ISSUE 10 – MARCH 2013
Last month’s Futuris presentation certainly demonstrated that there are success stories out there for Australian Manufacturing and so this month’s edition, with its updated format (if a new format is good enough for the AGE) I have tried to balance the good news with the bad, although the late news of Shell’s proposed closure of its Geelong refinery is another large piece of bad news particularly with the continuing uncertainty of Ford’s operations beyond 2016.
Sue Morphett, the new Chair of ‘Manufacturing Australia’ a lobby organisation formed by nine companies, Bluescope Steel, Amcor, Boral, Brickworks, CSR, Incitec Pivot, Rheem, Allied Mills and Capral made her first statement this month. MA’s charter is to create and retain Australian Manufacturing jobs by growing the industry and working with governments and stakeholders to address the challenges faced through innovation, good policies and workplace flexibility without supporting protectionism. As reported below Ms Morphett says the top 3 priorities are utilising the country’s energy advantage, restricting anti-dumping (a subject at the heart of some of its members) and investing in manufacturing. The appointment of a person who moved Bonds production off shore seems a poor one at first glance, and her cause cannot have been helped when this month CSR announced the closure of two of its NSW factories (see below).
This month we have seen the Labor Government create another internal crisis that surely makes every voter wish the election was next week. At the same time Bill Shorten pushes through IR changes, which while unlikely to be passed because of the turmoil, attempt changes (as reported by the AFR) to enshrine penalty rates in law, require employers to consult with workers before changing rosters and to allow the FW Commission to handle workplace bullying complaints. Many papers have reported this government is taking industrial relations back to the 1970’s. While other advanced economies appreciate society is now 24/7, this government seems trapped in its incestuous relationship with the union movement who plan to run member funded adverts in line with the election. Of course, these are bound to raise the spectre of a return to ‘Workchoices’, which is still the Achilles heel of any coalition Industrial Relations policy. At the back of this newsletter I have reproduced the coalition’s recent industry policy statement by Sophie Mirabella which lacks any statements in this crucial area. I also recommend an excellent article in the Weekend Australian’ this week by Judith Sloan that shows the reality of Labor’s and Wayne Swan’s management of the economy. As many economists are forecasting serious economic issues within a three year window, maybe a recession is the only thing that will get Australians to appreciate that we have had it too good for too long!
This Month’s Company News (All articles thanks to Manufacturers Monthly)
Geelong’s Shell refinery is up for sales says owner Royal Dutch Shell. An estimated 450 jobs are at risk if a buyer is not found by the end of the year when it will be converted to an import terminal requiring only around 50 jobs. Shell report the facilities performance is ‘border-line’ when compared to the Asian mega- refineries.
Queensland Company Ferra Engineering who specialise in the design, assembly and testing of aerospace structures and sub-systems has signed a $60 million deal with multinational aerospace and defence giant Boeing to manufacture its Joint Direct Attack Munitions Systems (JDAM). Queensland Premier Newman said “This Queensland aerospace company began as a two-man operation in 1992 and has grown to become a great Australian success story with more than 130 employees”.
CSR Subsidiary, Glass maker Viridian will close 2 factories in Western Sydney with a loss of 150 jobs. One factory’s production will be absorbed by another NSW factory and the other by either the company’s Dandenong facility or imported. CSR blamed the strong Australian dollar, weak building demand and an expensive environment, with “increasing energy and manufacturing costs”. Viridian is predicted to make a pre-tax loss of $37-39m.
Australian scientists at the University of Western Australia have helped develop a new ‘super material’ by harnessing the properties of ‘nanowires’ that is twice as strong as high strength steel. Using the new method researchers have made materials twice as strong as high strength steel with strain limits five to ten times higher than the best steels currently available. The new material opens the door for a range of new applications, and its potential for the medical and electronic industries has already been underlined.
Priority Engineering Services, an engineering and manufacturing business that works across the automotive, mining, metal stamping, materials handling and process control sectors, based in Adelaide has collapsed, leaving 120 employees out of work despite receiving a $200k grant last year. The owner stated that while the company had been actively vying for contracts that could have doubled its workforce, it simply ran out of time. However the site could re-open under new owners and so the existing workforce have been advised to sit tight and await developments.
Australian audio manufacturer RODE Microphones says that companies have to stop whinging about the $ and accept the economic situation – a different mindset is involved. The company conducts 90% of its business offshore and last year won the Large Advanced Manufacturers Award for NSW Exports. RODE Microphones adapted to the dollar by increasing its brand marketing, boosting its efficiency with new machinery, and restructuring its management.
ASIC data has shown company insolvencies for the last 12 months at record highs at 10,632, with the carbon tax blamed by some for contributing to the number. “For companies which have exposure to energy, and other factors which are affected by the carbon tax in a significant way, the carbon tax and the costs related to it are having a significant impact on the ability of these companies to continue,” Todd Gammell of HLB Mann Judd told News Limited. One example is Penrice Soda, the only maker of Soda Ash in Australia shut its factory with a loss of 70 jobs to concentrate on imports mentioned the Carbon tax as the last straw. The NSW government has meanwhile claimed that the carbon tax has cost the state $580 million in increased energy prices, $355 million in stranded carbon costs to electricity assets and a $237 million hit to the state’s budget.
Australian manufacturers such as Pact Group and Amcor are embracing business social media to attempt to break down silos within their companies and become more competitive. 600 of Pact’s employees use ‘Salesforce’ (CRM Software) Facebook-like Chatter tool to get answers to workplace questions. All businesses need to be nimble and responsive today and this helps to break down silos a spokesman said.
Global consumer giant the Breville Group Ltd will buy and market environmentally-friendly juicer bags by Melbourne based Cardia Bioplastics as accessories for the company’s market-leading Juicer juice extractors. The bags made in China from renewable sourced resins will provide clean and green bags for US based Breville.
Port Adelaide firm MG Engineering has delivered the first of three 25-tonne, 5 storey high masts in a $3.25m contract for the Air Warfare Destroyer program. The masts will house significant elements of the Aegis Weapon Systems and navigational radar. MG Engineering has hired an additional 12 production staff to undertake the AWD mast work over a two-year period, taking their total staff to 45.”
In a recent speech, the new ‘Manufacturing Australia’ Chair Sue Morphett said the 3 priorities for Australia should be:
1. Capitalise on Australia’s energy advantage. As an energy and resources superpower our domestic energy policies fail to capitalise our advantage by creating a domestic gas market that enables value adding manufacturing alongside gas exports.
2. Restore fair trading conditions by further improving Australia’s anti- dumping regime to ensure a more level playing field with our overseas competitors.
3. Invest for manufacturing growth. Get over the perception that manufacturing is a ‘sunset’ industry and as other advanced economies are doing, increase manufacturing capacity through deliberate, smart investment. Infrastructure, better industry links for R&D, industry linked training, increasing flexibility in our manufacturing workplaces and strengthening regulations that stimulate demand should be the priorities.
Quarterly figures from the Australian Bureau of Statistics show that the manufacturing sector lost 30,800 jobs in the most recent period. While the ABC reports that 100,000 new jobs overall were created in the quarter to February. Despite this news, manufacturing continued to shed jobs, with yesterday’s Westpac-Australian Chamber of Commerce and Industry showing the sector’s output shrunk for the quarter, and investment was weak. “Plant and equipment and building intentions were both scaled back again during the past three months,” read the report. At the same time Manufacturing in the UK shrunk by 1.5% in January, the fastest decline since June 2012 has created fears of another recession, its third since the GFC.
SA Premier Weatherill has listed advanced manufacturing as a pillar of his Economic Statement. He stated that innovation and engagement with Asia were both necessary for achieving success, as was the role of the SA government in its economy. “We must make choices about backing the businesses that are inventing the new products, designing the new services and taking them to the world,” “South Australia has always worked best when we have had strong government working with strong business.” The manufacturing sector employs 73,000 in the state.
An International Business Times report points out that one of the advantages of expanding globally is that companies with off-shore factories can adjust production levels to accommodate changing sourcing strategies. Most of the goods imported to the US are relatively low-value-added, low-margin products such as toys, clothing and apparel while US exports high-value-added manufacturing products that are used to produce these imports. “The relatively low-value-added toys, apparel and plastics that the U.S. imports from China contain inputs from high-tech machinery, aircraft and chemicals that the U.S. has exported to China.” Labour cost is, of course, one of the crucial factors to be considered when deciding on production location. However, the report says, issues such as transport costs, time to market and flexibility also need to be factored into the decision. Also, the gap between labour costs in the US and China is steadily decreasing. In a separate report it is forecast that US manufacturing is set to outperform GDP growth in 2013-14.
Austrade has identified automotive and aerospace as two manufacturing sub sectors that are positioned well for Indonesia’s growth story and is currently seeking expressions of interest from advanced manufacturers and others for the plan, which will provide $1.5 million a year worth of grants worth between $20,000 and $300,000 a year. Funding is open to member-based groups hoping to develop new relationships in countries such Indonesia. “Automotive is one of the booming sectors in Indonesia at the moment. Indonesia is set to become the the biggest automotive market in ASEAN,” said a spokesperson. Last year the Australian Automotive Aftermarket Association pointed out the huge opportunities available to auto parts makers, for example in in-car entertainment, wheels, oil and other products. Their research predicted that the country’s car sales are to increase by up to 50 per in the next half a decade. Four-wheel drives and SUVs are categories tipped for especially strong growth.
Holden Australia’s chairman Mike Devereux revealed that the company had received $2.2 billion worth of assistance since 2001, a figure which he defended as representing a good return for taxpayers. For the $150 million a year you get $2.7 billion of economic activity generated by having Holden make things in this country. It is 18 times the investment,” he said. He also stated that a local car making industry would be ‘absolutely impossible’ without government assistance. At the same time Nissan and Hyundai brands have outsold Holden for the first time in Holden’s 65 year history.
“Travels with Epicurus” by Daniel Klein
This is a whimsical look at growing old from a philosophical perspective as Klein, a septuagenarian and author of over 25 books, takes a nostalgic tour of the Greek islands, the birthplace of classical philosophy. Along the way he studies the attitudes of the senior citizens on the island as they meet to discuss life, food and beautiful women. The book is an easy read (available from Bayside Library so most likely others) and is full of tales and stories of Aegean life, including one of a wealth Greek-American tourist out walking when he comes upon an old Greek sitting on a rock sipping ouzo and staring at the sun setting over the sea. Behind the old man is an untended olive grove with the ground littered with fallen olives. When asked whose is the grove the man replies “Mine”. “Don’t you gather them?” the American asks to which the old man replies “Only when I want one”. “But if you picked the olives at their peak you could sell them. There is a big market in America for olives you could get a good price for them!” “What would I do with the money?” Well, you could build a big house and hire servants to do everything for you” was the American reply. “And then what would I do” asked the old man. “Well you could do anything you wanted” was the reply. “You mean like sit here and drink ouzo!”