More job cuts to come as parts industry shrinks
BY IAN PORTER | 7th Apr 2009
Many suppliers are under extreme financial pressure as a result of the industry slowdown, according to Barry Comben, acting chief executive of Federation of Automotive Products Manufacturers.
While some smaller suppliers have already adjusted to the reduced volumes over recent months, Mr Comben said in-line sequencing suppliers like Futuris have had to maintain second shifts so they could continue to supply to Holden on a just-in-time basis.
“There is no doubt there will be more direct effects across the supply chain, and that will especially be in the in-line sequencing firms that will now have to adjust their own shift arrangements,” Mr Comben said.
Futuris’ decision to retrench 90 people at its Edinburgh Park plant in Adelaide after Holden cancelled its second assembly shift marked its second round of downsizing.
Late last year, Futuris shed almost 100 jobs across its operations in Port Melbourne and South Australia.
Mr Comben said the use of non-production days by all the assemblers had given some suppliers a chance to adapt to the new lower level of output already.
“At 300 a day (at Holden), that’s 60,000 or 70,000 a year, and that level of production has been evidenced for some time with the down days. I think most suppliers without a second shift have already made the adjustments.” All companies were trying to maintain their skills bases, but that was difficult to do when demand had virtually been halved.
“In recent times, Australia has made between 350,000 to 400,000 cars a year,” Mr Comben said.
“It is generally accepted in the industry it is going to be between 175,000 and 200,000 on an annualised basis during this downturn.” That 50 per cent decrease will put extraordinary financial pressure on companies as they try to survive, he said.
“It takes an awful lot of cunning to reduce overheads and fixed costs. Sometimes you get to a point where you can’t take out any more without destroying the business,” Mr Comben said.
A variety of solutions will be tried.
“There is no one-size-fits-all for this adjustment,” Mr Comben said. “Some have been standing down workers on partial pay, like Holden. Some are working four-day weeks, others are using long service leave and other entitlements to keep people on the payroll,” he said.
But there will be more retrenchments, he said.
“People take this action as a last resort and they hold off as long as possible, but I think it is inevitable there will be more redundancies than we have seen to date.” Despite this gloomy prediction, Mr Comben said he had been impressed by the resilience shown by parts-makers across the industry.
“I have been surprised there haven’t been more failures under these pretty awful circumstances than have been reported so far.
“I think that’s a testament to the determination of business people to hand in there in the hope that there is a future which has a recovery for them.” They are trying everything they know how to do and so far I think the supply chain capabilities across the industry have held together remarkably well.”