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Why FAPM has closed, and where to now?

Inevitable: Toyota’s decision to follow Holden and Ford in closing down its manufacturing operations in Australia put the FAPM on a path that would also see it close.

Peak industry body for car parts sector closes, but VACC to stand in until 2017

General News logo14 Jul 2015

By IAN PORTER

ANOTHER pillar of the Australian automotive industry has bowed to the inevitable with directors of the Federation of Automotive Products Manufacturers (FAPM) placing the organisation into voluntary liquidation.

The federation will follow the three car-makers – Ford, Holden and Toyota – out the door after the automotive manufacturing sector was overwhelmed by a range of negative factors in recent years.

Formed in 1958, FAPM was the body that represented the army of more than 200 component manufacturers that flourished after the Chifley Government decided to encourage manufacturing in Australia as a means of providing employment to the urban poor and immigrants after World War II.

In an interview with GoAuto this week, FAPM chief executive Richard Reilly told GoAuto that directors decided to close the organisation down after it became obvious early last year that the car industry – and the parts-makers supporting it – had no future.

“That became clear for the parts industry after General Motors announced in December 2013 plans to cease manufacturing, and Toyota followed in February 2014,” Mr Reilly said.

While the legal entity of the FAPM will now be liquidated, FAPM will bequeath the name, logo and remaining funds – about $60,000 – to the Victorian Automobile Chamber of Commerce (VACC), which will cover the cost of a one-day-a-week secretariat out to 2017.

Long-serving FAPM board member and prominent parts industry executive Barry Comben also told GoAuto this week that the closure was inevitable.

“The fact is that the auto industry started to wane a long time before the most recent decisions were taken,” he said.

“If you believe what all of the car companies have said in their respective announcements in recent years, they have said no amount of government support would have influenced their decisions in the end.

“You either accept that or you don’t.

“I think they were right … because they knew, at least this is my take on it, that it had become unsustainable given the model mix that they were producing, the changes in consumer trends and the cost of developing and producing vehicles for a relatively small market. It just didn’t cut the mustard anymore.”

Mr Comben said making cars in Australia required solid exports if factories were to produce more economically.

“I would have loved to have seen an export program succeed, but the people who could have made it happen, the car companies, couldn’t see the sense in it.”

However, he did concede that Toyota had for a long time recognised the importance of an export program and had had the persistence to see it through.

“That’s the standout success. Toyota Australia was given that mandate for the Middle East a long time ago and, Toyota being Toyota, they did what they said they would,” he said.

“Except for that excellent outcome for Australia and Toyota workers over many years, nobody else has been able to make sense out of an export plan, otherwise there would have been one.”

Mr Reilly said FAPM directors had decided to waive membership fees in 2014 given the fact the industry was in decline and the federation still had some cash in the bank.

“The fee hiatus put us on a path, realistically, as you wind down reserves, on a path to liquidation,” he said. “We could have started charging fees again for 2015-16, but who would have paid? And what could we have offered them?” Mr Reilly said there were still around 150 members on the books, down from a peak above 200 as recently as 2004. At that time, FAPM members had combined revenues of $3.5 billion.

The deal was struck with the VACC after FAPM directors decided against simply shutting down the federation overnight and walking away, believing they owed it to the members to arrange an ongoing service.

The future of the organisation was discussed with a number of industry bodies before reaching an agreement with the VACC.

VACC chief executive Geoff Gwilym told GoAuto that “the important thing for us is we want to keep the automotive family together”.

“Our commitment is we will maintain a presence at least until the end of 2017, but our longer-term objective is to keep that part of the industry in touch with us,” he said. “It could be for 50 years, who knows.”

Mr Gwilym said the VACC had stepped up because it was concerned politicians and the public would assume there would be no automotive industry in Australia after 2017.

“They have overlooked the fact that there are 380,000 people who work in the service and repair part of automotive, and auto manufacturing was only ever one fifth of total automotive activity in Australia,” he said.

“In many ways it has overshadowed the retail service and repair sector that’s the mob that keeps 17 million vehicles on the road every day.”

Mr Gwilym said VACC directors decided to maintain the FAPM’s presence even though there was little in it financially and despite the fact that the remaining FAPM members may make a heavy call on the VACC’s industrial services in a period of restructuring.

“We’re saying: ‘We’re in’. If they need help, we’ll give them help,” he said.

Mr Comben said the automotive manufacturing industry was simply a victim of a period of relentless change that, in the end, caused its demise.

“I don’t think any amount of government money would have changed the result and the car companies are on the record as saying that, so that’s the view I had.

“But it doesn’t change the view I have that the FAPM has been a very worthwhile voice for the industry over a long period of time and I think it served the industry very well. RIP.”

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