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Exclusive: Coalition could crush car industry: expert

Holden on: Advanced Manufacturing Council chair Goran Roos believes Australia could easily lose its car-making industry.

Industry adviser Goran Roos rejects Coalition’s PC review plan, flags niche future

General News logo8 Aug 2013

ONE of the key architects shaping Holden’s future believes Australia will not have a major car manufacturing industry if there is a change of government.

Professor Goran Roos, the chair of South Australia’s Advanced Manufacturing Council who has just completed a crucial cost-savings report for car-making unions based on Holden’s internal financial data, told a conference in Melbourne today that the industry would not survive if a federal Coalition government came into power, based on the strength of its current policy.

This could see Holden and Toyota, the two remaining local car-makers after Ford shuts its factories in 2016, also closing down, leaving only a small-scale automotive industry operating in Australia.

The Coalition has committed to launching a Productivity Commission review into public funding for the Australian car-making industry if it is elected in September’s poll.

It has also promised to cut $500 million from the Automotive Transformation Scheme.

Shadow industry minister Sophie Mirabella said the Coalition would work closely with the industry and the Productivity Commission “to ensure that car industry funding is allocated objectively and sensibly, and that money is paid in accordance with clearly defined guidelines and benchmarks”.

However, Prof Roos said the Productivity Commission review could spell the end for Holden and Toyota, and the more than 55,000 workers associated with the car-making industry.

“My personal view is that if the Coalition wins this election, and if they decide to take three months out – which is very optimistic – to do another productivity review, then the industry will be gone well before that productivity review is out,” Mr Roos told the AutoCRC conference on sustainable manufacturing.

“The decision would have been made ... it’s very simple.” Prof Roos said one solution for Australia’s industry was to adapt to producing small-volume cars on behalf of other manufacturers.

He said a potential model was to become like Austrian car-maker Magna Steyr, which produces low-volume specialist vehicles on behalf of other car brands.

“There’s a debate in Australia that sometimes assumes that the only people who make cars are people with brands on the front of the car,” he said.

“It’s not right. Most cars that people buy that are specialised versions of something ... it’s not made by (the car brand).

“It’s made by a company called Magna Steyr and they do not make cars in volumes higher than 100,000 – they usually make them in numbers much smaller than that – and they are very profitable.

“So don’t tell me that we can’t make cars profitably in small volumes – but it is a different way of making cars.” Prof Roos said producing limited runs of specialist vehicles would have a huge impact on the supply chain feeding parts into the manufacturing process.

“It means incredibly quick response times, incredibly agile manufacturing, the ability to do multiple things at the same time,” he said.

“Or you can decide you don’t want to play, it’s too hard.

“You can do a local platform with local production, but that will require government money – there is no other choice, and it will require increasing amounts of government money.

“At the moment we pay about $18 per capita in Australia to keep them (the car-makers) here, and the next country up is about $95, and then it goes up to several hundred (dollars),” Mr Roos said.

“So if you want to keep them here we’re probably going to have to normalise our contribution to what is the norm in this area, and that means a lot more money paid, but also to understand what you get for that money.

“If I add up the benefits to the economy of this industry, I get around, give or take, $40 billion to $50 billion,” he said.

“Investing $1 billion to get $40 billion on the whole seems to me to be quite a reasonable estimate – maybe I’m not that good at maths.” Prof Roos has studied Holden’s books in recent weeks at the request of the Federation of Vehicle Industry Unions, and has made recommendations on how an estimated $15 million can be saved annually at the car-maker.

Workers are expected to vote next Tuesday (August 13) on whether to accept a new enterprise agreement, which will be crucial in determining the future business plan of the company, which is expected to be finalised by the end of September.

Holden has said it will wait until after the federal election on September 7 before making a final decision on its manufacturing future.

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