Blue Scope Steel loses 1000 jobs, what about the car industry?

This week’s sacking of 1000 steel workers because of limited export hope is a warning sign for the local car industry, says a leading business commentator.

If local car manufacturing were to collapse, the impact would be at least 60 times greater than this week’s Blue Scope Steel job losses. Car manufacturing directly and indirectly impacts up to 60,000 workers, according to industry estimates.

The largest of Australia’s three automakers, Toyota, alone spends $2.8 billion a year annually with 1200 local suppliers, it revealed yesterday at the launch of the Camry in Melbourne ahead of production start-up at Altona in September.

As demand for locally-made large cars has fallen to an all-time low, Australia’s three makers Toyota, Holden and Ford are increasingly reliant on exports. Indeed, Toyota exports 75 per cent of its local production mainly to the Middle East; Holden previously had an export target of 50 per cent of production and is trying to revive trade to the US. (Ford exports only in limited numbers, mainly to New Zealand.)

However the export potential of Australian-made vehicles has been dampened by the long term forecast of a strong Australian dollar driven by the mining boom.

“Concerns inside the Australian [car] industry must be escalating by the day,” Ross Greenwood, finance editor for Channel Nine told motoring.com.au.

“If the dollar is not going down in the near-term, big question-marks must appear over any Australian export industry.”

Greenwood said one of the main reasons Bluescope Steel dropped its export-based manufacturing in Australia was its long-term view on the Australian dollar.

Exports of both Toyota and Holden vehicles have struggled over the past 12 months, since the Australian dollar had parity with and eventually overtook the US dollar. Although most of Toyota’s Camry exports are to the Middle East, it trades them in US currency.

“The auto industry in Australia transformed itself after the Button Car Plan [in 1985] by taking advantage of the low Australian dollar and gearing itself for export – especially to the Middle East. But with car-makers around the world also feeling significant financial pressure (either from their own structural problems or recent natural disasters such as the Japanese tsunami) the concerns inside the Australian industry must be escalating by the day.”

Greenwood said there was little the Federal Government could do to reduce the value of the Australian dollar.

“The only thing the [Federal Government] could do is cut its own spending - eradicate waste - and take some pressure off the Reserve Bank and interest rates … and get some urgent reform going that is probably electorally unpopular. Do you think they'll do that?”

Toyota Australia executive director of sales and marketing, Dave Buttner, told Motoring.com.au its export program was “challenging” and that continued dialogue with government was critical.

“We seek a policy framework which gives us medium to long term horizons so that we can make significant investments [in local manufacturing],” he said.

“We like to think that as a large manufacturer in the largest manufacturing sector in Australia, that we can continue to engage positively with government to make sure our parent company can see an environment that is appropriate to invest large sums of money here.”

Toyota, Holden and Ford all said they would be unaffected by the closure of some Blue Scope Steel facilities, but the job losses demonstrated the importance of industry support as export demand softened.

“I’m not going to comment specifically on Blue Scope Steel [but] we need all suppliers to survive in Australia,” said Buttner. “We want to maintain as much local supply as we possibly can.”

Holden spokeswoman Emily Perry said: “We don't anticipate any impact on Holden following the Blue Scope announcement. As industry commentators have noted … it highlights the strategic importance of manufacturing in Australia and the need to invest in high-tech, value-added jobs and industries.”

A statement from Ford Australia said: “Ford Australia believes that ongoing dialogue with Government and continued recognition of the important role that car manufacturing plays in the Australian economy is vital to the industry’s ability to attract future investment.”

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