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Parts maker plans pre-emptive price hikes
Fallout from Ford, Holden closures to hurt many parts makers
16 Dec 2013
By BARRY PARK
A CAR parts supplier has warned he will have to increase prices to help pay for any potential redundancies in the wake of Holden’s manufacturing pull-out.
Peter Leahy, the managing director of Adelaide-based Plastic Products, said he would be forced to increase his prices to ensure that if ever it came to the crunch, he could afford to make redundancy payments to his workers.
“They’ve got four years which we don’t have,” Mr Leahy said today when asked what his next step to protect his 35-year-old business from following Ford and Holden down the road to closure was.
“I’m going to put my prices up – so what, they’re going to be leaving anyway,” he said.
“How are some of these companies who won’t survive going to pay for their redundancies? I’m really concerned about being paid in the last year that they’ re (Ford and Holden) here.” Mr Leahy said he also believed Ford and Holden would struggle to keep making cars until their withdrawal from Australia – Ford has flagged a late 2016 end to the Falcon and Territory range, while Holden has slated Cruze and Commodore production will end by 2017 – with forward orders already drying up.
“Ford has already cut its Territory sales in half – I’m going to be making half as many parts because they’re not selling as many,” Mr Leahy said.
“If sales drop even more, I don’t see how some car-parts makers will survive,” he said. “I will be surprised if many suppliers can see that time out.
“If orders fall off, they will start losing money. If they’re losing money now, it’s going to be even harder.
“If someone is 90 per cent dependant on the automotive industry, they’re all going to be tripping over themselves to go to Toyota.
“It’s hard – it’s like shooting an old labrador you’ve had as a pet.” Mr Leahy said he would start to seek cash payments to ensure his company was able to survive.
“I’m tipping a lot of closures, and I want to make sure that I’m paid because even now some people are not paying me fast enough,” he said.
“If Toyota also decides to close, that would be a big blow for us.” Mr Leahy said the loss of businesses around Holden’s Elizabeth plant would turn the region into a wasteland, as it was too far from Adelaide to be turned into an industrial park – the fate of the former Mitsubishi site at Tonsley Park.
The Federation of Automotive Products Manufacturers (FAPM) said last week it was “extremely disappointed” with Holden’s announcement last week that it would stop making cars from 2017 and become a full importer.
“The closure of GM Holden’s Australian manufacturing facilities in 2017 will impact tens of thousands of people working in the automotive components sector,” FAPM chief executive Richard Reilly said. “It has rocked the supply chain,” Mr Reilly said. “A lot of our members won’t make it. Holden’s – and Ford’s – withdrawal from the Australian car-making industry leaves Toyota as the sole manufacturer from 2018.
Mr Leahy said the impact on Australia’s car-making industry was evident in the size of the FAPM’s annual report, which had shrunk in thickness after corporate memberships had fallen from 170 in about 2002 to about 70 members in 2011.
He said there were tough times ahead for car parts makers.
“Things were easier when there was 70 per cent tariff protection of the car industry – anyone can make money in that sort of market,” Mr Leahy said.
“I recently bought a Toyota, but before that I had a Ford, and I always had Fords because my dad was a Ford man – he’d be rolling over in his grave.
“Times change, though, don’t they?”
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