Labor Party’s Infighting Threatens Australian Auto Industry’s Future

A week ago, the Australian Labor government was worried whether the domestic auto industry would survive, after Ford announced plans to shutter its manufacturing operation in the country and GM Holden threatened to follow.

Today, the industry is wondering if the Labor party, which has doled out billions of dollars in support of auto makers, will survive a leadership struggle in time for a scheduled Sept. 14 general election.

The uncertainty follows a shakeup yesterday in the party after former Prime Minister Kevin Rudd defeated Prime Minister Julia Gillard in a ballot vote of 57-45. Gillard, who deposed Rudd in 2010 in a similar ballot, said she planned to quit politics and asked the governor-general to name Rudd as Australia’s new prime minister.

Rudd was sworn in today.

The political bloodletting comes as Australian Motor Industry Federation Chairman Richard Dudley warns that a “perfect storm” is about to hit the auto industry and the next federal government must act within 100 days to save it.

The federation is demanding an automotive industry Green Paper/White Paper process be undertaken to address unprecedented change impacting the entire industry, not just vehicle manufacturing.

Dudley tells the National Press Club every sector of the automobile industry is undergoing a generational change.

“For too long, successive governments have failed to recognize that the domestic automotive industry does not begin and end with vehicle and component manufacturing and that a new approach is needed that includes the other 75% of the industry who employ 320,000 Australians in 100,000 businesses,” he says, according to a federation statement.

Some 2,700 workers left their vehicle-and-component manufacturing jobs between 2011 and 2012, he says, but more than 13,000 abandoned the automotive service and repair sectors over the same period. There currently is a shortage of 19,000 skilled auto mechanics in Australia.

“Those shortages, coupled with the effects of globalization, environmental protection policy, rapid technological advances, shifting consumer behavior and the maturation or decline of business lifecycles are creating a maelstrom that will have catastrophic consequences on the entire industry and the sustainability of its services to the community,” Dudley says.

“There must be a different approach to policy planning for the future. For too long, successive governments have failed to recognize that the domestic automotive industry does not begin and end with vehicle and component manufacturing. This is why we continue to see ineffective, ad-hoc policy that fails to address the critical issues all of the automotive industry is facing.”

Dudley’s warning comes as Ford prepares to end local production in 2016 and GM Holden says the cost of making cars in Australia is unsustainable. If GM Holden follows Ford offshore, industry analysts say Toyota will be next because suppliers will be unable to survive with just one manufacturer.

Rudd views the auto industry, and the pro-Labor Party votes of its workforce, as vital, and threw billions of dollars at the sector the last time he was the prime minister. But pundits say the political chaos means Rudd’s already minority government has little chance of winning an early election now or in September when the federal vote is scheduled.

The opposition Coalition grouping says it is committed to creating a viable future for the auto industry, but has promised a Productivity Commission review of industry subsidies as soon as it comes to power. It also has said it will cut A$500 million ($464.7 million) from the A$1.5 billion ($1.39 billion) of industry funding still promised under the Labor government.

Stirring the pot more, the Australian Broadcasting Corp. reports unions have delivered a 7-point plan to GM Holden demanding access to financial records, including executive salary figures.

Federation of Vehicle Industry Unions spokesman John Camillo says a letter received from GM Holden chief Mike Devereux calling for significant labor cost-savings at the Elizabeth plant is vague at best.

“The situation for these workers right now is job security; they're very concerned whether they are going to be around next week, next month, next year,” Camillo tells ABC.

The unions want to see all financial data GM Holden used to arrive at its decision to quit manufacturing if it can’t reduce labor costs, full disclosure of executive salaries and an independent business expert to review the company's books.

The auto maker is seeking 400 voluntary redundancies from the Elizabeth plant, but ABC says only 300 applications were received as of last week.

The Age newspaper in Melbourne says in an editorial the day General Motors stops making Holden cars in Australia is rapidly approaching, and there is plenty of blame to go around.

“The list of culprits for this once-avoidable state of affairs is long,” the newspaper says. “In a race for votes, politicians of both sides have fed the perception that Australia always needs a car industry; that propping up unprofitable operations run by multinational companies is in the public interest.”

But while unions for many years kept costs too high and work practices inflexible, much of the blame sits with GM for taking taxpayers for a ride, it says.

“General Motors' latest attempt to extract subsidies for a decade amounts to blackmail. Its other ultimatum – cut A$200 ($185.90) a week from the average pay of workers or we'll shut factories – is just a ruse to create a scapegoat. Holden wants to evade blame when taxpayers finally see sense and stop the handouts.”

The pessimistic scenario is that GM Holden and Toyota will walk away when the Coalition government fulfills its pledge to cut millions from existing programs, even before the Productivity Commission inquiry confirms taxpayers are not getting value for money in supporting the industry.

“It's time for Australians and their politicians to call Holden's bluff,” The Age says. “The next government should recognize the priority is to manage the car maker's exit, not throw more good money after bad.”