Look to Asia, not the US
BY JOHN MELLOR | 13th Nov 2008
The time has come to stop thinking of Holden and Ford operations in Australia as American. The time has come to start thinking of them as very desirable assets in the strongest growing automotive region in the world.
There are concerns by the Rudd government and many Australians that the billions now committed to the car industry might be trashed if General Motors or Ford pull from their Australian operations in order to shore up things at home. But this fails to take into account the big picture of the changing global car industry.
It is not beyond the bounds of possibility that Holden could wind up in the hands of GM’s Chinese partner, Shanghai Automotive Company and Ford Australia’s operations could wind up under the ownership of Tata Motors Limited, which recently bought Land Rover and Jaguar from Ford.
Meanwhile Toyota, despite recent setbacks in global sales, would continue to use Australia as a base for manufacturing and design – with the government money providing increased emphasis on design and engineering.
The rationale for an Asian take-over of the American operations – or at least part ownership – is simple. Both Holden and Ford Australia are unique in the global car industry. They are fully-fledged self-contained car companies that could be bought for relatively low sums of money – especially in any American fire sale.
Importantly, both operations can design and engineer a car from a clean sheet of paper all the way through to production of export quality cars.
What’s more, both operations can do this at a fraction of the cost of performing the same tasks in American and European design centres. They are also low-volume producers capable of cost-effectively developing niche models off common architecture.
This is helpful in a world where car-makers seeking full product line-ups struggle to fit low-volume models into their massive production schedules.
And, most importantly, Holden and Ford Australia are enormous storehouses of knowledge, innovation and ingenuity that any relative newcomer to the car industry – especially one with Western aspirations – would absolutely kill for.
Because Australian car companies have never been highly profi table, Australian designers and engineers have learned to do things on a shoestring.
This applies to the way the cars are built in our plants as well. Australian production plants are very efficient and full of clever thinking.
One of the reasons Daimler kept the Mitsubishi plant in Adelaide open for longer than it possibly should have was that it thought it could learn so much from the techniques developed within the plant for making highquality cars at low cost.
So there is much to learn from people on limited budgets who have to be innovative to keep the businesses viable. The benefit from a change of ownership of the Australian car industry would be enormous.
Attracted by the Rudd government’s huge boost to funding of car research and new designs for green cars, Indian and Chinese owners would bring to the table far more certainty than the cash-strapped Americans can offer – even in the medium term.
The problem is that the Rudd billions on the table for R&D must be matched by company money. The problem in the US is so serious that the potential for that investment to take place at Holden and Ford Australia may well be rather bleak given the strife GM and Ford are in.
Therefore our industry is going to spend the next few years under the threat that work that is going on here, and models that are being developed here or are planned to have been developed here, might be pulled back into the States.
In a country where 80 per cent of the members of Congress do not own a passport (and a similar fi gure operates within the executives of the American car industry), who do you think is going to get the work or the dollars when it comes to choosing between Australia and Michigan? However, if our industry was to be linked to owners operating in the greatest growth area of the car industry in the world, then Australian car industry employees would become part of the growth.
You can imagine the line-up of projects our designers and engineers would be called on to perform as those developing carmakers seek to short-circuit their pathway to Western design standards.
The transfer of knowledge that would flow to these developing car-makers would be massive. It is also easy to imagine that Australia’s car plants would be swung over to build larger, more up-market variants of smaller cars.
These would be designed here for those growing Asian markets that would increasingly open up to Australian production – especially if Indian and Chinese car-makers owned the production facilities.
Both Ford and, it is reported, Holden are moving their medium-term production goals away from large cars to build cars that are small on the outside but family-sized on the inside.
Crossover variants of those cars can be made and sold profi tably in this country and the export volume flowing into Asia would give the operators of those plants far more “protection by scale” than any tariff would achieve.
If Shanghai Automotive was to pick up Holden it would also gain a little less than half of GM Daewoo Auto & Technology which provides the company with most of its small car production for China and give Shanghai direct access to Eastern Europe and Russia and many other markets pioneered by Daewoo.
Even offering partial ownership of Holden and Ford Australia to the Chinese and the Indians would give the Australian government, and the Australian people, a lot more comfort that the money being invested in the future of the industry would be well spent.
It would give the industry much more certainty by locking it into growth companies and growth markets rather than tying it to the walking wounded of the automotive world. And if Holden and Ford Australia are not already thinking along these lines, then maybe they should start now. It makes sense.
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