Wednesday, April 10, 2013

on being driven to the wall

April 2013


Let’s start with an observation that people raving about billions of taxpayer dollars given to auto manufacturers rarely make it clear how many years those payments are spread over [in contrast to the report above].

Okay, we have privatised the supply of necessities like gas and electricity, and water. If [God forbid] someone declares war on Oz I suppose it’s a simple matter of taking back control of essential industries and bugger the shareholders.

Something equally vital to our survival would be manufacturing capability – not just workspaces, equipment and materials, but the skills at all levels on which manufacturing depends. Manufacturing was once the bread and butter of Victoria’s economy, but that is no longer the case.
Our defence capability would depend enormously on our ability to set up some “Rosie the Riveter” sweatshops.

The car market in Australia is not just about what type of car Australians buy. Ford and Holden have been quite successful for years in establishing and serving export markets. This is a pretty staggering achievement considering shipping costs, and the prices and efficiency of competing brands.

Our car industry is no more immune to the effects of a high dollar than any other industry.

What cheeses me off about government subsidies to industry is that the money seems to be forked over without any of the benefits normally given to investors. Many other companies have taken government money, changed business strategies or gone broke, and sold physical assets to related companies at bargain basement prices.

When Bob Hawke “represented” the seat of Wills, he gave Kodak 8 million dollars to keep their Coburg plant open, even though film cameras had no future. When Hawke [quite rightly] lost the seat of Wills, Kodak shut the plant, sold up and moved on.

Why in heaven’s name can we not attach some reasonable conditions to these arrangements?

Cost benefit analyses are built on common sense: If it costs us 80 government cents to produce 100 cents of income for the government, then the government will gain something.

The auto industry is not a hugely profitable one for many people. Every supplier in the chain is screwed to the wall with prices, and for the most part have no say in where they buy their raw materials, who they buy them from, or the terms and conditions of purchase. You would be better off investing your dough in a savings account earning 2% a year in interest.

Nonetheless, the industry is huge. 

Someone makes or imports the plastic pellets that are used by another company to mould plastic parts [such as arm rests] using moulds engineered in Australia. The plastic arm rests then have foam [from another Oz company] attached and these are then covered with fabric of some sort [mostly locally produced] and arm rests then sent to a factory where they are incorporated into door assemblies and the doors are then sent to a car assembly plant which uses a heck of a lot more than doors to make a car.

There are thousands and thousands of jobs created in first, second, third and fourth tier supply industries.

Taxes are collected on profits and wages.


The bottom line is not always about money. We’ve been reading a lot about Margaret Thatcher this week and I have suggested elsewhere that despite all the pain suffered by coalminers, Thatcher recognised the brutal truth that the coal industry was stuffed and had no future.

What she failed to do was recognise that every single person on earth needs food, shelter, and meaningful employment.

What Thatcher failed to do was consider [or care about] the enormous impact on huge populations and cities by simply slamming the door shut. People had no way of envisioning a future for themselves.

Julia Gillard is making a similar mistake in many areas, but on this issue she is right: subsidies for the car industry are vital.

When auto workers are laid off they are laid off in their hundreds, not two or three at a time. They lose their dignity and sense of self-worth, the economic security that helps them see a future worth working for, and all too often they lose their homes. Local businesses suffer a loss of business, and the flow on effects are extensive. The housing market suffers and those who speculate in the housing market see their capital gains shrink and the economy spirals in on itself.

And now, of course, the impenetrable mysteries and inaccessible “services” of Senna Link are stacked against them, and Mickey Mouse retraining schemes are a joke.

Auto industry subsidies must stay.

auto industry; industry subsidies; manufacturing;


  1. I agree, although the system needs some refinement, as you suggest. For the naysayers, think of it as private enterprise being paid to run a loss making government business and governments are rather keen on this form of business.

    1. I rather like the way you explain the business side of it. Well put.

  2. Good article, FruitCake. .... it doesn't sound very respectful to write 'FruitCake' after a compliment but it's genuinely meant!

    1. No disrespect taken Kath - though I've not changed my name by deed poll, I chose the name myself.[This might say something about my taste in names, of course.]
      TY for the compliment :)