Auto industry prepares to meet its maker

Saying 2014 wasn’t a good year for Australian car making is
putting it very mildly. So what will happen to component suppliers after the
car makers shut up shop? Is there a future for them? Alan Johnson reports.

With the car industry effectively closing its substantial
doors in 2017, the push is on to transition as many automotive component
manufacturers (and their workers) into as many other areas of manufacturing as
possible.

History shows that such transitions are difficult processes
for companies. However, Australian Industry Group’s Director – South Australia, Stephen Myatt,
who is working closely with the group’s members in the car industry, is
optimistic a large number will be able to diversify.

He told Manufacturers’
Monthly
there are three different categories of manufacturers involved.

“First are the multi-national component companies whose sole
task is to supply parts to automotive manufacturers, and if there are no
automotive manufacturers here then they won’t be here,” he explained.

“On face value, you’d think that would apply to all the
multi-national component companies, but in these circumstances there are some
who are allowing their local subsidiaries to search out other opportunities in
Australia. That would be the second category.”

Myatt said the third category includes the Australian-owned
companies.

“These companies are very keen to diversify their
capabilities into non-automotive areas and some of them have been working at
that process for a considerable period of time,” he said.

“I know of at least one company which has had two or more
people working full time on the diversification project for over 18 months.

“They are confident they have some ideas which they will be
able to bring to fruition, but at this stage it’s a case of waiting to see,
with the closure still a couple of years away; not until 2017.”

However, this transition to new areas is making many
non-automotive manufacturers nervous. Myatt said they are worried this
diversification of automotive component manufacturers might mean they diversify
into their area.

“We have been talking to the Government to ensure that any
diversification is into new areas of opportunity, and not just into existing
markets, which will introduce competition and cut margins,” he said.

The Government has established a $155m Growth Fund to
support employees, businesses and regions affected by the closure of
Australia’s car manufacturing operations.

The fund supports initiatives to assist workers transition
to new jobs; businesses find new markets and invest in capital equipment; and
regions invest in infrastructure projects.

Myatt said these grants are vital for this transition to
work.

“The two grants that are of interest to us are the ones that
apply specifically to automotive component companies to help them diversify,”
he said.

“The other grant that is important is for non-automotive
manufacturing companies who can accelerate their growth plans, so they are in
the best position possible to take up automotive workers who are looking for
new opportunities.”

Myatt said there are a number of companies in South
Australia, not in the car industry, who are looking very seriously at that
program to accelerate their growth plans.

While it’s too early for feedback, he said many companies
are working feverishly on their propositions.

“Companies in South Australia are very aware of the
programs, and those who have a viable proposition are working hard towards
putting it together,” he said.

Myatt said there has been a strong push in the region to move companies into high-value
manufacturing.

“Over the past three or four years we have worked closely
with Professor Goran Roos, an international authority on business model
Innovation,” he said.

“He has been working hand in glove with us to assist
companies, on an individual basis, with business model innovations in a
high-cost, high-wage, high currency economy.

“We have been working with him, putting companies through
pretty intensive courses to completely restructure business models.

“Roos believes our sweet spot in manufacturing, going
forward, is products that are low-volume, highly complex, highly variable, and
high-value added.”

Nevertheless, said
Myatt, there will be a significant hit when Holden closes its doors in
2017.

“The Mitsubishi closure was in an environment where we still
had Holden and Ford. Those workers had the opportunity to transition into the
supply chain or other manufacturers, but when Holden goes the industry is
gone,” he concluded.