Why Australia should take the manufacturing high road

Australia needs to further embrace advanced manufacturing. aap

Sometimes there’s nothing like timing to really hammer a point home. The day after manufacturing expert Dan Swinney, Chief executive of the Chicago Manufacturing Renaissance Council, spoke in Victorian regional city of Geelong about why we need advanced manufacturing to survive in Australia, Ford announced layoffs affecting its plants in Geelong and Broadmeadows.

Despite Ford’s efforts to reposition itself in the market, including revamping its LPG Falcon and diesel Territory, falling demand for large cars has forced it to cut 240 jobs and reduce production by 20%.

Any drop in production volumes sends a ripple through the supply chain, demonstrating the job multiplier effect that Swinney argues is unique to manufacturing. Although first tier suppliers have mostly been moved off-shore, second and third tier suppliers remain in the region and are feeling the impact not only of demand turndowns, but also of the Japanese earthquake which has affected Toyota’s production.

The layoffs also come in the broader context of a general trend of downsizing of Australia’s manufacturing sector, including the automotive industry, which in 2010 produced 210,000 vehicles out of the million sold here - a large reduction in the local proportion.

Swinney argues each manufacturing job generates five more in other sectors of the economy. But there is a much broader social implication as well - advanced (or high road) manufacturing is the only sector that can support a large middle class, boost productivity and generate a broader tax base.

“Without it, society will become increasingly polarised between the haves and the have-nots,” Swinney explains.

Arguing that the manufacturing sector is the key to a vibrant and sustainable future is hard to square with reports of layoffs and downturns.

The key, says Swinney, is to focus on advanced manufacturing. Sure, he says, high volume-low cost production has little future in economies like the US and Australia, but advanced manufacturing is about high-end technologies and skills, allied services, and innovation.

“Advanced manufacturing represents the highest fusion of public and private interests,” says Swinney, who believes that encouraging people to go as far as they are able with their education, and then work in manufacturing, is the key to a renaissance in the sector.

In fact, the profile of Ford’s activities in Geelong exemplify this attempt to shift to the high road – Ford’s R&D capability in Geelong numbers around 450, and activities are diverse from the proving ground and engine testing through to the environmental testing facility in the You Yangs.

For Swinney, the importance of advanced manufacturing is not only the contribution it can make to social conditions, but also its role in environmental improvement. In the Geelong region investments are underway in carbon fibre and renewable energy, and these patterns are echoed elsewhere.

The successes in Chicago that we in Australia can model our manufacturing future on involve collaboration between government, industry, communities, educational institutions and the labour force.

However, shifting from low cost-high volume approaches to advanced manufacturing is not a trivial undertaking.

According to industry sources, Geelong has around 14,000 manufacturing jobs, of which about 2000 are in the automobile sector. In 1990, this number was around 5500. Swinney suggests that a major barrier to the growth of advanced manufacturing is manufacturing’s poor image in the minds of school teachers and careers counsellors, parents and students, and politicians and their advisors.

“These people think that factories are filthy and dangerous places, where work is just toil; they think that manufacturing work is all going offshore and that the future lies in the service economy,” Swinney says.

This negative perception of manufacturing is so pervasive that it drives away potential workers. “There are around three million unfilled vacancies and 30 million unemployed in the US,” he says.

Swinney created the Chicago Manufacturing Renaissance Council to work towards an ambitious goal: to create strategic partnerships that would ultimately make Chicago the global leader in advanced manufacturing.

The partners – business, unions, government and communities – would normally be on the opposite sides of an argument, but the Council works because it focuses on only four issues: advanced manufacturing, education reform, community development, and the partnership itself.

Recognising the lack of interest among students in pursuing careers in manufacturing, and the inability of current educational offerings to attract, inspire and prepare students for such a career, the Council established the Austin Polytechnical Academy.

“Austin Poly is a technical high school, but it is much more than a trade school,” says Swinney. “Students are encouraged to go as high as they can go – they learn that advanced manufacturing needs high level skills across the curriculum, and can lead to a broad range of opportunities from high-tech machinist, through to IP lawyer and owner of a business.”

This grass-roots approach to making change has struck a chord in the workshops and discussions we have been running with Swinney in Western Melbourne, Ballarat, Geelong and Burnie.

Audiences drawn from manufacturers and business leaders, federal, state and local government, education and training providers, unions and welfare organisations, have been encouraged by Dan’s cogent arguments in support of manufacturing’s future, and what is needed to continue the push for advanced manufacturing and to re-engage community interest in manufacturing-related jobs.

The strongest message from these discussions is the need to form stronger partnerships – the example of the Austin Poly, a school of 380 students, which has the active financial and practical engagement of 65 industry partners, is compelling.

Swinney argues that government and communities can do a lot more to help the manufacturing sector transform and thrive. “I estimate that 80% of the job losses due to plant closures in the 1980s and 1990s in Chicago could have been avoided with carefully targeted intervention, for example, to assist with management buyouts for small firms facing a succession problem.”

Our broader research program at the University of Melbourne explores how the interests of businesses and the regions in which they operate can become more closely coupled and mutually supporting. Swinney believes the challenges facing Australia are similar to those in Chicago.

The vision that has driven Dan Swinney’s 30-year effort is one of building the fabric of society through advanced manufacturing. His story is no simple recipe approach, but a tale of hard slog – persuading, cajoling, and bringing people to the table.

“We have to keep the conversation going,” he says.

Dan Swinney’s Australian workshops and public lectures were supported by the Australian Government’s Enterprise Connect, the Foundation for Sustainable Economic Development, Faculty of Business and Economics, the University of Melbourne and numerous local partners.