Fears over Icon

AUSTRALIA’S automotive manufacturing industry is still reeling from the effects of the decision to put Melbourne components maker Icon Automotive into voluntary administration.

Striking Icon workers in late July forced the closure of Ford and Toyota’s Victorian plants and the stand-down of more than 3000 workers as production ground to a halt, costing the companies tens of millions of dollars in lost sales.

Icon workers walked off the job over concerns about their entitlements after the company went into administration.

The company produces a variety of plastic automotive components such as air-intake assemblies, battery boxes and brake fluid bottles.

An eleventh-hour hearing of the Industrial Relations Commission resolved the dispute.

Ford and Toyota both rely on Icon as a vital tier-one components supplier, while Holden, which uses Icon as a tier-two supplier, was better insulated from the downtime.

The three-day closure of Ford’s Broadmeadows plant cost millions as 1600 workers were stood down, effectively losing production of 500 vehicles a day.

Ford’s Geelong facility was also closed for one day, affecting about 500 workers.

Toyota spokesman Peter Griffin said the Australian car industry could not afford the damaging fallout on its international reputation from another local supplier going into administration.

Icon is the second car supplier to go into administration in less than 12 months.

Late last year engine-block manufacturer Ion suffered the same fate, forcing Holden to seek alternative sources for its engine blocks.

This latest dispute has not just affected car manufacturers, according to Ford spokesperson Sinead McAlary.

Ms McAlary said 2200 workers at other component suppliers outside Ford were also hit by the stoppages.

Toyota’s Altona plant builds 480 Camrys a day, with 60 per cent of them destined for export markets, primarily to the Middle East.

Mr Griffin said some of the parts supplied to Toyota were unique to the Australian-built Camry and could not be flown in from other Toyota factories where the car is made.

Until now, Ford has not experienced problems from Icon as a supplier.

"We’ve sourced from them for some time and have no plans to change," Ms McAlary said.

"We’re quite keen to keep them as a supplier if the business can be proven to be viable." Ms McAlary said the three days’ lost production was diffi cult to recover.

"We’d have to do that on overtime rates so there’s added cost there just for the workers," she said.

Although falling short of suggesting the automotive component sector in Victoria was facing meltdown, one senior executive said the car industry faced new challenges both in Australia and from low-cost countries abroad.

In recent months the component sector has been feeling the pinch from cheap imported parts and low-cost offshore labour, which has forced the shedding of jobs at Autoliv Australia and windscreen-wiper manufacturer Trico.

Braking systems manufacturer Pacifica also announced it was to relocate some manufacturing to China and Thailand.

Ms McAlary said Ford fully supported Australian-based suppliers "wherever we can".

Icon administrators PPB has blamed prohibitive labour costs, inherent production diffi culties and labour-related issues for the company’s problems.

It did not rule out the possibility that some jobs would be axed to maintain its viability and that it would seek a buyer for the company.

PPB said last week it intended to implement a broad program of cost rationalisation under a deed of company arrangement.

Road ahead unclear as Aussie component suppliers face a new world order

EARLIER this year, an Australian Industry Group report warned that the growth of cheap carparts manufacturers in China was threatening Victoria’s automotive sector.

The list of Australian companies hit by the emerging Chinese automotive juggernaut is growing.

Trico, Pilkington Glass, Autoliv and Pacifica Group Ltd have all suffered because of changes in the global supplier chain.

In June, Autoliv and Trico announced they were sacking staff in Victoria and moving some production aspects to China.

Windshield wiper maker Trico, based in Springvale, plans to cut 160 jobs and Autoliv said it would axe 200 jobs at its Broadmeadows factory.

Another 65 jobs at a subsidiary of Autoliv, seatbelt textile maker VOA Webco, were threatened as the company expected it would be forced to close its Thomastown plant.

Pilkington has lost a valuable Holden contract for the supply of glass for the VE Commodore.

Like Ford, Holden will now source glass from Asia.

In May, Melbourne-based brakes and clutch maker Pacifica Group said it was facing a difficult business environment and expected lower profits as car production volumes fell in North America, the price of steel rose and exchange rates continued to be unfavourable.

In December 2004, cash-strapped car parts maker Ion Ltd, also based in Melbourne, had administrators appointed after bankers withdrew support.

Ion, which employed 3000 people in Australia, New Zealand and the United States, suffered crippling cost overruns and delays on three major capital projects.