Hella's $12m expansion, despite squeeze

HELLA Australia’s Melbourne-based operation is being held up as an example for the future of the local components sector, as new estimates suggest that two-thirds of firms are suffering financial stress.

The federal government has received half a dozen formal applications from companies looking for financial assistance under the Car Plan to amalgamate or “rationalise”.

Speaking at the opening of a new dedicated production line for Toyota at Hella’s Mentone plant, federal industry minister Kim Carr said about 130 suppliers were under stress, of which more than 70 are described as facing “serious stress” and some “acute stress”.

Mr Carr said the number of automotive suppliers in trouble had doubled in the past six months as a result of the global economic crisis.

He said the government did not know how many might ultimately fail, but conceded that some would not be viable in the future.

“The world’s a very different place from August last year when (the Bracks) report was handed to government,” Mr Carr told us.

“We will assist firms where we can. Some firms will not be viable, we have to acknowledge that, but where there is the capacity for restructuring or a capacity to concentrate on strategic capabilities we will be encouraging that. That’s what we’ve got with our industries assistance programs.

“We do have a program for structural adjustment, which we’re bringing on stream, and special circumstances applications are being received and processed right now. We’ve made some commitments for those, but no money has been paid as yet.

“There are investments required for amalgamations or rationalisations. They’re not cash grants for nothing, they are on the basis of co-investment for firms that want to come together.

“We can’t declare them because they remain in commercial confidence until we pay them, then we publish the details. But there are a number of applications before the government – probably half a dozen for amalgamations, rationalisations, about strengthening capacity within the industry.” Hella’s new line was built at a cost of $12 million – a quarter of which the company can expect to get back from the government – using Toyota’s ‘Kaizen’ production system and will make headlights and tail-lights exclusively for the company.

The German-based president of Hella worldwide, Juergen Behrend, told GoAuto that the new line was the company’s most advanced and would be used as a benchmark as it sought to win more Toyota business globally.

He said this is the second time that Hella Australia had been a pilot for the company, the first being when it was established 48 years as the first Hella overseas affiliate.

Mr Carr said the new Hella line had protected the company’s 440 workers and represented a much-needed good news story at a time when the industry was dominated by bad news.

“There aren’t too many good news stories like this around, that’s why it’s so significant,” he said.

“It’s probably the most significant investment this company has made in its 48 years in Australia. Strategically, it’s incredibly important, giving it a global platform into a global company like Toyota.

“People keep saying we don’t have the capability, but this proves the point that Australian manufacturing can be as good any in the world. There’s no reason why we can’t produce here for global markets and that’s exactly what’s happening here.

“It’s global and that’s what we’re trying to achieve here, to ensure that the Australian industry is able to work competitively on the global stage. We think this is a very good example of what can be done and there should be a lot more of it.

“The capacity to work collaboratively with other firms is extremely important. No one firm is going to be able to survive this crisis on their own – they’ve got to be able to work co-operatively with other firms.

“In general terms, the industry is probably working at 60 per cent capacity at the moment, so there is considerable labour hoarding because the industry understands how important it is to sustain skills through this period of difficulty.

“The main thing now is to keep the doors open. We’ve got ensure that we move through this period as quickly as possible. We’ve got to maintain capacity (and) get projects up and running.”

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