A worker at Toyota’s Altona factory, which makes its last car on Tuesday.
The Australian Newspaper- 12:00AM September 30, 2017
Next Tuesday the last Camry will roll off Toyota’s assembly line in Altona, in Melbourne’s west. On October 20 the final Commodore will be built at Holden’s Elizabeth plant north of Adelaide. Nearly four years after its approach was first heralded, carmageddon has arrived. Yet, for all the jobs going and factory doors about to close, a more profound change to the auto industry is hurtling down the road.
The federal government’s indifference towards the end of local car-making is evident in its belated response to a Senate inquiry into the future of Australia’s automotive industry. The committee held public hearings in March 2015 and delivered its final report in December that year. The government tabled its formal reply this month, nearly two years later — and only then after the parliament ordered it to do so.
To the surprise of no one, the government rejected the committee’s principal recommendation to make the undersubscribed, $2.5 billion Automotive Transition Scheme more accessible to manufacturers looking to diversify, value-add and otherwise stay in the game. Even if the government had shifted ground on this point, it would have come too late to help the 7165 people about to finish up at Toyota and GM and the 6085 workers, mostly based in Adelaide and Melbourne, who are losing their jobs with component suppliers.
The industry is cautiously optimistic about these workers. Anecdotal evidence from the factory floor suggests their skills, experience and training are highly sought after by employers in other industries. Not all will find other jobs but most will. Many already have. The bigger concern is what is coming next and Australia’s preparedness to meet it.
Electric vehicles, zero-emission hydrogen vehicles, autonomous vehicles and new forms of mobility: as Australia punches the clock on car-making, global motoring is undergoing a transformation full of possibilities and opportunities for hi-tech design, engineering and manufacturing. Goran Roos, a strategic adviser to the Defence South Australia advisory board and one of the sharpest minds in manufacturing, describes it as a paradigm shift.
Steve Bletsos, a senior research analyst with the Victorian Automotive Chamber of Commerce, says the impact of cars exiting Australia will be dwarfed by the motoring revolution. “The manufacturing issues, although important, are not the most important issues for the industry,” Bletsos tells Inquirer. “The disruption of EVs and autonomous technologies is going to be massive when it happens on a large scale.’’
Bletsos is the author of Directions in Australia’s Automotive Industry, a report commissioned by the Motor Traders Association of Australia. The report is informed by Australian Bureau of Statistics and industry data and a survey of 1000 businesses. Its findings make for sober reading.
There is no denying the impact of carmageddon. From July 1, 2014, to June 30, 2019, the automotive industry will shed 30,324 jobs. Although manufacturing makes up just 4.4 per cent of the national total automotive industry, nearly 90 per cent of all job losses will come from car and component-makers. In 2007 Toyota built a record 148,931 vehicles in Australia. This year production will stop after 61,000. A total workforce of 3900 will shrink to 1300 by year’s end. Once Ford, Toyota and Holden are gone, a $37.1bn industry will have taken a $2bn hit.
At the end of the last financial year, there were more than 3000 automotive manufacturing businesses in Australia employing 43,627 people and adding $3.8bn of value to the economy. After the final passenger cars and replacement parts are made, assembly lines decommissioned and plants shuttered up, Australia still will have auto manufacturing, albeit in significantly reduced form.
Robert Wilson, managing director of Palm Plastics, will keep his factory open. Picture: Stuart McEvoy
The VACC estimates there will be 30,000 people employed to make buses, trucks, trailers and specialist vehicles. Australia also will have a large automotive industry heavily reliant on repairs and maintenance; a sector plagued by skills shortages and a lack of qualified apprentices. The immediate crisis facing the industry is not the jobs that are going; it’s the ones it can’t fill.
A problem identified by the MTAA report is a disconnect between how we imagine the auto industry and the reality of working in a hi-tech, highly automated and fast-evolving field. We imagine an industry where job opportunities are scarce but in reality the industry is crying out for more and brighter people willing to pursue a career in auto. We imagine grease pits and dirty assembly lines when in reality today’s auto is about design, engineering, complex systems and advanced problem solving.
“Given the rapid pace of technological change within motor vehicles, including electrification, vehicle safety and connectivity and the development of autonomous vehicle technologies, automotive employers are in need of higher performing students with sound STEM (science, technology, engineering and maths) skills … to understand, program and repair these technologies,” the report reads. “There is still a perception however amongst school career advisers that automotive trades are for the less academically inclined, therefore such students, including many with learning difficulties, are steered towards automotive trades.
“This mismatch of skills demand and supply is an ongoing source of frustration for both automotive employers and students, resulting in both high attrition rates for employees and contributing towards ever increasing skill shortages for automotive businesses.”
Roos says Australia has a “completely erroneous view” of its automotive sector. The labour-intensive assembly lines of the 1970s are long gone. Modern automotive is highly automated, with relatively few workers needed to put a car or components together. The people you still find on the factory floor — from Toyota’s Altona plant to BWM’s production facility in Landshut, Germany — are highly skilled.
“The work is in the design of the vehicle and the development activities and associated business model development and services,” Roos says. “That is high-skilled work that requires a reasonable level of education to do. We have an unarticulated assumption that manufacturing is full of blue-collar workers. It isn’t.”
The best measure of this manufacturing misconception is the tally of skill shortages within Australia’s automotive industry. As things stand, we need another 16,656 light vehicle mechanics, nearly 6000 spray painters and panelbeaters and nearly 2000 auto electricians to meet present demand. We have a shortage of 35,083 skilled workers across all auto trades, more than the number of people who will lose their jobs as a result of carmageddon.
Unless the VET sector starts producing more capable apprentices, the skill deficit will get only worse. If you can’t find a good mechanic to service your car now, how will you go in 10 years when your fully electric, zero-emissions car needs a tune up?
Component-makers have long known what is required to survive carmageddon. Well before Ford announced in May 2013 that it would cease production at its Geelong and Broadmeadows plants, well before Holden and then, reluctantly, Toyota joined the Australian exodus, the global financial crisis and surging Aussie dollar wiped about one-third off local car production.
From that moment, if not before, it was clear to anyone in manufacturing that a sole reliance on local car-making was a precarious business model. Companies understood they had to diversify beyond automotive or service a bigger market by securing contracts in the global supply chain. To do this, they needed to compete on cost with Asia and match the skills and efficiency of advanced manufacturers in Europe.
Robert Bosch is one company that will survive. About six years ago the Australian arm of the German-based multinational abandoned its most profitable automotive product, ABS brakes, and focused on developing and engineering diodes, a small electrical device that regulates the flow of a current. The shift came at a cost. More than 450 people lost their jobs and a valuable export business was jettisoned. Yet the gamble paid off. There will be Bosch diodes inside the final Camry and Commodore built in Australia. More important, the company exports more than 100 million units a year to Asia and Europe.
As local car-making winds down, Robert Bosch’s Australian business is on a three-year upward trajectory with about 1600 people on its payroll. The company kept its engineers and maintenance people from the old ABS assembly line and started a new business, Bosch Manufacturing Solutions, which consults with companies in other industries — mainly agriculture and pharmaceuticals — to improve their production systems.
It kept its most valuable resource — its highly skilled people and their knowledge of manufacturing systems — and is well positioned to take part in the coming mobility revolution.
“One of the things we are trying to do is show that it is possible to do it here,’’ says Bosch’s head of corporate affairs, Mounir Kiwan. “Tomorrow’s automotive is completely different to yesterday’s automotive.’’
Robert Wilson will keep his factory open but has been forced to radically reshape the business. When he bought Palm Plastics in the 80s, it supplied parts used by all five Australian carmakers. Once Toyota and GM are gone, his Moorabbin factory mainly will produce plastic drinkware.
Wilson is proud that his company has successfully diversified. In no small part this is because of the efficient production systems it learned from Toyota, which have enabled it to be price competitive with Asia. He is also saddened by what is happening to automotive and manufacturing in Australia.
“People put a good face on it but it is a disaster for many companies and it is a hollowing out of skills,’’ he says. “We rely on toolmakers in Australia, equipment suppliers, raw material suppliers, and they are all reducing and downsizing. The expertise is gradually going out of the people we rely on.”
Other companies are preparing to close their doors. Chassis Brakes International, previously known as Patons Brake Replacements, is one of Australia’s oldest automotive companies. It was established in Melbourne in 1927, before the first Holden was built and Toyota Motor Company was formed. It was twice taken over by multinationals: first by Bosch, then CBI. This has left it with nowhere to go. CBI makes brakes and other components all around the world. There is nothing made by its East Bentleigh factory that can’t be made elsewhere, closer to where cars are built.
“You exist where you are for the business that you have got,” says Peter Shortal, CBI’s director of human relations. “Once that business disappears, your nearest competitors are in Thailand and China. We looked at whether we could diversify, but without a product and a market it is extremely difficult. Manufacturing is extremely difficult in this country now.”
At its peak, PBR employed more than 2000 people. The company now has 110 people on staff, most of whom will take redundancies once the final brake parts are delivered to Toyota and GM. The remaining workers will leave when the East Bentleigh plant is mothballed in March. Shortal says it will be a sad day. Most of the workers have been with the company for 20 years or more. “A lot of them were immigrants and this is the only job they have had in this country. It is sad for them and sad for what the future holds, with the absence of manufacturing. You’ll have fewer engineers designing things. A chapter in Australia’s manufacturing history is gone.”
Australian Arrow is also shutting down. It is a tier one supplier of electrical components to Toyota and tier two supplier to GM. Its parts will be used to make the last Camry and last Commodore. It is wholly owned by the Yazaki Corporation, a huge multinational automotive component supplier with nearly 60 manufacturing sites in Europe, more than 100 in the Americas and 87 throughout Asia and Oceania. Yazaki doesn’t need its Carrum Downs factory in Melbourne’s southeast to diversity or adapt; once Toyota has gone, Australian Arrow has no reason to stay in business.
Carmageddon has already hit Carrum Downs. A factory that used to employ 1000 people now has 53 on its books. Last week managing director Craig O’Donohue travelled to Apia, Samoa, to close down the company’s sister plant, which for 26 years has supplied electrical parts to Australian Arrow. About 600 people were made redundant but O’Donohue says that despite these numbers, relatively few workers were left without other jobs to go to.
“It is not the horrendous thing that we were expecting three years ago,” he says. “It actually turned out that there is light at the end of the tunnel. People from our business have basically picked up jobs. I’m not hearing too many hardluck stories. To this point, everyone has been pleasantly surprised that their skills and their abilities have been taken up very quickly by other organisations.”
Roos says the end of car-making will leave Australia with a “sparse competence landscape”: a place lacking the critical mass of skills, suppliers and customers necessary to support advanced manufacturing. Canberra appears content to let this happen. “Their view was if you get some form of support from government you shouldn’t have the right to exist,” he says. What is the cost, however, of Australia playing itself out of the mobility revolution? Roos says: “Do you want to produce electric batteries, do you want to produce electric engines, do you want to produce telematics and all these things that are going to happen in this area?”
These are the questions that keep MTAA chief executive Richard Dudley awake at night. He says the government “missed the boat” with its response to the Senate report into the future of automotive and fears that Australian industry is about to do the same.
“The focus has always been on manufacturing but there are tremendous opportunities in the intersection of mobility and communication, alternative propulsion technologies and what that means for infrastructure and the way each of the sectors within the automotive industry are fundamentally changing,” he says. “If you have a federal government that has wiped its hands of an industry, you could argue that it is not going to have any role to play.”