's hurting Ford,
Falcon and territory sales going away are just more proof of a systemic failure to adapt.

In this day and age, a manufacturer claiming that its front line imported products are either
volume constricted or unavailable is just plain laughable, no wonder they're in trouble....

[Venomous1]

Originally Posted by Jesmol

For my $0.02 , as a person with 20 odd years experience in the automotive manufacturing industry I'm thinking at most 5 ~10 years is left.

We really aren't that clever when it comes to building cars.

Could Post Notsureifserious.jpg

I think were exactly opposite of this.

Alot of changes will come in the next 5 to 10 years tho.

[Jesmol]

to expand a little on my thoughts

At the top level (Ford , Holden , Toyota) there's quite a bit of innovation and yes they do build a good car. All 3 however suffer largely from a slow dimwitted supply base who lack the courage and funds to truly innovate (and true with all generalisations there are exceptions but they are few)

The Aust car market has also fundementally shifted , it is much more diverse and therefore to succeed a more diverse range of products is needed. However the plants are all designed to make one or two models at high volume, what they need is 5+ variants in different segments to get a good spread.

Most people are concerned about Ford, a lot of the information coming out is very reminiscent of Mitsu post 2000 and we all know what happened there (even comments along the lines, we not chasing fleet because the quality of sale is not there). Ford have hit the point where their volume is really going to hurt them.

So lets say Ford drop out in a few years, Leaves Holden and Toyota. These two have very little common suppliers, whereas right now most companies supply at least 2 of the 3.

Once the supply base becomes tied to a single major customer , the difference between survival and bankruptcy becomes very narrow. Once one goes over then more will fall. So I think that the industry will fail, but more due to the supply base rather than the OE's themselves.

[Gobes32]

Australia's auto industry will not survive because of a number of reasons,

Too many manufacturers trying to supply to a small market.
Our free trade agreement with countries who still protect theirs
Overheads are too high in Australia, i.e salary tax, workcover premiums etc.
A lack of major export contracts between the three manufacturers

There are many more reasons than stated above, but at this rate we are becoming a country that buy's goods, we just don't make them anymore. In Australia we are slowly becoming used to the idea of buying a car for $12,990 drive away with no idea of how or why it is manufactured at that price.

[charles_wif_xf]

^^ If that were to eventuate, Australia is dead, no place can survive as a service economy (with mining thrown into the mix, thats if the rest of the world doesn't go to hell in a handbasket).

[Bossxr8]

Originally Posted by bobthebilda

Like the article says, he is an automotive journalist. Whilst we may elect unknowledgable politicians to head up financial portfolios, they tend to be backed up by public servants who have some knowledge of Finances. I would tend to think that Ian Porter is not one of those trained financial experts, nor would he have any knowledge of manufacturing.

The fact is, the story is so full of holes, you could probably drive his australian car manufacturers sponsor cheque thru it.


If we import half the components for the falcodore (and its going to be 70% for the cruze), how can it be said we produce the whole vehicle. Its like slapping a rego sticker on a corolla and saying it was made here.

And yet car sales have been travelling at record rates. The local cars have just been replaced by the imported cars that people want.

And some of these people sell, transport and service the 86% of the cars we import, who jobs will still be there.

Oh please Mr Porter, 90% of the textiles in aussie cars come from Thailand. A Tier one supplier importing parts, assembling them and then sending onto the car manufacturers is not innovation. Its called box opening.


What a poor basic understanding of economics. We export the copper used in the car ($10,000 per tonne), we export the coal used for the steel making, we export the gas for electricity generation, we export the nickel ($27,000 per tonne), and we pay the workers in these industries on average $100,000 per year, compared to the $50,000 per year in the auto industry (on the downward slope of competing with those overseas of $2 per hour, with 6 day weeks).

Mr Porter would do well to rally his own employer to support workers in the australian paper industry, and buy locally made paper, before he starts to preaching to others.
http://www.adelaidenow.com.au/news/s...-1225995683890

What is it with you, not satisfied until local manufacturers shut up shop and are gone for good. You can't help yourself trashing them at every opportunity can you.

[vztrt]

Originally Posted by Bossxr8

What is it with you, not satisfied until local manufacturers shut up shop and are gone for good. You can't help yourself trashing them at every opportunity can you.

Well according to him they use to much fuel which gives money to terrorists!

[Resurrection]

Originally Posted by Jesmol

For my $0.02 , as a person with 20 odd years experience in the automotive manufacturing industry I'm thinking at most 5 ~10 years is left.

We really aren't that clever when it comes to building cars.

+1 .

[Bossxr8]

Originally Posted by vztrt

Well according to him they use to much fuel which gives money to terrorists!

Didn't the US Government use some sort of propaganda like that by making TV ads that claimed terrorists were getting funding from growing weed, and anyone who buys weed is helping support terrorism?

Or did I just see that on Family Guy

[bobthebilda]

Originally Posted by Bossxr8

What is it with you, not satisfied until local manufacturers shut up shop and are gone for good. You can't help yourself trashing them at every opportunity can you.

No boss, I own an australian made car. In fact my last two have been australian made. Probably owned more australian made cars than some here.

Just dont think the governments intervention over the many years, has benefitted the industry one bit. And the facts surely bear it out. The more money the government has thrown at it, the more sales continue to decline. The money just gets siphoned off.

You have other australian companies coming up with innovative ideas, which have to go overseas to get development money. And yet the australian government thinks it innovative to give the likes of a US company $150 million to build a car that has been produced in Korea for many years, or a Japanese company many millions to import a Hybrid engine made in Japan.

If you keep taxing $50,000 wage earners, so their money can be paid to overseas execs earning $1 million, so they can invest the money to keep the $50,000 wage earners in a job, you end up on a merry go round to poverty.

Like most articles say, The majority of the politicians want the industry to die, they just dont want it to happen when they are in power. It just ends up being a waste of money. Its a populist play, with irrational decisions made on an adhoc basis, with no long term goal put in place.

You'd be better of venting your anger at your local politician, or the management of ford australia who has lead to this terrible decline, or the 900 odd thousand australians who prefer to buy imported cars.

Whilst I havent owned a Falcon before (have rented some), I have done far more to support the industry, than all the others listed above.

[Fordman1]

Originally Posted by bobthebilda

Whilst I havent owned a Falcon before (have rented some), I have done far more to support the industry, than all the others listed above.

What does that mean ?

[GTP-03]

I think its just a quiet period where going through, when the new lpg system and eco boost Falcon and deisel territory come on board, sales will pick up again just like it did after the GFC, well I am hoping that is the case.
My father said the media had been talking about the demise of the Falcon since the mid 60s after the XL and XM range were released because people didnt trust the Falcons because of the ball joint and suspension problems they were having and it was almost the end for the Falcon back then.
Only after the release of the XP Falcon did people start buying them in big numbers again, lets hope history repeats itself with the FG mark 2.

[mik]

for once i agree with the journo, should we lose whats left of our manufactureing base , perhaps not a immediately but down the track our living standards will decline further imo, its happening already, we are working longer hours as more money goes over sea`s.
Entrepeneurs like Dick smith can see the value of manufactureing in Australia, its a pity some of our people don`t , as for the green car levy, $400/500 million, thats peanuts compared to other handouts the govt gives.

[Trendseeker]

Originally Posted by Gobes32

Australia's auto industry will not survive because of a number of reasons,

Too many manufacturers trying to supply to a small market.
Our free trade agreement with countries who still protect theirs
Overheads are too high in Australia, i.e salary tax, workcover premiums etc.
A lack of major export contracts between the three manufacturers

There are many more reasons than stated above, but at this rate we are becoming a country that buy's goods, we just don't make them anymore. In Australia we are slowly becoming used to the idea of buying a car for $12,990 drive away with no idea of how or why it is manufactured at that price.

I hope your prediction is wrong, but your reasons for the decline in sales of locally manufacturerd cars are spot on.

Rather than what Bobtheblind argues, the local manufacturers have done reasonably well considering the onslaught from competitors. But they are not competing on a level playing field, given the costs to produce here locally. I'm concerned about the domino effect if our local industry fails. If all we do in future is dig up minerals, we'll end up like Nauru.
PS. My last 6 cars have been Australian made - all purchased new.

[phillyc]

Originally Posted by bobthebilda

No boss, I own an australian made car. In fact my last two have been australian made. Probably owned more australian made cars than some here.

Whilst I havent owned a Falcon before (have rented some), I have done far more to support the industry, than all the others listed above.

So, if you haven't owned a Falcon before, don't seem to have appreciation for the brand then why do you post? Most of your posts are negative and wishing the death of Australian manufacturing.

As for owning Australian owned. I've owned 1 Mitsu built here, a N14 Pulsar built here, a VK Commodore built here and my 2 Falcons. I've only owned 1 imported 90s Nissan Bluebird. Later this year, i'll be buying my first new car. Depending on whether the houses are finished or not i'll be buying an FG, hopefully a new XR6T or if the year works out really well a GS, or the 3rd option of a 4yo Terri if things don't quite pan out as expected.

[Struggo]

Originally Posted by mik

for once i agree with the journo, should we lose whats left of our manufactureing base , perhaps not a immediately but down the track our living standards will decline further imo, its happening already, we are working longer hours as more money goes over sea`s.
Entrepeneurs like Dick smith can see the value of manufactureing in Australia, its a pity some of our people don`t , as for the green car levy, $400/500 million, thats peanuts compared to other handouts the govt gives.

Totally agree Mik and to quote Ian Porter,

For years economists have insisted that Australia should dismantle its tariff barriers and get rid of any sort of assistance for car makers. They fail to note that Australia already has the lowest levels of assistance offered by any of the 15 countries around the world that can produce an entire vehicle, from the concept to the finished product.

The car industry was encouraged by government policy after World War II as a means of moving the economic base from primary industry to secondary industry. Value adding requires education, skills and investment. It provides relatively high-wage employment, tradeable goods and a stimulus to the supply sector.

To move backwards towards reliance on primary industry (agriculture and mining) by abolishing the main pillar of Australia's industry policy seems a shortsighted decision that will cost the country dearly in decades to come.

Ian Porter is 100% spot on

Future generations deserve a high standard of living, this will be provided only with local employment oppourtunities in primary, secondary & tertiary industries, nothing more, nothing less.

[Venomous1]

Just to add some

What if the government does what the US government is doing in the future pumps our tax into them to keep em going?

[jpd80]

Originally Posted by bobthebilda

No boss, I own an Australian made car. In fact my last two have been Australian made. Probably owned more Australian made cars than some here.
-----------------------------------------------
Whilst I haven't owned a Falcon before (have rented some), I have done far more to support the industry, than all the others listed above.

Were almost there Bob.....

Would you care to share which Australian cars you purchased in recent times
and were they new from the factory?

I take it your support for the local industry is in areas other than purchasing products.....

[BroadyFord]

As mentioned before, if the media are so hell-bent on seeing the end of the Falcon through, Ford should come clean about their intentiones once and for all instead of leaving everyone to guess. I remember last year when Marin Burela was publicly ****ed-off with the media for publishing such negative crap about the Falcon's demise, yet now they are back to square one.

I've said it countless times already but IMHO, the only thing that will save FoA is exports. Toyota's locally made vehicle sales are woeful in Australia yet they produce over 100,000 cars annually at Altona with around 80,000 for export and always manage to churn out a decent profit. Combine this with the Commodore being the most popular car in Australia as well as their US PPV program, Holden should be in the black from now on.

Ford on the other hand just don't seem to care.

[jpd80]

When the global financial crisis hit in 2009-10:
Toyota were doing near on $9 billion revenue to make a around $182 million profit
Holden were doing near $6 Billion revenue to make around $200 million loss

Ford were doing near $2.2 billion revenue to make around $16 million profit