Ford Australia’s decision to cut another 300 manufacturing jobs from May is a warning that it might shut its local car making operations well before the initial scheduled closure date of October 2016.
The Ford job cuts will come as the company cuts its local car production by almost one-third in June.
GM Holden is travelling better with sales of its two locally made cars, the Commodore and the Cruze, but a sustained decrease in sales could see that company bring forward the closure of its Adelaide plant from 2017.
The fate of the last remaining local car maker, Toyota Australia, is still in the balance, as the company seeks approval this year from its parent to make a new model Camry beyond 2017.
The chances of the Abbott government deciding to give assurances to Toyota on getting industry assistance are looking increasingly shaky, in the wake of earlier knock backs delivered to Holden and the fruit processor, SPC Ardmona.
But there’s more. The government’s economic adviser, the Productivity Commission, last week dismissed the case for assistance to the car industry as being “weak”.
Yet the PC report was itself light on detailed arguments.
It has delivered a preliminary stance which is unlikely to change, but has yet to do the economic modelling on the local and economic impacts of the Ford and Holden cutting 4100 jobs when they eventually close.
Even though that modelling has yet to be done, it has argued against regional assistance packages even though the most affected parts of Melbourne and Adelaide most exposed to Ford and Holden already have high unemployment.
“Given the advanced notice of Ford and Holden plant closures, there is time to learn from previous adjustment programs,” the PC reported.
Furthermore, the Commission warned the government’s plan to cut $500 million in car industry funding between 2015 to 2017 could hasten the Ford and Holden closure, and even push out Toyota.
“The uneven funding profile could elevate the risk of earlier plant closures by Ford and Holden and might negatively affect investment decisions by Toyota and its component suppliers,” it said.
This funding pinch is most marked in 2015.
That is only a year away and the car industry has long lead times for making decisions.
The PC is not due to report until the end of March and the real squeeze is now being in the car industry supply chain, which still supports around 30,000 jobs.
Meanwhile, there is still Toyota.
It has accepted taxpayer funding in the past, but has generally been handed less than Holden or Ford.
What Toyota does want is a viable supply chain and consistent policy , but it now has official complacency about the speed of industry change and unknown policy settings.
While the government is right to ponder if taxpayers get bang for their bucks in industry assistance in making cars, it could do something clever about retaining the high technology end of the industry.
All three cars makers – Toyota, Holden and Ford — have world-class research and design centres in Australia.
In the case of Ford, it employs about 1000 engineers and designers who work for its global operations on projects such as designing an international pickup truck.
The Productivity Commission says that the R&D operations should be ineligible for industry assistance and this threatens their future.
The PC argues that “spill over” economic benefits of the R&D work is limited but employing 1000 engineers and designers is nothing to sneeze at.