Australian car making "on the limit"

The man who oversaw the closure of the Mitsubishi factory in Adelaide last year says it will be "difficult" for Australia to sustain three car manufacturers.

The president of Mitsubishi Motors Corporation, Osamu Masuko, also revealed that the corporation lost Y140 billion ($AUD1.66 billion at the current exchange rate) in keeping the factory alive and developing a new vehicle between the years 2000 and 2007.

He also admitted that, with the benefit of hindsight, the company should have closed the plant years earlier.

"If we think about it now, as a company, from a business perspective, we should have made the decision [to close the Adelaide factory] earlier," he told a group of Australian journalists at the Tokyo motor show yesterday.

"But we wanted to find a way to continue our business in Australia, so we were enduring and trying to hold on ... but it came to the limit so we just had to close the plant."

He said it was fortunate that the factory was closed before the global financial crisis.

"It was good that we closed the plant in March 2008 because this was the time the economy was still good ... and employees could find re-employment."

He had words of caution for the three remaining car makers in Australia -- Toyota, Holden and Ford -- which are subject to varying levels of government assistance to help them weather the current sales slump and sudden shift in car-buyer tastes.

"Honestly speaking, in a market of about 1 million vehicles shared with three manufacturers ... that's probably the minimum amount in terms of sales volume, that is on the limit," he said. "They need to increase production volume. Without more volume it would be difficult [to sustain three manufacturers]."

Significantly, and contrary to Federal Industry Minister Kim Carr's mantra, Masuko-san is not convinced that exports are the key to the survival of the Australian industry, because of the uncertainty of demand.

Mitsubishi experienced this first-hand, when exports of its locally made sedan to North America were cut suddenly in the late 1990s. This effectively made local production untenable because Australian sales, too, were weakening at the same time.

"[Export] is a very difficult issue, because there is the foreign exchange issue, as well as free trade agreements," he said. Further, he added, "you have to compete with the Chinese and ASEAN markets, which is also quite difficult."

He said if local car makers received a tax break, "maybe then they would be able to sustain their business".

When advised of the Mitsubishi president's comments, the CEO of Mitsubishi Australia, Robert McEniry, told the Carsales Network: "I have always taken the position that there will always be a manufacturing base in Australia. I've never been able to work out exactly what it is, but it would be remiss of the Australian governments not to support local automotive manufacturing. Quite clearly it will have to change with the way the global industry's changing, but I don't think it's changing fast enough or getting enough immediacy from the governments at the moment."

It is estimated the Australian car industry supports 60,000 jobs both directly at the car makers, and indirectly at suppliers.

Toyota, Australia's biggest car maker, exported 101,000 of 141,000 locally-made cars last year, but it makes the Camry in seven factories around the world and has the flexibility to switch sources.

Of the 80,000 or so Holdens made last year, about 60,000 were sold locally. (Holden is busily working on a deal to export sedans to North American police to fill the void left by the Pontiac export program after GM axed that brand in its recent restructure.)

Most of Ford's production of 60,000 cars last year was sold domestically. The maker has no major export program, but its annual production rate is regarded as low by global automotive standards, prompting suggestions that Ford may have a future as a local supplier of automotive engineering expertise rather than as a manufacturer. Ford Australia boss Marin Burela, however, is adamant that Ford is here to stay.

"We wouldn't be investing the money that we are, ... the $230 million, unless we were confident that there was opportunity for us as we move forward," he told the Carsales Network last week.

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