Holden’s exit: Is there a silver lining?

The fallout from Holden’s sudden but expected exit has unions and politicians float some rather scary numbers.

The loss to the economy is forecast to be huge. How big exactly?

Depends on who you ask.

University of Adelaide Associate Professor John Spoehr is quoted in the Australian Financial Review stating that this “would create an economic vacuum of at least one billion dollars in Adelaide and $4 billion nationally.”

The Greens are talking about a recession. And the Australian Manufacturing Workers Union claims it will “punch a $21 billion hole in the economy”.

The reality may play out quite differently. For one, the plant will close in 2017 and the economic landscape could change quite significantly by then.

When Mitsubishi closed its plants in South Australia, most of the workers made redundant were able to find employment within 18 months.

Auto parts suppliers are likely to be badly affected, especially since a majority of them are small enterprises employing less than 20 people. Being small can be a blessing in some ways as it allows them to be nimble and pursue other opportunities — if they have access to funding.

There are calls for the Government’s auto industry subsidies to be redirected to the parts manufacturing sector. With the recently-signed Free Trade Agreement with Korea, there may be opportunities to participate in that country’s booming auto sector.

Advanced manufacturing and 3D printing are reshaping manufacturing; parts makers could well harness these technologies and move into other sectors such as mining.

Roy Green from the University of Technology has for long been promoting the concept of ‘micro multinational companies. These are small companies with superior technology and high-value IP that link into global supply chains.

The parts suppliers employ 45,00 people and have shown remarkable resilience in the past. In 1995-96, just nine percent of the vehicle body parts were sourced from local suppliers. In 2011-2012 this figure grew to 24 percent.

It’s time for this sector to transform, with some help from the government.