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Go global, says Carr

Innovative: Ford's Geelong R&D centre officially opened late last year.

Industry minister urges car parts makers to go global after another week of job cuts

21 Oct 2008

AT THE end of another tumultuous week for the car industry last Friday, federal industry minister Kim Carr told the Australian components sector that it needs “to aim a lot higher than mere survival”.

Mr Carr was speaking at the Federation of Automotive Product Manufacturers’ (FAPM) southern region annual dinner last Friday night – a day after Ford announced a further 450 job cuts at its Australian operations, a move that according to unions will represent a further 2500 job cuts in the components sector – and two days after a FAPM delegation presented the government with a survival plan.

While several of the smaller suppliers are facing the loss of even more work with a slump in local sales and the closure of Mitsubishi’s Australian operations, Mr Carr suggested suppliers invest in more technology and “go global”.

“If we get serious about innovation – serious about going global – we can aim a lot higher than mere survival,” Mr Carr told the attendees.

The FAPM delegation presented the government with results from a survey of its members, which suggested that about 7000 jobs would be lost between this month and the end of next year, with a large proportion of them terminated by February.

It also gave the senator a proposal which included a list of measures its members would be prepared to take, including setting aside money for workers’ entitlements and placing more of an emphasis on exports. But a core part of the proposal was that component suppliers would receive more funding than was outlined by the Bracks report into the car industry.

The report was released in August and is still under consideration by the federal government. Senator Carr said he understood the implications of the survey. However, he refused to be drawn on the level of government commitments, either in line with the Bracks review or over and above the former Victorian premier’s recommendations.

Instead, the minister insisted that component suppliers should spend the money regardless of whether they received more funding.

“FAPM itself has proposed signing suppliers up to a code that will commit them to developing capability, making adequate provision for worker entitlements, increasing exports, increasing R&D, and bringing Tier Two and Tier Three suppliers into global supply chains,” he said. “FAPM has suggested that these commitments should be conditional on component makers receiving funding over and above anything recommended by Steve Bracks.

“I’d suggest that these are commitments firms would benefit from making anyway.

“Frankly, these are not just things that might be worth doing to attract extra support. They’re things the industry must do if it wants to survive.” The minister said he understood that the industry was experiencing difficult conditions.

“Steve Bracks warned us that up to one third of the 200 Australian automotive component firms could be at risk of exiting the industry over the next few years,” he said. “We’ve already had job losses. The survey FAPM released this week suggests we could have a lot more if we don't make the right decisions now.” While Senator Carr did not elaborate on what those decisions would be and declined a GoAuto request to comment on what the government would do in response to the FAPM proposal, he claimed the component sector had a bright future despite the current challenges and urged it to be confident.

“There is no doubt in my mind that the industry can work through the problems confronting it today and emerge stronger – more creative, more productive and more competitive,” he said.

“If we in this room don't believe that, why should anyone else? Hope will get us a lot further than despair. Persistence will get us a lot further than panic.

“I'll say it again: confidence is everything – and this industry still has plenty to be confident about.” Senator Carr would not be drawn on announcing when the government would hand down its response to the Bracks report. “The plan will be announced soon. Once it's in place, we will continue to work with the industry – vehicle makers and suppliers – to ensure that it is doing the job,” he said. “The sector won't be left on auto-pilot again – not while this government is around.” Even before the Bracks report was issued, the government brought forward $35 million from the Green Car Innovation Fund for Toyota to build the Camry Hybrid at Altona, despite the fact that the green fund was not due to kick in until 2011.

However, the move is unlikely to bring any more new jobs for local component suppliers as the powertrain for the Camry hybrid is imported from Japan, unlike the engine in the standard car which is made in Altona.

Last week’s announcement that Ford would cut more jobs at its Geelong and Campbellfield operations drew a sharp response from the Australian Manufacturing Workers Union (AMWU) and its Victorian state secretary Steve Dargavel. Mr Dargavel claimed Ford was using the opportunity to contract out more than 700 jobs, including 600 at the engine plant that has been scheduled to close in 2010. However, Ford Australia has denied the claim.

“There is no plan to change the way the engine plant is running,” Ford Australia spokeswoman Sinead McAlary told GoAuto. “The engine plant employment arrangements continue as normal.” Ms McAlary told GoAuto there was no plan to increase the percentage of contractors at its plants, but she did point out that the company had introduced contractors to manage many non-core parts of its business.

“During the last 12 to 18 months we have outsourced several small parts of the business including the truck fleet. We are not in the business of running a truck fleet, so it is a logical move to outsource it,” she said. “We will continue to do that where it makes sense.” Like the other car-makers, Ford Australia uses many contractors in its engineering divisions who are brought in to work on specific projects and then let go when the projects near completion. Ms McAlary said this would continue to be the case at Ford Australia. “That is the normal process in the industry, it is cyclical,” she said.

Mr Dargavel was unavailable for comment today.

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