No. 92

Stone the crows! Who says Australian industry can’t compete? Why when it comes to self-defeating stunts our workers united will never be defeated.

Last week workers at Toyota went on strike for more money. Their union wants 12 per cent over 36 months while the company is offering 11 per cent over 39 months.[i] David Smith from the Australian Manufacturing Workers Union is quoted as saying, “The workers believe they’ve done the right thing by the company. They’re saying the cost of living pressure is hurting, especially utilities which are skyrocketing.” [ii]

And this in a struggling industry whose survival is suspect thanks to the high dollar hurting exports. A globalised industry where companies can switch production offshore. A mendicant industry where pay and profits are provided in part by the taxpayer.

It’s an excellent example of what happens when taxpayers shell out for the privilege of protecting unionised workers and their managers. According to the Productivity Commission, state support for the industry through tariffs (on new and used cars) and direct subsidies came to $1.6bn in 2009-10, or around $29,000 per worker [iii]

Not you understand that this has anything to do with the protectionism of the past that rewarded politically powerful unions and employers at the expense of everybody else.

At least not according to Industry Minister Kim Carr who made his belief in public funding for car makers quite clear when he launched the Bracks Review, which funnily enough recommended just that:

Now, answering today’s challenges and seizing tomorrow’s opportunities will require new ideas and new policies. That’s why we’ve been talking about the need for a new partnership between government and the sector to attract new investment and to secure the jobs, the innovation, the technical skills which are driven by this critical industry. [iv]

And at least not according to Sophie Mirabella, Shadow Minister for Industry, Innovation and Science who says, “Manufacturers are not asking for handouts, for the reinstatement of tariff walls and fortresses, or the creation of some kind of siege mentality in Australia. Far from it.” [v]

And certainly not to Toby Hagan, motoring editor of The Age who says the fact that Australians prefer imported vehicles matters less than maintaining our ability to construct a car from concept to carpark: “That’s something that will become more important once the mining boom ends.”[vi]

But protection for privileged people is precisely what the Crows think they are all advocating – without state support it is a racing certainty Toyota would not be employing all its 4,500 workers.[vii]

As anybody as old as the Crows knows, protection is pointless. Manufacturing has no future if it depends on politicians to prop it up.

Of course it need not be this way, Australia can have an automotive industry, and manufacture all sorts of other stuff as well, if we are prepared to pay the price – which we aren’t.

The Yanks demonstrate how to do it. Two days ago, the United Autoworkers Union, representing the elite of what is left of American mass manufacturing, reached an agreement for better wages and conditions with General Motors.

But before anybody starts pointing out precedents for us, 2000 entry level workers at GM, who are paid $14 an hour or half as much as long-term employees, receive only “a modest” increase of between $2 and $3 an hour.[viii] The package also comes off a pretty low base following Washington’s $ US 60bn bailout of the big three during the GFC, (granted this was protectionism on the grandest scale, which is expected to cost the taxpayer $14bn in the end, but in crises politics trumps economics.)[ix]

GM, Chrysler and Ford still have a way to go before they are cost competitive, even against other US manufacturers. Unionised labour costs the big three over $50 an hour; twice what Volkswagen and Hyundai pay in the Tennessee and Alabama plants.[x]

With the US economy stagnating as China booms there are estimates that by the middle of the decade manufacturing workers in Mississippi will cost just 30 per cent more than their competitors in the Yangtze delta. For companies servicing the US market it makes manufacturing at home close to competitive.[xi]

The chance of Australians accepting a similar strategy are somewhere between buckley’s and none at least while manufacturing is unionised and industrial relations reform is off the agenda. Which means that ultimately the automotive industry must improve its productivity or go broke.

Just now, everybody seems to expect the latter will happen. It is certainly fashionable to argue that Australians are hopeless at manufacturing. Ross Gittins argues:

You can’t specialise in everything and the truth is we’ve never been good at manufacturing. Our domestic market has been too small to give us economies of scale and we’ve been too far away from the developed countries that buy manufactures.[xii]

True, but protection also meant productivity was ignored – if we want a manufacturing industry of any sort it will have to survive without the burden of sloth- ensuring state support. And by producing products that compete on price and quality in the global market.

Which is easier said than done, especially in the post Fair Work world where productivity is seen as a synonym for exploitation. As Jessica Irvine put it in a spectacularly silly piece last week, “Calling on Australians to be more productive somehow makes it sound like we’re all drones – our sole purpose being to produce more and more.” According to Ms Irvine, we should work smarter rather than harder so we can have the same standard of living while working less, which would allow productivity improving creativity to flourish [xiii]

This rather misses the point that competing countries will work harder, longer and smarter while we are kicking back.

And all the public subsidies in the world cannot overcome this.

But it is not a message people who think a manufacturing industry is essential have heard. Barnaby Joyce told Christian Kerr last week:

If you remove your manufacturing industry you can’t somehow conjure it up from nothing at a later stage if you need it. You’ve got to have a pragmatic approach to this. … You do have a responsibility to the people of your country that requires you to go beyond the theoretical to the pragmatic. [xiv]

But which people? Those that protection pays or the vast majority who do the paying, through the tax and tariff systems?

The answer is obvious. We cannot leave people behind, relying on government funding. Michele O’Neil from the Textile, Clothing and Footwear Union explains, perhaps unintentionally why, saying, “One of (manufacturing’s) great strengths is that it has provided employment for generations of Australian workers without necessarily having formal qualifications.”[xv]

No longer. If manufacturing has a future it will be because it employs people with education and training, degrees and Certificate IV for a start.

The Gillard Government passed legislation last week, with coalition support, which guaranteed access to university for everybody with the demonstrable ability and inclination to study.[xvi]

It’s the sort of state support that manufacturing needs.

stephen4@hotkey.net.au

ENDNOTES


[i] Belinda Merhab, “Toyota workers strike enters day two,” The Australian, September 16

[ii] Tim Beissmann, “Toyota strikes continues,” Car Advice, September 15 @ www.caradvice.com.au/138165/toyota-australia-strike-continues-militant-strikers-call-workers-scabs/ recovered on September 17

[iii] Productivity Commission, Trade and Assistance Review 2009-2010, Table 2.5 @  www.pc.gov.au/annualreports/trade-assistance/tar0910 recovered on September 17, Gene Tunny, “Carr’s car crash and Australia’s reform malaise,” Policy, 27, 3 Spring 2011, 15-22, 17

[iv] Kim Carr, “Transcript: Automotive Industry Review Report Release,” August 15 2008 @ http://minister.innovation.gov.au/Carr/Transcripts/Pages/AUTOMOTIVEINDUSTRYREVIEWREPORTRELEASE.aspx recovered on September 17

[v] Sophie Mirabella, “Manufacturing matters – an optimistic future: Address to the National Press Club,” September 14 @ www.sophiemirabella.com.au/Media/Speeches/tabid/74/articleType/ArticleView/articleId/505/MANUFACTURING-MATTERS-AN-OPTIMISTIC-FUTURE-ADDRESS-TO-NATIONAL-PRESS-CLUB.aspx recovered on September 17

[vi] Toby Hagon, “Comment: government funding,” The Age, May 21

[vii] http://www.toyota.com.au/about/diversity recovered on September 17

[viii] Nick Bunkley, “U.A.W. reaches tentative agreement with GM,” The New York Times, September 16, Sharon Terlep, “GM-UAW deal includes pay hike for entry-level workers,” Wall Street Journal, September 17

[ix] Brad Norrington, “US auto workers face brave new world,” The Australian, July 23, Matthew Dolan, “For UAW, jobs trump pay,” Wall Street Journal, July 25

[x] Mike Ramsey, “VWs new plant in Tennessee chops labor costs,” Wall Street Journal, May 23

[xi] Jane Slaughter, “Next low-wage haven: USA” Labor Notes, August 4 http://labornotes.org/2011/07/next-low-wage-haven-usa recovered on September 17

[xii] Ross Gittins, “Our future is mining not making,” August 24 @ http://www.rossgittins.com/2011/08/our-future-is-mining-not-making.html recovered on September 17

[xiii] Jessica Irvine, “Imagine this: boosting productivity with a more creative workforce,” Sydney Morning Herald, September 16

[xiv] Christian Kerr, “Liberals are ashamed of policy failure and scared of Barnaby, Weekend Australian, September 17

[xv] Philip Wen and Ruth Williams, “Flagging but still waving proud,” Sydney Morning Herald, September 17

[xvi] Senator Chris Evans, “University education now within reach of more Australians,” September 14 @ http://www.deewr.gov.au/ministers/evans/media/releases/pages/article_110914_141718.aspx recovered on September 17

'2012