Massive job losses to follow car factory shutdowns

Job losses will be felt beyond car industry: experts

Australia's sole surviving wheel manufacturer has warned there will be unemployment on a scale never seen before when the car industry closes by the end of 2017.

ROH Wheels, based in the Adelaide suburb of Woodville North, is the last wheel supplier to the Australian car industry after Ford and Holden began sourcing wheels from China and Taiwan 10 years ago.

Even though ROH has just invested $5.5 million in new machinery and production line changes that will deliver cost savings for the updated Toyota Camry due to go into production early next year, the future of ROH Wheels and its 147 employees is uncertain beyond the end of 2017.

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The same economic conditions — a high Australian dollar and cheaper labour in neighbouring countries — that have hamstrung Australia’s three car makers also mean ROH Wheels and manufacturers in other industries cannot export profitably or compete with cheaper imports.

“I think we’re in for a shock, this is the tip of the iceberg,” said ROH wheels boss Bill Davidson.

“I think we’re headed for more closures in non-automotive manufacturing, as well as automotive manufacturing.”

An April 2014 report released by the University of Adelaide called Closing The Motor Vehicle Industry: The Impact On Australia estimated almost 200,000 jobs would be lost nationally, including up to 98,500 in Victoria and up to 24,000 in South Australia.

Professor John Spoehr said: “The likelihood of further job losses in manufacturing is very high.”

Professor Spoehr said the high Australia dollar and cheaper production costs offshore “are a powerful cocktail” that will make it difficult for manufacturing industries to survive.

However, the chief economist of AMP Capital, Shane Oliver, says while there will be a downturn once car manufacturing ends “we are a long way from Armageddon”.

“There will be a flow-on affect when workers lose their jobs … but we’ve survived other industry shutdowns before,” said Mr Oliver. “We have found other industries to fill the gaps along the way and I suspect that will happen this time.”

Mr Oliver said the decline in manufacturing has been happening for more than 50 years: in 1960 it represented 25 per cent of all jobs, today the sector represents 8 per cent of all jobs.

A spokeswoman for Federal Industry Minister Ian Macfarlane’s office said the government was working with the automotive and manufacturing sectors to “address the changes” occurring in Australian industry.

The government says it has established a $20 million Automotive Diversification Programme, and a $60 million Next Generation Manufacturing Investment Programme to “accelerate private sector investment in non-automotive manufacturing”.

When asked how many of his 147 workers will find new jobs if ROH were to shut its doors after 71 years (the company was founded in 1946, two years before General Motors produced the first Holden), Mr Davidson said: “I’m genuinely concerned.”

“A lot of our workforce, at least half, are aged 50 plus,” said Mr Davidson. “In Victoria and South Australia, manufacturing workers at the supplier level are going to come to the employment market at the same time as the car manufacturing workers. Where are they all going to go?”

Mr Davidson said in South Australia there was “no significant manufacturer of anything to take up the slack”.

“The government is scaling back expenditure on defence, they’re going to buy more defence products from overseas rather than build it here, so the hope of being able to retool or continue to employ people, that’s going to shrink.”

Meanwhile, ROH has been reinventing the wheel to compete with imports.

New machinery installed with assistance from Toyota has introduced world-class technology and greater savings.

“We met (Toyota’s) 2018 cost reduction targets for the next model,” said Mr Davidson. “The upgrades we are about to introduce were going to get us — and in theory Toyota — through until the next generation Camry which was due to run until 2023.”

At its peak just 10 years ago, when ROH supplied Holden, Ford, Toyota and Mitsubishi, the company made 1 million wheels per year, or about 5000 a day, and employed 550 workers.

Today, production has slipped to 340,000 wheels per year — or 1600 per day — and ROH only supplies Toyota.

More than 500,000 wheels a year are imported from China at an average cost of about $58 each. “I can’t even make them for that,” said Mr Davidson.

Most aluminium smelters in China are state owned or heavily subsidised, and many stockpiled aluminium during the Global Financial Crisis.

“The Chinese kept their smelters going and stockpiled (during the GFC) and now that aluminium is filtering back onto the market,” said Mr Davidson.

“The price of aluminium has come down since China started to release this stockpiled aluminium and aluminium smelters in Australia are shutting down because they can’t get a (selling) price that’s sustainable.”

Mr Davidson warned rising energy costs — even with the scrapping of the carbon tax — were also going to put other industries under pressure.

ROH uses about $1 million in gas energy each year, but its gas supply costs are forecast to increase by more than 70 per cent by 2017 because Australian gas can be exported to foreign buyers at a higher price.

“Manufacturers are already on the brink, if cheap foreign labour and government subsidies don’t wipe them out, then rising energy costs will,” said Mr Davidson.

When asked if he thinks ROH will be operating in 2018, Mr Davidson said: “I don’t know, but we’re not going to give up.”