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China trade mission opens doors for parts-makers

Opportunity: The Rolls-Royce lookalike Geely GE concept is just one Chinese-made car that might end up with Australian parts, including Albury-made transmissions.

Chinese car-makers to form working parties with Australian parts suppliers

17 Jul 2009

AN AUSTRALIAN trade delegation visiting Chinese car manufacturers this week has secured agreements with Chery, JAC and Dongfeng to create working parties that will explore new business opportunities with Australian components suppliers.

Industry minister Kim Carr, who fronted the delegation with trade minister Simon Crean, said he expected Australian components sector jobs to be created in the near future as a result of the co-operation agreements, just as Holden’s export operations would soon be boosted with a massive influx of V6 engines into China over the next four years.

Specific model programs were not identified. However, the meeting with Dongfeng was revealed to be the second held with Australian officials in the past six weeks, and Senator Carr described Chery’s new R&D centre as an example where smaller Australian auto suppliers could gain a foothold in China.

He also highlighted the experience of Victorian gearbox manufacturer Drivetrain Systems International (DSI), which was in financial dire straits earlier this year before being bought by Chinese manufacturer Geely – and which, the minister has now revealed, will supply automatic transmissions for no fewer than 10 new models.

“We see with Geely that the DSI purchase has meant that that gearbox will now go into 10 models in this country,” Senator Carr said. “Now bear in mind that Geely bought that plant with cash – not bank loans, no liquidity problem, cash on the table. And that’s something the Australian automotive industry is very interested in.

“There are other investments. Chery, of course, has got a new R&D centre.

 center imageLeft: Industry minister Kim Carr. Below: Trade minister Simon Crean.

“I’m expecting that there will be increased interest in the components section of the automotive industry – not the OEMs (original equipment manufacturers), not the majors, but the components sector. That’s likely to be quite an attractive area for future investment from the Chinese motor producers.

“They are looking for high-quality, developed technologies. They are looking for partnership arrangements. And they know, I believe there is increasing awareness, that Australia provides the capacity to produce good results in those areas.

“There are 11 companies operating here at the moment that have come out from Australia. I believe we can expand that quite substantially in a whole range of capacities – and we are developing new capacities. That’s the key for us, the new generation.

“In terms of light metals, in terms of composite materials, in terms of fuel systems, there are huge opportunities opening up.”

Speaking after the meeting with Dongfeng, Mr Crean insisted job opportunities could be created without a free-trade agreement in place between Australia and China, and Senator Carr said there were strong prospects for partnerships to be formed in the near future.

The senator later rejected a Fairfax report that quoted Dongfeng vice-president Li Shaozhu as saying “there have been contacts” with GM Holden over the possible sale of the Australian car manufacturer. Holden has also denied that discussions over a sale have occurred.

However, the industry minister was highly optimistic about the prospects – be they joint-venture arrangements or DSI-type buyouts – for Australian components suppliers.

“That (new parts industry jobs) will be flowing through quite quickly,” Senator Carr said. “One thing that you cannot not be impressed by is the speed with which this country moves. What we’re looking at is growth rates of up to 15 per cent throughout central China. These are enormous in the significant areas of economic development, and what we are seeing are some companies with up to 40 per cent growth rates.

“So the prospects for new economic opportunities arising very quickly I believe will become very self-evident. We’ve already seen in Shanghai what that means in terms of our (Holden’s) engine plants. We’ll see it in regard to other component manufacturers as well – I’m absolutely convinced that these arrangements will lead to thousands of jobs for Australians.

“We know that the problems that we are facing today can’t be fixed by just one country, and that we need international co-operation to get the very best out of our people. This is an issue that is about assisting thousands of Australians with new jobs and to sustain the jobs that they’ve got. This is about creating economic opportunities for Australian workers and for the Australian people – as it is for the Chinese people and the Chinese workers.”

Mr Crean added: “This is the time to strike, because the car industry is undergoing fundamental global restructuring. This is the largest automotive manufacturer and the largest automotive market in the world – and Australia, with its strength, has to be part of it.”

The trade minister said that it was the positive reception from the previous meeting with Dongfeng that, in part, prompted the government to embark on the current mission.

“It was the discussion at Dongfeng in Wuhan six weeks ago – where they, unsolicited, said they and the developers of their domestic brand wanted access to Australia’s componentry – that in part resulted not just in the return visit to Dongfeng but expanding the focus of our interest into the other areas of potential,” Mr Crean said. “Our challenge is to join the dots, as I say. And that isn’t going to happen unless what we get is an understanding at the political level about the importance of this commercial relationship, a realisation that there are really good Australian operations servicing the market here.

“Futuris is a great example of it, but there’s PBR, there’s the DSI-type operation, all in different forms and convincing (the Chinese) that in terms of an industry here that is growing in such a huge way that if they want to maintain world-class production they’ve got to team up with those people that can supply world-class componentry.

“The gap that fits for us is the size of their market.”

Senator Carr identified the high end of the Chinese passenger car market as the area where Australia could play a significant role. He also said Chinese government actions to consolidate the automotive sector was a positive situation for Australian interests.

“In the auto industry, they have moved down to 10 companies – they have got 130 companies (and) they are moving down to 10 which will have 90 per cent of the market share,” Senator Carr said.

“There is a huge opportunity opening up for Australia. What we are doing is talking about opening up new channels, new business opportunities, in areas which have not yet had the capacity to actually deal directly with us.

“We are dealing with companies with a growth rate of 40 per cent a year, and have had so for 17 years. Yet they have not had the direct involvement with the Australian automotive industry to the extent that we think appropriate.

“These are companies which will have a 40 per cent growth rate this year, in the middle of the worst recession in 90 years. This is the sort of opportunity that we want to see open up for our country and our industry.

“And consolidation is part of the way the Chinese government is looking at it – these are opportunities for us and not great threats.”

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