The car industry - and jobs !

Holden cars will still be produced in Australia - at least until 2022.  The Federal government has agreed to inject a $ 215 million contribution to the one billion dollars General Motors will spend to design and produce two new Australian built cars at it's factories in Victoria and South Australia.   These new vehicles will most likely follow the trend to smaller, more fuel efficient designs, which are fast becoming car buyers choice.

The world car industry has the upper hand when it comes to making decisions on which country will assemble it's products.  It is a huge provider of jobs - and consequently no government wants to see existing car plants close.  That $ 215 million will be spread over the next ten years, and much of it will be recouped from various taxes on the product produced.

But - that is not the end of the matter.    There is every expectation that we will shortly hear of a similar deal with Ford.    Holden and Ford are the only two car companies still manufacturing in Australia and in combination their needs support the 200,000 jobs spread across the spectrum of manufacturers who supply component parts to the two brand giants.

Car manufacturing is similar to the home building industry.   Today's home builders are more managers than builders because they have skilled independent contractors construct the building.   Concrete teams reinforce and lay the slab.  Specialist factories construct the wall frames and roof trusses and deliver them to site - where different assembly teams put them in place, and these are followed by roof tiler teams and drywall people cladding the interior walls.

A similar scenario has developed in the car industry.   The car assembly line puts a huge array of components together - and out the other end comes a vehicle bearing that maker's badge.   To achieve economy of scale, these parts manufacturers need the volumes required by Holden and Ford to be viable.   If we had just a single car manufacturer in this country, it is probable that many in the parts industry would not survive.

That would not be the end of car manufacturing here.   Imported parts would quickly fill the gap, but instead of a huge array of jobs spread over a large number of parts manufacturers, we would have a very different car industry.   The end product might still boast a " made in Australia " claim, but it would be almost entirely constructed of imports.     The parts supply industry has a ratio of about four jobs for every actual assembly line job - and that is what makes cars so attractive to the national economy.

The decision to financially support Holden does not stand alone.  We have made a decision to support an industry that comprises many factors.   All those factors go together in integrating a large work force that is integral to the survival of car manufacturing in Australia.

Let us hope that the Mandarins in Canberra have done their homework correctly, and understand  how this complex manufacturing sector works !