Trouble in paradise

AUSTRALIA’S car industry is on the brink of an uncertain future as the fallout of Holden’s decision to axe 1400 jobs and revise downwards its production forecasts has long-term implications for local car manufacturing.

Trade unions are meeting this week to discuss industrial action at Holden that could spread to the country’s other three vehicle manufacturers – Ford, Toyota and Mitsubishi, which is about to launch its crucial new 380 large car.

These three manufacturers are taking a "business as usual" approach to the possibility of wider union disruption and the impact of Holden’s decision to downgrade production forecasts.

Holden last week announced it would wind down the third shift at its Elizabeth plant in Adelaide by Christmas with the loss of 1000 jobs.

The third shift was introduced in 2003 to cope with increasing exports, particularly of the Monaro, and an expanded product line-up.

Another 400 jobs will go by the middle of next year as the workforce is slashed through voluntary redundancies.

The cuts will reduce total employee numbers at Elizabeth to about 4300, which is close to 2002 levels.

Holden highlighted higher commodity prices, exchange-rate vagaries and lower import tariffs as contributors to its decision to axe jobs and reduce production.

However, it remains committed to manufacturing here in the long-term.

In an ABC radio interview last week, GM Holden’s chairman and managing director, Denny Mooney, said the company was still viable, and committed, as a manufacturer in Australia.

"We’re still going to be, even with this reduction, the highest-volume manufacturer here," he said.

Holden has now wound back its build forecast for this year by 19,000 vehicles, from 183,000.

Curiously, it has refused to talk about next year’s build forecast, however GoAuto understands the numbers will contract further to around 135,000 – a total drop of almost 50,000, which to illustrate its significance is more than the number of vehicles Mitsubishi Australia will manufacture next year.

The drastic reduction now places question marks over future export programs, particularly for the Monaro to the United States.

This has been further dented by General Motors’ decision not to go ahead with the Holden-engineered Zeta large-car platform in the US.

Industry analysts have also suggested Holden has been caught on the back foot for failing to anticipate the growth in 4WD sales while pinning its future on the new VE Commodore as the traditional buyer turns to smaller, more fuel-efficient cars.

VFACTS industry figures show that to the end of July, in a record sales year, Holden had managed to lift its market share 0.5 per cent over the corresponding period in 2004 to 20.9 per cent (104,278 vehicles sold).

However, its overall performance is stagnating.

Its overall market share has been slipping since 2002, due in part to a move away from large cars like the Commodore to medium and large 4WDs, vehicles Holden lacks with which to compete effectively against rivals.

Demand for the Commodore has dipped this year but it still dominates the large-car sector with a 45 per cent share, followed by the Ford Falcon with a 33.6 per cent share.

The new VE Commodore is under development but will not be on sale until the second half of next year.

Apart from the Commodore, the company’s imported Vectra medium car and Australian-built Adventra 4WD station wagon are also struggling.

Although the Australian Manufacturing Workers Union disputes the need for 1400 jobs to go, it has welcomed the $10 million assistance package announced by the Federal and South Australian governments to support the workers.

AMWU national secretary Doug Cameron has called for a national summit with government, unions and employers to implement a strategy to save the industry.

The union said it was not enough to throw money at the axed workers and that Holden’s decision highlighted a broader crisis in local car manufacturing.

A leading Adelaide labour researcher has also warned the South Australian components industry could lose a further 3000 more indirect jobs because of theHolden decision.

The executive director of the University of Adelaide’s Centre for Labour Research, John Spoehr, believes the flow-on effects of the Holden decision would be "fairly significant".

Mr Spoehr said it was fortunate that South Australia had won a $6 billion contract to build air warfare destroyers as it would provide a "life raft" to some of the 1000 Mitsubishi workers who lost their jobs last year and now 1400 Holden workers who face unemployment.

"It will provide a life raft for a good number of those workers who aredisplaced from Mitsubishi and GM, but I have to say I don’t think that itwill provide a life raft for everyone," Mr Spoehr told the ABC.

"You know we’re talking about big numbers here, 1400 direct, and the flow-on impacts will be fairly significant."Automotive tariffs in Australia have fallen from almost 60 per cent in the 1980s to 10 per cent now, and are set to fall a further five per cent by 2010.

This has prompted a rationalisation of the car industry that has produced moreefficiencies as well as more responsive exportoriented companies.

Holden exports a third of its cars and enjoys solid prospects in developing niche markets in China, South Korea and Thailand, as well as in the US.

Ford exports to New Zealand and South Africa and Toyota has a strong export base in the Middle East and is further investigating emerging Middle Eastern markets.