Tariff cuts to proceed

[King Nothing]

At different points in time different industries are in boom and bust cycles. At the moment the Australian Automotive Industry (I'll call it AAI, including holden, fort, mitsu, and component supliers) is in a slump, aggrevated by record oil prices that were not foreseen.

However in the past it has been profitable, and will be again in the future. It was only 10 years ago that there was a waiting list for a VT commodore, they couldn't make enough of them. At that point in time petrol prices were low and there was no major warnings of a massive hike. Greenhouse gas was only something "those weird greenies" used to talk about.

Things were going well, and there were no major signs of trouble ahead. So I imagine that the AAI made a decision to sail on with minimal R&D in small/efficient cars, as is somewhat reasonable. Remember that the margins on these small cars are very small. So why invest in something, that did not have as large a market as anticipated and made less money, instead of doing very well selling thousands of profitable cars.

Fast forward 10 years and its a very, very different picture. Particularly in the last 5 years where large car sales have shrunk massively, mistu is gone, environmental concerns now actually mean something (accellerated even more since the election of labor), and greenies aren't as weird as they used to be to a lot of people. Think how much Aus has changed, really. It is a massive change.

We now have an automotive industry that is struggling. Companies which, when in good times, provide thousands of people with jobs (both direct and indirect) and contribute massively to the economy. Sure, they may have misread the last 5 years badly. But who else predicted it? Not many, I'm sure.

The AAI is behind the ball, no doubt. No proper diesels (craptiva doesn't count), an old technology LPG system at ford, holden only recently getting into the game. No hybrids, let alone electric. In fact no small cars, bar the upcoming focus. They are up the proverbial creek, no doubt.

So the solution posed by some on this forum? Let them drown if they can't hack it. Maybe they are right. But this is a huge decision that cannot be rushed into. Once our automotive industry is gone, it will never come back. Ever. Do we dare risk an entire industry, based on poor performance and poor management in the last few years? An industry which, given the help and support it needs, could produce some fine vehicles.

The AAI has historically done a lot with a little. Really, we have quite good quality cars for such a small market, especially the Falcon with no major export market. This industry can do it. It just needs time. Sure, a lot of the money goes overseas to american companies. But if it dies, a hell of a lot more will be leaving our shores, and a lot of jobs will be lost.

Will it help or hinder the economy? I don't know, I'm not an economist, I'm an engineer. But to me, looking at it from a material flow point of view in terms of dollars, I don't see how draining more of our wealth overseas, as opposed to keeping it in our borders, is better for us overall.

Australian manufacturing (as a whole) has some of the highest quality and safety standards in the world. This not only gives great efficiency, but also costs money to maintain. We also have some of the lowest tariffs in the region. So why should we, as a country, allow other countries with (in general) lower quality and safety standards (hence lest cost), and higher tariffs on OUR goods, to destroy what is left of our manufacturing industry? It could all very quickly turn around again.

[ltd]

^^^^^^^^^^^^^^^^^

Absolutely brilliant, well reasoned piece.
Agree 100%.

[Fordman1]

Originally Posted by King Nothing

Australian manufacturing (as a whole) has some of the highest quality and safety standards in the world. This not only gives great efficiency, but also costs money to maintain. We also have some of the lowest tariffs in the region. So why should we, as a country, allow other countries with (in general) lower quality and safety standards (hence lest cost), and higher tariffs on OUR goods, to destroy what is left of our manufacturing industry? It could all very quickly turn around again.

Good post. Factual and true.

[SB076]

Originally Posted by Wretched

Just tell me how well the locals are going with their sales? Are they themselves confident about their future here and what are they doing to secure it? Yes we know Ford is building the focus, that is a big plus.
What have they done so well in the last decade?

I am in the IT industry so I know all about changes and moving with the times. Our clients are from a variety of industries with one being a car manufacturer so we do get to see and become familiar with all the changes happening.

Local sales are not going well for various factors which have already been covered.

From reading their responses to the reduction in tarrifs there isnt a lot of confidence out there. Obviously they will do what they can to secure a better future but they are limited with what they can do.

In the past decade the local manufacturers have been working on whatever the market dictated. Recent examples of this are safety, installation of airbags, traction control, ESC and pedestrian safety (none of this happened overnight) The result of all this has been that the FG falcon has been the first Oz car with a 5 star ANCAP rating (Holden and Toyota are not far behind) Currently (I presume) they are working on more efficent technologies. If you want to know how they have gone, how many large cars (globally) have been awarded 5 stars and cost approx. $40,000

To give you an example that hopefully you understand (keep in mind its been 10 + years since I got my degree in IT) Try developing a piece of software that is completely unique and then selling it too 100 people. How well do you think you would go competing against an overseas competitior producing a similar bit of software, however they are selling it too 100,000 people. Take into accound the development, programing, testing, marketing etc. Now to complicate it all, your competitior is based in India and paying wages of $20,000 pa, there government taxes its companies less than you get taxed and as such they are able to provide a lower cost product. How do you think you would fare?

Then to top it all off, the government rather than support and buy your software (to where your business pays all its taxes) buy the overseas product.

As a shareholder "that sometimes" reads financial reports and market information, the IT industry isn't imune to this either. Many multinationals and even Australian companies are moving their IT resources off shore (namely India)

EDIT: Good post x 3 King Nothing

[xbgs351]

Originally Posted by Barraxr8

Good idea for a few posting here.......

I have worked as a mechanical engineer at a couple of automotive manufacturers. I was not one bit surprised when one of them went to the wall last year. Poor management, large labour component, out-dated machinery etc. There was no way that it was going to compete with a modern factory based in a low wage country.

[Mick K.]

Originally Posted by XBROO

So if holden and ford die off, then what happens to the V8 supercars? I don't think I'll give up a weekend to watch 4 or 6's race around. I can't really talk as I always buy second hand but aleast they are fords. If this dose kill ford and holden motor racing in this country it will never be the same again.

How about Australian built Camry Hybrids racing?

[Fordman1]

Originally Posted by xbgs351

I have worked as a mechanical engineer at a couple of automotive manufacturers. I was not one bit surprised when one of them went to the wall last year. Poor management, large labour component, out-dated machinery etc. There was no way that it was going to compete with a modern factory based in a low wage country.

You'd be surprised how low tech some Asian plants are (not much automation at all, poor safety standards etc).

High tech is appropriate if labor costs warrant it.

There was a e-mail video clip doing the rounds recently with a single press being "operated" by 7 operators in China, most of whom were sitting inside the press (says a lot for the safety standards) and ducking their heads as the press cycled when each part was stamped.

In Australia that press would have had electronic guarding etc, full power lock out, and the load / unload would have been handled by a robot.

[4Vman]

Originally Posted by Barraxr8

You'd be surprised how low tech some Asian plants are (not much automation at all, poor safety standards etc).

High tech is appropriate if labor costs warrant it.

There was a e-mail video clip doing the rounds recently with a single press being "operated" by 7 operators in China, most of whom were sitting inside the press (says a lot for the safety standards) and ducking their heads as the press cycled when each part was stamped.

In Australia that press would have had electronic guarding etc, full power lock out, and the load / unload would have been handled by a robot.

Yes, but the aussie press would be 10 times more expensive to buy and about 10 times more expensive to provide labour for and produce 1/1000 the number of parts..
The fact is we cannot compete equally against those global sized economies that have poorer standards of living and 19th century industrial relations laws...

[Fordman1]

Originally Posted by 4Vman

Yes, but the aussie press would be 10 times more expensive to buy and about 10 times more expensive to provide labour for and produce 1/1000 the number of parts..
The fact is we cannot compete equally against those global sized economies that have poorer standards of living and 19th century industrial relations laws...

Yep the automated Aussie press would run about the same hourly rate as the one above, the labour cost would be higher because it would still require a person to 'run it' (more costly than the 7 who get payed SFA overseas), and the other costs would be a lot higher to ensure all of the safety and other standards are met (including environmental concerns which are being monitored in big businesses).

Lets just screw local companies over a little more and make them compete on equal terms with these overseas places :togo:

Better still lets just close them down and import everything from OS, after all we can send them iron ore, coal, and wood chips can't we ?

Oh yeah that's right, we buy that stuff back when it's been processed (into steel, paper, etc) and pay 100's of times more for it. :

[xbgs351]

Originally Posted by Barraxr8

Yep the automated Aussie press would run about the same hourly rate as the one above, the labour cost would be higher because it would still require a person to 'run it' (more costly than the 7 who get payed SFA overseas), and the other costs would be a lot higher to ensure all of the safety and other standards are met (including environmental concerns which are being monitored in big businesses).

Lets just screw local companies over a little more and make them compete on equal terms with these overseas places :togo:

Better still lets just close them down and import everything from OS, after all we can send them iron ore, coal, and wood chips can't we ?

Oh yeah that's right, we buy that stuff back when it's been processed (into steel, paper, etc) and pay 100's of times more for it. :

I just looked up some statistics from the Australian Bureau of Statistics and it looks like the growth in manufacturing over the last decade is line ball with mining.

Something else that you may find interesting is that manufacturing contributes more to the economy than any other sector.

[4Vman]

Originally Posted by Barraxr8

Yep the automated Aussie press would run about the same hourly rate as the one above, the labour cost would be higher because it would still require a person to 'run it' (more costly than the 7 who get payed SFA overseas), and the other costs would be a lot higher to ensure all of the safety and other standards are met (including environmental concerns which are being monitored in big businesses).

Lets just screw local companies over a little more and make them compete on equal terms with these overseas places :togo:

Better still lets just close them down and import everything from OS, after all we can send them iron ore, coal, and wood chips can't we ?

Oh yeah that's right, we buy that stuff back when it's been processed (into steel, paper, etc) and pay 100's of times more for it. :

No arguement here, we're the stupid ones selling our dirt overseas and buying it back processed!
The problem is we can't process it economically enough to justify doing it here, remove all tarrifs and we might as well shut all local manufacturing and build a bridge to china..

[xbgs351]

Originally Posted by 4Vman

Yes, but the aussie press would be 10 times more expensive to buy and about 10 times more expensive to provide labour for and produce 1/1000 the number of parts..
The fact is we cannot compete equally against those global sized economies that have poorer standards of living and 19th century industrial relations laws...

Nor should we compete with what the third world excels at. We should compete in other areas that we excel at and they suck at.

[4Vman]

Originally Posted by xbgs351

Nor should we compete with what the third world excels at. We should compete in other areas that we excel at and they suck at.

Thats true.

[Fordman1]

Originally Posted by xbgs351

I just looked up some statistics from the Australian Bureau of Statistics and it looks like the growth in manufacturing over the last decade is line ball with mining.

Something else that you may find interesting is that manufacturing contributes more to the economy than any other sector.

That I guess underlines how important manufacturing (in total, not just automotove) is to our economy and the future of Australia. Automotive exports I guess make up most of those numbers (cars have the most value added of any manufactured goods).

No 1st world country (AFAIK) exists without a strong manufacturing base. The automotive sector provides much of the innovation and technological initiatives in manufacturing.

[xbgs351]

Originally Posted by Barraxr8

That I guess underlines how important manufacturing (in total, not just automotove) is to our economy and the future of Australia. Automotive exports I guess make up most of those numbers (cars have the most value added of any manufactured goods).

No 1st world country (AFAIK) exists without a strong manufacturing base. The automotive sector provides much of the innovation and technological initiatives in manufacturing.

Automotive manufacturing consists of 6% of the total manufacturing sector.

[Fordman1]

Originally Posted by xbgs351

Nor should we compete with what the third world excels at. We should compete in other areas that we excel at and they suck at.

Will there be anything like that in 20 years ? I don't know the answer to that.

IT ? No.
Manufacturing ? No
Farming ? Perhaps
Mining ? Yes
Service industries ? How do you export that ?
Administration ? Well that's being sent overseas with IT.
Education ? Perhaps.
Telecommunications ? Perhaps - but that will be sent overseas too.
Maintenance ? Ok we'll need local tradies but how do you export that ?
Professional services ? How do export billions of dollars worth ?

[Fordman1]

Originally Posted by xbgs351

Automotive manufacturing consists of 6% of the total manufacturing sector.

Interesting. Dollar wise or employment wise ?

What's the largest subset ?

[xbgs351]

Dollar wise.

Food, Beverage & Tobacco is the biggest, standing at 20%.

[Fordman1]

Originally Posted by xbgs351

Dollar wise.

Food, Beverage & Tobacco is the biggest.

That makes sense. Thanks.

We have some of the best manufactured food stuff's in the world and we export a lot too. They require top class quality systems as well (we're good at that in Food & Beverage).

I didn't give those much thought. I've been thinking about complex manufactured items and products like steels etc.

[Fordman1]

Originally Posted by xbgs351

Automotive manufacturing consists of 6% of the total manufacturing sector.

Do you have a link to the total breakdown please ?

[xbgs351]

Those categories where pretty much second and third in the rankings.

[Fordman1]

Originally Posted by xbgs351

Those categories where pretty much second and third in the rankings.

Mmmmm.

It'd be interesting to find out the amount of value ($'s) added to those as a % of total cost. After all Food and Beverage are a "need", other manufactured goods can almost be regarded as luxury items.

It'd also be interesting to find out the tariff rates used to protect the various manufacturing sectors, and the number of people they employ.

[mik]

as i see it one thing we can do, is let the decision makers know we don`t like what they are going to do and we will vote them out, rightly or wrongly if enough people voice they`re dissaproval the pollies will suddenly see who pays their wages:.

[BTTB]

I hate it when i venture into these threads by mistake

[sleekism]

Originally Posted by xbgs351

Automotive manufacturing consists of 6% of the total manufacturing sector.

What about the Defence Industry?? The Collins Class Submarine project was worth $6 billion by itself and the whole industry is Government protected. We didn't even manufacture submarines in this country we had to set up from scratch.

[ltd]

Originally Posted by sleekism

What about the Defence Industry?? The Collins Class Submarine project was worth $6 billion by itself and the whole industry is Government protected. We didn't even manufacture submarines in this country we had to set up from scratch.

That's a bad example.
These monolyths cost an absolute bomb and are still substandard compared to the rest of the world.
Most of them still leak, are noisy and have been found in war games in minutes.
The collins class submarine was a result of Kim Beasley the former defence minister trying to stimulate a stifled economy by pumping billions into it.

[sleekism]

Originally Posted by ltd

That's a bad example.
These monolyths cost an absolute bomb and are still substandard compared to the rest of the world.
Most of them still leak, are noisy and have been found in war games in minutes.
The collins class submarine was a result of Kim Beasley the former defence minister trying to stimulate a stifled economy by pumping billions into it.

From what I have heard thanks to help from the U.S. Navy these issues have been largely fixed and in recent war games a Collins Class Submarine "sunk" a U.S. carrier. They have also been refitted for special forces operations.

[SB076]

Interesting article in today's John Mellor's GoAutoNews - stating that the the Australian economy is better off with tarrif's than with out. Professor Dixon (economist) who created the model stated that the productivity commission calcultated things wrongly

[MethodX]

Originally Posted by ltd

That's a bad example.
These monolyths cost an absolute bomb and are still substandard compared to the rest of the world.
Most of them still leak, are noisy and have been found in war games in minutes.
The collins class submarine was a result of Kim Beasley the former defence minister trying to stimulate a stifled economy by pumping billions into it.

Almost as bad as those Choppers we never got, paid a fortune for and were over 20 years old.

[SB076]

Article from industrysearch with two economists who developed the model used by productivity commision, stating that the removal of tarrifs is a mistake

http://www.industrysearch.com.au/New..._experts-33996