Have no doubt, further plant closures in Australia’s car parts manufacturing industry are much closer than anyone thinks. The rapid escalation of the Australian dollar has created a price competitive crisis. But there’s more to the equation than just the exchange rate. The industry has largely given up on itself.

Over the last few years Australian car parts manufacturers have established plants in Asia designed to directly compete with their Australian operations. The plants have excess capacity and can supply Australia without delay.

It’s well known in the industry that two of the domestic car companies are demanding they be supplied from these Asian plants.

The failure to progress labour reform through the industry to the extent needed to be internationally competitive is the big reason why industry strategies are against Australia. Car manufacturing mangers do not believe they can achieve the cultural workforce changes that could take the industry into a new future.

The industry workforce is skilled but heavily weighted toward post war baby boomers waiting for retirement packages. Industry restructuring is glacial because industrial agreements take too long to adapt and have incredibly expensive redundancy arrangements.

Governments in the car manufacturing states know these facts as do senior union officials. But no-one dares speak publicly and no-one can see how to break from the downward spiral.

This should not be the case. The Asia supply equation is changing. China is experiencing wage pressures. Skills shortages are appearing. Quality can be inconsistent. Shipping and additional stock holding costs result in marginal cost differences between Asian and domestically sourced car parts.

The Australian industry should have a future. But local manufacturers must achieve labour reform of a scale that occurred in the mining sector in the 1980-90s. State governments and unions have to allow this to happen.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey