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Cutback fears

Australian automotive parts sector on edge as Huon hits on hard financial times

General News logo11 Jul 2006

AUSTRALIA’S automotive components industry could be heading "towards a perfect storm", according to leading auto analyst and partner with national law firm Hunt and Hunt, Evan Stents.

Mr Stents said the voluntary administration of the Huon Corp last week was bad news for the local component industry.

He said Huon’s possible demise could be the start of a widescale rationalisation of the domestic component sector and closure of other companies, including those from ancillary industries such as the tooling industry and other automotive service sectors.

"There are sufficient forces at play in the Australian automotive industry to expect a significant rationalisation of the sector over the next 24 months," he said.

Huon Corp supplies Toyota, Holden and Ford with air-intake hoses, steering column covers, rubber seals and fuel filler shields. It went into voluntary administration last week as it battles a restructuring and the prospect of up to 250 job losses from its three Victoria manufacturing sites.

Huon Corp has sites at Empire Rubber in Bendigo, FRN in Frankston and Mills Elastomers in Dandenong.

Despite the company’s turmoil, the major car-makers were confident of an uninterrupted supply chain. Holden and Toyota expected supplies to continue until Huon sorted out its internal issues.

A Toyota Australia spokesman said Huon was a relatively low-volume supplier, while a Ford spokesperson said Huon only supplied it with rubber windscreen surrounds.

Huon Corp bought the three sites from Nylex Ltd last December and has since initiated legal action claiming Nylex misrepresented earnings during the sale, forcing a company restructure.

Tony Sims and Ken Sellers from Sims Partners have been appointed administrators.

Mr Stents said the industry rationalisations were largely unavoidable, due to structural aspects of the local automotive industry and forces that were essentially outside the control of domestic component producers.

A decline in large-car sales, which are off more than 20 per cent this year, posted an alarming trend for the components sector.

Mr Stents said if the new VE Commodore and Toyota Aurion did not achieve their targets the components sector would suffer. He also said low-cost manufacturing countries such as China and India were also placing increasingly competitive cost pressures on local component producers.

Camry kicks off at Altona AMID questions about the effect the situation at Huon was having on Australian car production, Toyota Australia last week introduced its all-new Camry to employees at its Altona plant in a traditional "line off" event that celebrated the launch of the forthcoming car.

Production of the new-generation four-cylinder Camry begins this month, and together with the forthcoming Aurion V6 large car represents a $450 million investment in facilities and technologies by Toyota Australia.

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