A bloody good reason to subsidise car making
The announcement by Toyota of several hundred job losses this week is certainly alarming and it will have had and will continue to have ramifications for the broader industry.
But it will only mark the end of the industry if we as a society say we don’t want manufacturing and we are happy to simply be China’s quarry and maybe a second tier tourist destination.
In all the hyperbole and wild statements we hear about our mining industry, we rarely hear some of the uncomfortable truths. That it’s only 9 per cent of the economy, that it is the cause of the high Australian dollar which is putting pressure on our manufacturers and farmers, and that, at its best, it really only represents the highest aspirations of the average third world dictator.
This is because if we as a society and economy continue with an unhealthy focus on mining then all we will ever be is a country that’s really good at digging holes and selling the dirt – nothing but a jazzed up Sovereign Hill that is forever subject to the economic fortunes and the strategic benevolence of the rest of the world.
If all we do is mining then we won’t be the country that cured a cancer, which pioneered new modes of transport, that created new engineering solutions to our energy challenges, or that had good jobs for the 300,000 Victorians who work in the manufacturing sector, and huge numbers of workers in other states too.
Without a solid manufacturing base we lose a whole range of industries that benefit from the diversity and resilience of a sector that benefit’s from global investment in innovation, research and productive capacity. Without a solid manufacturing sector to underpin our modern economy and way of life, we will have to content ourselves with living in shipping containers in the Pilbara; which we rent for $1500 per week.
It’s not just our lifestyle that is supported by the manufacturing sector, it is our ability to live it. In the great wars that Australia has endured over the last 100 years our local manufacturing capacity underpinned our capacity to win those conflicts.
Our great friends the US are not so great that they share all their defence industry intellectual property with us, and our geography means that we must be prepared for interruption of supply lines and information. We cannot simply invent a manufacturing sector when we find that we have a strategic imperative to have one. It’s why there is some very good strategic sense not just pork barrelling for Adelaide and Williamstown in making our own submarines and our own frigates.
And so we come to the events of this week. Some commentators have said it is time to choose whether we have an automotive industry. Some conclude, perhaps sharing some of the argument’s outlined here, that we must have one but it must be different.
For some the recipe required is old fashioned Soviet collectivisation, somehow forcing the three remaining carmakers into one big production line… somewhere. That approach of putting all the eggs in one basket would be a fatal exacerbation of an existing frailty within the Australian car industry that relates to its scale.
The late Geoff Polites was rightly hailed as the man who saved Ford in Australia. He oversaw the BA Falcon and the Ford Territory - popular cars that may have robbed sales from each other, but restored the stocks of Ford’s locally produced vehicles and the brand more generally. Yet Polities was very nearly the end of Ford when he oversaw the droopy looking and wildly unpopular AU Falcon. In truth he was lucky to get the go ahead from the parent company for another model run.
These examples indicate how an automotive company is only as good as its next model. What Australian car makers need to do if they want an industry is attract the next model. Our industry puts out about 250,000 vehicles every year. In China or the US that can be between 400,0000 to 1 million cars per year per factory and so to compete we need to do more with the scale we have.
Ford has learnt and offers more models and variants than its earlier days and Holden is the marvel of the automotive world in the way that it can deliver more than 20 variants of the same platform off one production line. Toyota has benefitted from a global parent that understands global platforms may be standardised but need diverse production to mitigate supply risks and utilise broader sources of innovation.
Three different approaches spring from an organic diversity that allows the local industry to support many thousands of employees in the supply chain who manufacture parts for all three car makers.
And all three are supported by subsidies; on the whole subsidies to the auto industry are a lot more transparent than elsewhere. But this website has also been effectively subsidised by the government subsidisation of university journalism courses, and our agriculture draws heavily on taxpayer funds for research.
At the end of the day, virtually every industry gets some form of subsidy, and we should actively decide whether we want to subsidise these industries. But the whole world is playing the subsidy game and if we don’t play it in some form, then we should start choosing our shipping container houses in the Pilbara now.
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