Car Crash: Good Riddance To GMH If It Quits Australia

SOME WILL TAKE exception to this article, and so be it; there are reports General Motors has decided to withdraw from automotive manufacturing in Australia by 2016 unless it gets more money from the Abbott government; despite the death knell Holden’s departure would sound for car making in Australia it should get out, and good riddance to it.

The Weekend Australian is reporting that a decision by GMH to close three of its car manufacturing plants internationally was signed off by its headquarters in Detroit last month, but that the official announcement of its withdrawal from Australia has been deferred until after Christmas to allow the company to spread the multi-billion dollar writedowns across its balance sheet.

And that cavalier accounting decision pretty much sums it up.

Of course, the company is denying any such decision has been made; it is said — to quote the Australian — that Holden is being “cut some slack.” But only to allow it to take one final shot at wringing more money out of Australian taxpayers.

Tens of billions of dollars have been gifted to car manufacturers over a period of decades to induce them to maintain operations in Australia, and for what?

Leyland left decades ago, whilst Chrysler/Mitsubishi is also long gone; Ford has already announced it’s going in a couple of years’ time, and the departure of GMH means it will take what’s left of the car making sector in Australia with it: even if Toyota was inclined to remain, a single manufacturer lacks the critical mass to support parts makers, suppliers of accessories, and all the other secondary businesses dependent on the automotive manufacturing industry to remain viable — irrespective of whether it’s subsidised or not.

Commonwealth governments — of both Liberal and ALP varieties, to be clear — have gone to extraordinary lengths to foster and perpetuate a mentality in the car manufacturing industry that demands an ever-increasing “entitlement” to huge amounts of taxpayer money, always with the barely veiled threat of closure held over the government of the day like a gun to its collective head.

And as night follows day, governments have capitulated; it says a lot that a government run by the likes of John Howard and Peter Costello was the worst single culprit for shovelling industry protection and subsidies all over the car makers like confetti.

Yet in a modernising and globalised world, plenty of other industries have either failed, become obsolete, or seen their workforces stripped and relocated to places like Bangladesh, Thailand, or the Philippines; in most cases these failures or mass job losses have been permitted to occur with little intervention from the government sector — even on Labor’s watch — and the handful of times “bailouts” do occur, they are roundly condemned and turned into political footballs by all and sundry.

Australia, to put none too fine a point on it, never really had its “own” car manufacturing sector; every car ever built in this country was made in a factory owned and operated by a foreign multinational. The national chauvinism of protecting “our” car industry is based on a false premise. It is an industry that, structurally, was never profitable in its own right in this country. And in recent years, and as that reality (even propped up by taxpayers) has moved from undeniable to inescapable, one by one the multinationals have closed up and left.

Many people will be screaming at me at this point: the tens of thousands of jobs that stand to be lost if car manufacturing vanishes from Australian shores makes what I am saying truly abominable, reprehensible, amoral. Surely, I should hold my tongue and hang my head in shame?

I would counter with three points.

One, the government isn’t in the business of making cars, and nor should it be; if state-protected car makers fail and/or close, a huge contingent of that displaced workforce will be absorbed by foreign car makers whose sales and service presence in Australia will need to expand to fill the void, and others may be able to reskill to take on other opportunities in the car industry or elsewhere.

Two, all those businesses and industries that have been allowed to fail, or have been superseded, failed to elicit tens of billions of government dollars to prop them up indefinitely: governments may well have been prepared to intervene to protect the jobs of workers in unviable automotive businesses, but in doing so send the terrible signal that those thrown onto the street in businesses and industries that didn’t attract such largesse were — and are — that little bit less valuable.

And three, those who make the most noise about “protecting jobs and conditions of working Australians” — unions — bear the largest single share of the responsibility for the car makers ultimately being unable to remain commercially feasible, even with billions of dollars raked out of taxpayer-funded drain pipes: unionised workforces, especially in the car sector, may indeed enjoy high real wages, penalty rates, allowances, loadings, bonuses, and blah blah blah…but in the end, they price themselves out of the market.

I suggest all readers have a look at this programme, viewing a three-minute segment commencing at the 39:30 mark: the speaker is Sir Keith Joseph, Industry minister under Margaret Thatcher, and the segment is illustrative of my point. Joseph is talking about unionised British state monopolies in the 1970s such as British Steel, although in the wider context of this programme there is an indirect link to Australian car manufacturing through British Leyland, which withdrew from Australia as a direct result of the exact phenomenon I am talking about — the unionised workforce had, in Joseph’s words, “priced itself out of the market.”

The logical end consequence of any trade union that is successful in prosecuting its stated objective of advancing pay and conditions of its constituent worker group is that the business which pays those ever-increasing demands must fail; so it is in the automotive sector (but again, we could just as easily be talking about, say, QANTAS — and barring unforeseens, in the next couple of days, we will be).

Of course, the automotive sector has received much, much more assistance to skew the market in its favour than a mere endless funnel of taxpayer cash.

Government car fleets lavish preferment on the local car making industry; sometimes with exclusive supply contracts, sometimes with hefty “local manufacture” quotas, but in any case relegating considerations of value for money very much to the status of a secondary concern.

It receives further protection by way of tariffs and import duties being applied to automotive imports.

And those imported cars are further disadvantaged in the market by a luxury car tax that cuts in at a ridiculously low value, currently just over $60,000; taking into account the fact that you can spend close to that on a new Commodore with a couple of options attached to it, it doesn’t take a rocket scientist to recognise this tax as just another protectionist measure to distort new car sales in favour of so-called local manufacturers.

Remove the tariffs, the import duties, the luxury car tax, and open the option of bulk government purchasing and leasing to include offshore manufacturers, and Australians will be well-served in a car market offering choice, at reasonable price points, and for vehicles built to suitable safety standards.

Prime Minister Tony Abbott was absolutely correct in his position prior to the September election to refuse any additional handouts to the car manufacturing industry beyond the $500 million already on the table between now and 2017; by contrast, The Weekend Australian notes that Holden’s stay of proceedings insofar as closing its Adelaide plant is concerned is made with the aspiration to realise eventual “annual ‘rent’ payments” to continue operations, and that aspiration should be met with the contempt it deserves.

This has gone on quite long enough; if automotive manufacturing dies out in this country during the Liberal Party’s tenure in office it will be no fault of the Abbott government: indeed, the removal of this particular market distortion, and the accompanying correction it would have forced on the labour market, should have occurred years ago.

The GMH decision, in any case, was made before the new government even jumped out of the barrier.

And short of nationalising the industry, it is doubtful the government could do anything other than stave off the inevitable — with buckets more cash — if it wanted to.

I understand that there is a lot of misty-eyed sentimentality around this issue: after all, a Holden was “Australia’s First Car” back in 1948, and like any legend allowed to grow and evolve, this one took on a life of its own — captivating millions of enthusiasts along the way.

In the final analysis, however, Holden was always a branch office of an American multinational, and General Motors has added precisely nothing to Australia for many years; even now, at five minutes to midnight, it still has its hand out, saying “I want” and “give me” to a new government elected on a platform of ending freebies for car makers.

General Motors — along with all the other foreign rent seekers in the car industry looking to use the Australian taxpayer to prop up businesses that by rights should have ceased to exist years ago — should now peddle their extortionate demands somewhere else, and good riddance to them when they leave our shores to do so.