A famous quote from Albert Einstein states that doing the same thing over and over again and expecting different results is insanity.
Yet this is exactly what has occurred in the car industry which has formed a crucial part of Australia’s industry policy.
For decades, governments have developed a hotchpotch of plans and practices, allocating generous funding via blunt instruments that are implicit in traditional protectionist policies and industry assistance.
Companies like Holden and Ford receiving government support or bail outs repeatedly promise that – this time – the industry will become robust and self reliant. They then renege on these promises. For a number of reasons (including pressure from the high Australian dollar and low demand), jobs are lost and the industry struggles on. Debates continue about the cost and benefits of supporting a car industry: opposition to propping up a declining industry versus the need to protect jobs and acknowledging the flow-on value to other manufacturing sub-sectors.
We need to move beyond these debates. The problem is not whether industry policy should keep ailing industries from going to the wall, but rather how to pursue productivity and longer-term economic investment.
Industry policy’s key objective is to encourage long-term strategies encompassing innovation, research and design, updating production and control over distribution networks and responding to shifts in global demand.
Everyone knows that to be successful, firms need to produce quality goods and services and develop a competitive advantage through brand identification, good service and market strength.
A lack of direction, cohesion and vision has led to short-term, uncoordinated policy responses. Therefore, it is worth considering the usefulness of a coordinated industry policy as a way of avoiding unsuccessful strategies embraced in the past.
Recognising the interconnections of problems and the inappropriateness of existing silos is a start to addressing the issues.
Coordination involves a whole of government approach that works across portfolios, offering the opportunity to develop an integrated response and focusing on policy development and implementation. Industry policy is interdependent with other polices such as fiscal and monetary policy, environmental sustainability, training and skills development and industrial relations.
Apart from the public sector and economic policy public servants, a rigorous consultation process would engage different players including representatives from the car companies, the trade unions, environmental and consumer groups. It is important that governments develop constructive relations with key firms and industry groups, developing shared policy goals and priorities on matters such as technological improvement, “green” cars, design capacity and workplace relations. It is also important to collaborate on developing environmental regulations which are based on either a self- or co-regulatory basis to achieve compliance and control environmental externalities.
Another challenge to address is that there is little accountability and transparency. Governments consistently offer bail outs to the car companies which then limp along for a little longer before announcing the next bout of job redundancies. This type of assistance is a reactive, political fix which placates the industry for a while, but contributes little towards longer term industry restructuring or viability.
As part of a better planning package and closer coordination between industry and policy makers, firms should have to provide guarantees for improved performance.
Despite huge amounts of public funding, car manufacturers have not been answerable for poor production and profitability outcomes. The provision of funding with hardly any strings attached is not new. There have been no effective instruments for identifying or correcting failures which has merely resulted in additional uncertainty.
The Department of Industry administers approximately $3.4 billion to Toyota, Ford, General Motors and their suppliers. The public regularly receives announcements about staff cuts as well as further subsidies for various manufacturing plants. After Holden threatened to close its manufacturing base in Australia, the Gillard government declared that its $275 million deal to the company was “not a hand out” but “a strategic investment”. Holden would commit to continuing operations in Australia until 2022 and promised it would invest $1 billion. Notwithstanding these assurances, there was no guarantee that there would not be any forced redundancies, consequently employment remains vulnerable.
Australia needs an industry policy which advances overall performance in the automotive industry and avoids wasteful interventions and the benign neglect of the past.
If there is unwillingness to move beyond the “same old, same old”, or incapacity to reconsider industry policy via strategies such as better coordination, the government should stop propping up the declining car industry. We cannot afford to squander millions of dollars of public money on inefficient and ineffective car industry policies.
Tyrone Berger
PhD candidate
Any moves to initiate change in the automotive industry must begin with a dialogue about alternative business models and technologies. In this context, governments (plural) have failed this crucial leadership test, leaving it to the private sector to come up with the solutions.
neral
logged in via Twitter
Add to this the calculus of foreign-owned manufacturers exploiting subsidies and other types of handouts and I am not hopeful that they have the willingness to change a history of boring and largely locally disengaged behaviour that is in any way sustainably supportive of the national economy. And governments have let them get away with it in an erronous belief that the industry serves a public good somewhere along the line...
Andy Saunders
Consultant
Tyrone, I think you are absolutely right. Modern vehicle manufacturing is more about specialisation, for instance GMH is a global centre of excellence for heating/ventilation/AC systems worldwide. That seems to me to be a highly value-added activity.
Having sub-scale assembly plants staffed by high-cost unskilled workers doesn't seem so highly valued. And we're all paying for it via our taxes...
william hollingsworth
student flinders university
Any action on Australia's car industry needs a healthy dose of realism. Australian workers receive high wages which makes industry without protection via subsidies , tariffs or quotas impossible. A relatively small market makes multiple companies life harder as well. A joint single venture to produce a limited range of models with a market share guaranteed by Government policy is the only future for a local car industry. It worked for Brazil and Volkswagen. However the timid nature of our Governments both state and federal towards business probably precludes such necessaries and the Australian car industry will gradually become concerned solely with the importation of built up vehicles. The current model Falcon and Commodore will be the last two indigenous cars produced in Australia and their replacement models will be fully imported. Vale the local car industry.
Michael Shand
Michael Shand is a Friend of The Conversation.
Software Tester
Great Article, its amazing that the same people that cry about the free market continually want government handouts. If you can run a successful business then you cant run a successfull business and we shouldnt be paying for your failures.
If they were to make a next generation car that used preasured oxygen or batteries then sure I can understand helping an industry until it is established but if you are going to keep churning out out of date gas guzzeling V-8's then whats the point, surely the government cant introduced a carbon tax and subsidise V-8 engines at the same time?
People need to grow up and get over their infantile facsination with big petrol engines, they are ineffecient, costly, wasteful, who can really justify the need to travel faster than 120kph?
Laurie Strachan
Writer/photgrapher
Cutting through the jargon, the question is simple - do we want cheap, imported cars or a local car industry? If we want a car industry, we will have to pay for it because a small industry in a high-cost economy simply cannot be competitive on the world stage. The "blunt instrument" of tariffs was the way we kept it going until tariffs became "sinful" in the utopian world of free trade. However, tariff protection can be fine-tuned so that enough imports come in to keep the local makers honest but…
Read moreMichael Shand
Michael Shand is a Friend of The Conversation.
Software Tester
Would you make an exception for zero emmisions cars? Really for me the idea of manufacturing petrol cars just for the sake of keeping people busy is a dead end
Michael Swifte
writer
What exactly are the 'flow on' effects of subsidising the car manufacturing industry? Is it that we can proudly say we build a V8? I've never been convinced that the 'flow on' effect is solid. Seems a bit like the 'trickle down' effect to me.
It's sad that we've repeatedly subsidised global corporate car manufacturers while we've allowed the solar industry that we built from the very ground - unlike Holden which was an aussie rebranding of GM - to fizzle out and die just when we should have given it some support.
It doesn't matter if we become more of a net importer of cars. We would be better off developing industries that are not unworkable propositions. Lets stop throwing good money after bad.
George Naumovski
Online Political Activist
That famous quote from Albert Einstein, well that explains what 90% of the worlds populations does!
The ALP should have bought into the companies instead of just giving them money and should ban the importing of large cars so if you want a large car it will be an Australian made car.
The laws has to change, if not; GMH, Ford Australia and Toyota will leave!
Stuart Eley
logged in via email @gmail.com
That would be a bad outcome for all of us.
Protectionism of an inefficient industry against efficient and I would argue more desirable large cars from overseas does nothing to promote innovation here at home. it just reinforces the non-future thinking process the car manufacturers already follow.
Tim Connors
System Administrator
Trickle down? The producers of components for cars could be employed to produce components for solar panels (instead of closing those industries and moving them offshore because there's not enough help for those industries locally), or components for a fast train network or something else useful, instead of producing components for large cars that no one actually wants.
Current policy seems to be all about the broken window fallacy. Lets employ people to dig holes and other people to fill them…
Read moreKeith Bendall
logged in via Facebook
I think you need to be careful who you quote in the future, as according to Einstein your entire argument is nothing but the insane flogging of the dead horse of capitalism, to the point where the denial of the abject failure and catastrophe caused by the current meltdown is bewildering, Do you not see an that we are on the precipice of even bigger meltdown than 2008?
Read moreHere is what Mr Einstein had to say about the solution you have proffered.
The economic anarchy of capitalist society as it exists…
Stuart Eley
logged in via email @gmail.com
"Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all."
This is just silly. Technological progress does not create unemployment. We'd all be unemployed if it did. Easing the burden of work? Of course it does, but not in the way he is implying. Einstein is implying there is some set amount of work to be done, and if only we could do that, we would just stop working. That's not the case. If a robot takes my job, I am temporarily unemployed. I then re-employ in some other area increasing the productive capacity of society. So it eases the burden of doing that work, so we can do more a better things.
Dean Ashby
Company Owner at Ezestore Storage Sydney
I have met a few people who are seeking work in the self storage business, who come from the car industry. I know that the big guys are investing a lot on research, and innovation in design, but these workers are the ones who are hurt the most in such. They should pay attention to these workers who carry with them expertise in the car industry that no one could easily gain in just a couple of years working. I am sure that the self storage industry would benefit from them, and hopefully they are able to find jobs.