Speeches Chris has made in the Australian Federal Parliament.

COMMITTEES Employment, Workplace Relations and Workforce Participation Committee Report

December 07, 2006

Mr HAYES (Werriwa) (11.10 a.m.)—I join my colleague the member for Gorton in speaking
to this important report from the Standing Committee on Employment, Workplace Relations
and Workforce Participation entitled Shifting gears: Employment in the automotive components
manufacturing industry. It is important because the report was brought down without dissent.
Clearly a lot of time and effort was put into addressing the present position of the industry—
the industry collectively as well as various enterprises within it.

The picture that is painted in the report Shifting gears is one of significant global developments
affecting our automotive industry and developments occurring which are having a profound
effect on the domestic supply chain. The global automotive industry at the moment is going
through a huge and profound change. It is moving to restructure significantly to respond to
competition; to address the rise of new markets, principally markets based around India and
China; and to address production costs by moving closer to markets. Globally we have a
position of overproduction—certainly overproduction of certain classes of automotive vehicles.
Hence the move to restructure into smaller, more efficient vehicles and vehicles which are
more in demand in the rising markets of developing countries.

It is far too easy to say this is simply a global problem that the industry finds itself in and it is
one that the government has got to dig it out of. I, for one, do not accept that rationale. We
have seen over the last number of years a number of significant closures in the supply chain of
our domestic automotive industry—one only two weeks ago. Clearly our motor vehicle
manufacturers are changing how they access components. They are certainly going more and
more offshore. The proportion of Australian components in Australian manufactured vehicles
has dropped considerably over the last five years and it is a trend that does not appear to be

When we look at this industry a couple of features stand out. It really now can been
categorised as a just-in-time industry. Whether it is the fasteners, the transmissions or the
power steering, when they are outsourced, it is within the domestic context a just-in-time
industry. The motor vehicle manufacturers do not carry inordinate stocks. They run their
manufacturing schedules around the provision of parts. They are so carefully choreographed
that component manufacturers effectively have to meet the just-in-time demands that apply in
this industry.

Another thing that is clearly the case in this industry—and not just in automotive parts
manufacturing; it could probably be seen almost as a microcosm of manufacturing generally at the moment—is the rise in competition from imports, particularly imports as a consequence of
cheap labour in developing countries. Quite frankly, that is having a dramatic impact on the
Australian automotive industry, having regard to the way it seeks to outsource the supply of
various areas of componentry.

It is a little easy, I suppose, to have regard to this, despite the fact that the Australian
government over many years has, through the Automotive Competitiveness and Investment
Scheme, contributed to the adjustment costs of industry, particularly with the withdrawal of
tariffs. That assistance does not seem to have percolated right through the supply chain and,
as a consequence, many within that supply chain still suffer in terms of adjustment costs in
meeting the demands of Australian motor vehicle manufacturers.

One of the matters that really stands out in this industry is that, despite the fact that on one
hand we see a contraction, on the other we are still seeing skills shortages. Numerous
organisations appeared before us and expressed concern about how difficult it was to fill
vacancies, particularly in relation to the skilled ranks. For people who have not studied this
review closely, that would seem to be a contradiction in terms. On one hand the industry is
suffering because of overseas competition and because local manufacturers are going offshore
for parts and componentry, yet on the other, within the component sector itself, they are still
struggling to fill vacancies. This is occurring while we are seeing much-publicised
redundancies. We saw the Ajax Fasteners case during the week before last and the downturn
in the motor vehicle industry in South Australia—a lot of people, unfortunately, have been
retrenched there—yet we are still struggling to fill vacancies in various sectors of the industry.
That gave rise to one of our recommendations, recommendation 10, which, among other
things, calls on the government to commission a national study on the post-redundancy
outcomes for workers in the automotive industry which takes into account employment,
educational and social outcomes for those individuals accessing a formal labour market
adjustment program. It is a little trite to think that, just because there are workers who are
displaced in one location, they can easily fill the needs of another location. Realistically, we
must start to plan, or at least look at and identify where these issues are emerging so that we
can do something about it.

I would also like briefly to draw attention to recommendation 11, which recommends that the
Australian government develop a general labour adjustment program for the automotive
components industry that focuses on the provision of training and employment support
strategies to assist employees while they are still employed; targeted training to upskill
displaced workers; and addressing the concerns of the wider community about the impact on
regions where the automotive components industry is a major employer. That is something
that we consider to be overdue. As I said earlier, we are concerned that the assistance that
has been provided by way of an adjustment program to automobile manufacturers has not
necessarily made its way down to all the various support industries within the automotive
componentry manufacturing area. That is something that we should be taking on board. It is
difficult when we have this contradiction of, on the one hand, a skills shortage and, on the
other hand, redundancies throughout the automotive industry on the scale that we saw during
the period that we participated in this inquiry.

One of the things that we have addressed is research and development. The reason I want to
draw attention to this is recommendation 12, which says:
The Committee recommends that the Australian Government review R&D assistance available to automotive
component manufacturers to assess whether it is commensurate with incentives offered internationally.
During the recent House of Representatives Standing Committee on Science and Innovation
inquiry into commercialising innovation, one of the things that we found when we looked at the
level of research and development that has taken place in this country was that, whilst we may provide financial incentives or tax incentives for Australian based companies to undertake R&D
within this country, we do not make the same provision for overseas based companies.
As was the case with the science and technology committee, I think it is fair to say all
members of the employment, workplace relations and workforce participation committee came
to the view that undertaking R&D is a little bit like education. Certainly, we should look at
attracting R&D into this country, because if we can do that there is probably a greater
likelihood that we will get the downstream benefits of manufacturing itself. We are supportive
of what the science and technology committee recommended, and we are strongly of the view
that the government should consider reviewing the tax incentives that are available for
companies that undertake R&D in this country. We also feel that the government should make
those tax incentives available for overseas based companies, provided the R&D work is
actually conducted in Australia. We think that that would further stimulate skills in this
industry. It would certainly provide a much-needed skill base of available personnel and would
build a very substantial link between R&D and manufacture generally.

In closing, my own personal observation is that many people in the industry will have to face
up to the reality that there does have to be diversification. I would raise just as an example of
that—only because this occurs in my own electorate—Broens Industries. This organisation
started 25 years ago, ostensibly as a toolmaking shop, but has now targeted the higher end of
the manufacturing industry in precision engineering, special purpose manufacture of
machinery parts and automotive application. Currently, this shop, which is in Ingleburn,
exports to 17 countries. It includes among its customers companies such as Mercedes-Benz,
Ford, General Motors, Boeing and Airbus. The company employs 150 people. It put on 27
apprentices. This company invests 30 per cent of its annual turnover each year in process
development in new products. When I look at it, this company is actually doing it right. It is
committing to it. It is backing itself for the future and, as a consequence, it is now supplying a
substantial proportion of the Australian domestic market with power steering. This is a
company, as I say, that started off 25 years ago as a toolmaking shop.

I think that this is the way that people in the manufacturing industry are going to have to go. I
was very heartened when I heard the first contribution of the new Leader of the Opposition the
other day in the MPI, when he outlined his view about Australia not being the quarry of Asia
and certainly not being the beach for Japan, but being able to not only meet and compete but
actually attack the manufacturing market, particularly at the high-tech level. We do support
the retention of higher skills within this industry, and that should be Australia’s niche. The
higher end of this market is something that I think we can work to attract. I commend the
report. (Time expired)