General Motors teeters at the edge of bankruptcy, with a bailout from the US government about the only thing that can stop it. Even if bankruptcy is avoided, it’s inevitable that the company – Holden’s global parent – will be completely restructured. In the USA, many plants will close. Tens of thousands of employees will be laid off. But it’s not at all clear what will happen to Holden, a tiny, and currently unprofitable, corner of the global GM empire.
In the UK, GM’s Vauxhall brand is apparently asking the British government for cash, or at least government guarantees. So, reputedly, is Opel in Germany. But we haven’t heard a peep out of the Australian government yet. They’ve been too busy guaranteeing loans to car dealers to prevent their mass collapse. Yes, the government is throwing a lot of money at the car industry through the Green Car Fund and export assistance schemes, but most of that is long-term tariff rebates rather than short-term cash in hand. They may need that cash in rather a hurry, and the only place they’ll get it is the Australian government.
So have Holden and Ford Australia been round to see Kim Carr? And what’s the government been saying to them in response?
“So have Holden and Ford Australia been round to see Kim Carr? And what’s the government been saying to them in response?”
Hopefully, “We wish you well, but you’re on your own”.
Toyota makes good cars and at a profit. If they end up as the only car manufacturer in Australia, so be it.
If Toyota takes up the slack, so much the better, because when you’re making cars, more scale is better. And even if they don’t, there’s plenty of imports to provide competition.
I’m not sure that survival of the car industry in Australia can be left to the market. I take Spiros’s point that we don’t need all the manufacturers to survive, but it worries me that the policy of allowing only internationally competitive industry to survive could leave Australia as nothing but a giant quarry. For now our labour costs give us a competitive disadvantage in many sectors such as manufacturing. But eventually that will change and I’d like to think that we would still have the expertise and skills to make things when that happens.
It’s probably not so much the “big two” that worry me, it’s their little suppliers that are going to the wall if either of them fail. I’m not sure the Australian govt. can keep either of Ford or Holden viable if the parent companies decide to cut them loose. There don’t seem to be too many alternatives though, we just have to wait and see what happens with the parent companies. Keeping either factory alive would be impossible without the parents anyway.
“it’s their little suppliers that are going to the wall if either of them fail”
That was the doomy prediction about what would happen if Mitsubishi failed.
Mitsubishi failed, and the suppliers are still with us.
Ford and GM, globally, are the authors of their own misfortunes. Decades of mismanagement have led them to where they are today and it’s hardly a surprise that a world wide recession might finish them off. And if they go globally, then they will go locally. No Australian government can do anything about it.
Spiros, all of the locals share suppliers for things they don’t import (seats for example) so when Mitsubishi failed, they still had a couple of fallbacks.
When those go, look out. I’d agree we can do little about it though, giving them money would simply be a waste (could simply give it to the sacked employees).
Failing that, a free car for everyone who qualified for the financial stimulous package. I’m not greedy, a current base model Falcon would be OK and I promise I’ll take it to the local dealership to get serviced
That way, the dealers financial hardship on their debt servicing could be covered up as an “emissions reducing scheme” by replacing all the old clunkers in the national fleet with shiny new cars. Everybody wins.
I hope we do some sort of semi-nationalisation if we decide a bailout of Australian manufacturers is needed. That way in the long run the public will benefit through dividend payments. If we just give them no-strings-attached money then the problem will not be solved, instead we will simply have to give them more money in the future.
Nice post. Thank you for the info. Keep it up.
The automobile industry gets us the critical mass required to do all sorts of high tech stuff from laser cutting to tool making; even to high end Numerically controlled Machine tools and CAD systems. Mining also contributes to this, the most successful engineering firms around here make stuff for mines.
The real issue here is that we should be investing in manufacturing high grade widgets – including electric vehicles.
The Dinosaurs in the car industry (who fly in private jets to Washington to beg for money) will never be able to cope with the change to the $5000:00 electric vehicle that is coming down the road at them.
Huggy.
I’d have slightly more sympathy for the car manufacturers if they’d started making cars the world needs (fuel-efficient, just for a start), and that people want, some time over the last 10 years or, rather than the supercharged V8s and 4WD trucks that give them a personal stiffy.
They deserve to fail. Unfortunately, the poor bastards who work for them don’t deserve to be unemployed.
Er, Australia is a giant quarry and has been for many years. What do you think was happening to Aussie exporters and import-competing manufacturers while you were enjoying a 98c dollar? These businesses are now a fraction of the size they were at the turn of the century, or have shut up shop completely.
Now that no-one wants our dirt anymore, we have nothing to fall back on. Nothing.
There’s b*gger all chance Kev will let Holden go under. He’ll nationalise it if he has to. The shock of losing Holden would burn deep in Aussie psyche and crush confidence, not to mention all the job losses alluded to above.
It just would have been nice if the media, government, anyone, had given a damn about Australia’s hard-working exporters during the mining boom.
What a refreshingly old-fashioned view, carbonsink, that we should actually make anything in Australia …
One of the criticisms of the sub-prime thingy was that it was clearly an accident blatantly waiting to happen and the signs were ignored cos it was ‘inconvenient’.
And there are a few blatant problems in the Australian economy pointed out in comments above.
Such as :
-”Er, Australia is a giant quarry and has been for many years…….
Now that no-one wants our dirt anymore, we have nothing to fall back on. Nothing.”
And:
-”The real issue here is that we should be investing in manufacturing high grade widgets ”
And the whole of David’s #11 above.
But hey, lets ignore all these until its too late, gee its only been obvious all my life.
huggybunny @ 8 – in what form would this investment be though? Where and what do you think we could develop that would lead us to the state where we don’t need to continuously subsidise products or protect them with tariffs against production from from other countries?
Yeah: Do we have to have one? Why?
Like Marx and Engels I’m a free trader and opposed to protectionism. However there are exceptions to every rule – and building a national Trabant is clearly one of them.
Roll on the Aussie Trabbie!
Pshaw to the Trabbie idea. The underpants gnomes whispered this one to me:
1. Find tooling for Goggomobiles.
2. Fit several electric motors from the pensioner scooter industry.
3. ???
4. Profit!
Chris@13.
No effing way should we ever subsidise the manufacture or purchase of any-thing.
Example the so called Solar “Industry” – the technology has been stagnant for at least 10 years. The massive subsidies have just gone to support mediocrity.
One model is for the Government to put say $200 million on the table and invite dollar for dollar contributions from Industry “partners” – providing they can demonstrate new and lower cost technology and manufacturing methods.
Regardless of the mechanism the objective must be to produce better and lower cost high technology products that require less energy to manufacture and use than the existing clunkers.
The potential products range from simple things such as more efficient electric motors and cooking facilities through to electric vehicles, new mass transport technologies and on and on forever.
Then when you find you cannot produce enough of this stuff to satisfy the global market you licence the process to other countries.
Huggy
http://www.huffingtonpost.com/2008/12/07/krugman-us-auto-industry_n_149082.html
It’s a shame, it’s and end to an era and the repercussion of GM collapsing with my favourite (once upon a time love of Holdens) probably following suit.
I will remember Chrysler also, first producer of the automotive alternator, replacing the bulky, inefficient generator and as my father informed me, Chrysler invented 4 wheel brakes long long ago. (As a former auto electrician, how we loved drilling a tapered hole with the lathe into the SRE shaft of a Chrysler “birdcage” rotor, so we could machine the slip rings!!!)
Chrysler nearly went bankrupt until former Ford exec Lee Iacocca rescued it in 1979 with a 1.5 billion bailout which he conned Washington into give him (and paid back that loan years before it was due)
But now the writing is on the wall: those imbecilic executives of late, of the big 3, ignoring the signals of the first oil shocks in the early 70s; ignoring the wily ways of foreign competition more recently with far, far superior products, have, screwed themselves beyond redemption.
I drive a turbo-diesel Hyundai i30 these days (company vehicle) and I’m saying to Holden and Ford Australia, comparing my 5litres/100km with their 8-10 litres/100km (whatever) gasoline gas guzzlers, who needs you?
Let the market sort out the detrius. No taxpayer bailouts for the Oz dinosars!
Look, let’s stop kidding ourselves okay. This industry is a joke and the only point of subsidizing it is as an excuse to give people money. So let’s buy ‘em all a house. It’ll be cheaper in the long run.
Far be it for me to suggest that a Nobel Prize winner is talking out his arse…but I reckon Krugman’s wrong on this one.
GM and Chrysler might disappear as American-owned companies. But Toyota, Honda, Nissan, Mercedes-Benz, and probably a bunch of other companies will continue to produce vehicles in the United States. So will the remnants of the Big Three.
As for electric vehicles in Australia, I doubt it, at least as far as the powertrains go. Why would you set up a factory in Australia when it’d have to export 90% of its production to have competitive volumes?
Robert, because its an opportunity to develop a market for a product that people want across the globe, and one that will reduce carbon emissions too. We can either lead the world on this opportunity or sit there a wait for electric cars to come in from Switzerland, Sweden or China.
That’s the problem with the US and Australian car industry – they are absolute laggards. Big sixes & V8s. Big cars. Going the way of the dinosaurs, with pea size executive brains to match. And they want taxpayer’s money to bail out their moronic lack of foresight! Propping up there hopelessly out of date business model is a waste of money and will not prevent their inevitable demise – but governments both here in the USA will do this to secure short term jobs.
The answer is – build truly green cars that people want to buy.
More reading on electric cars
Peter: think like a businessperson for a moment. Assume you’re trying to make as much filthy lucre as you can. You’re looking for a site to build a battery factory, or an electric vehicle motor factory.
You have a choice: Australia, which has a tiny domestic market, is a long way from both suppliers and export customers, and has a history of manufacturing industries falling over. Or China, which has a massive domestic market, has suppliers of all your components conveniently to hand, and to top it off has much lower labor costs.
I know where I’d be building my factory.
Turns out he was mis-quoted:
Now there is a turnip.
Interesting reading the “Save vs Sink” battle being played out on Alternet at the moment.
The first salvo came from Flint, MI local Michael Moore (yes, that one) who pointed out that you could probably buy (i.e. nationalise) an entire company for $3bn (at current prices) – which is considerable less than the $33bn they asking for.
The retort came from Toby Barlow who fought in defence of the “Big 3″ and their workers – but judging by the comments, it was an argument already lost. Most comments reflect a view that the local industry is under performing, out of date and delivering unreliable cars no-one wants – something that most think was obvious 20 years ago – so to be crying poor now just emphasises their poor management.
Robert Merkel wrote:
Heh, not so fast Robert. There’s one right where I live
(OK, so they are adapting Mazdas, but it’s still a factory)
Whoops. of course, that was me not Ute Man.
David Rubie, the underpants gnomes have been whispering to me as well, but on a smaller scale.
As it happens, I have a (mostly busted) Mighty Sherpa! 500ccs of raw 2-cylinder power! I reckon if I can source an aircraft starter motor and a heap of car batteries, I can make it electric.
Go Mr Irving, although I reckon you’d have a hard time finding the space for the batteries in a Sherpa. I’ve always thought an Alfa 33 was about the perfect recipient for an electric transplant – the engine faces forward rather than being transverse and is usually buggered and the cars are given away. Easy to fit an electric motor in there. Plenty of room in the boot for batteries. Of course, you’d need to be handy with a mig welder for the rust…
Damn those underpants gnomes and their crazy schemes!
Them gnomes better start whispering about something with room for a drumset (and a Lady Friend), or I’m gonna be a petrol dinosaur for years to come.
Robert, it really comes down to the choices we make. Do we want to be a leader or a follower. We could pioneer production methods (and R&D) here and form partnerships with Chinese manufacturers to make them.
Or we could sit around on our hands and just wait and watch the world pass us by – as happened with 4WDs, modern diesels and hybrids. Now the best that Rudd can do is throw money at poor cash-strapped Toyota t o build outdated hybrids.
Look at what Ross Blade is pioneering: http://www.bev.com.au/
I guest in the end we need to decide whether we just do iron ore, coal and beef, or whether as a supposed first world country we are smarter than that.
We might just be, but our politicians are not.
You’re right Peterc. In my opinion it’s a collective failure of imagination, will, and commitment. If some of our predecesors had had this attitute, I shudder to think where we’d be today.
That may well work, but it wouldn’t actually result in us having the manufacturing jobs here in Australia as some are suggesting we need to preserve.
You’d be surprised how much cargo space a non-electric Sherpa has, DR. We’re talking 2, maybe 3 bales of straw.
Of course if you filled it with batteries, the chassis would probably need strengthening …