Engineering & Manufacturing Influence News – Issue 11 April 2013

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ISSUE 11 – April  2013

EDITORIAL:

Last month’s Renishaw presentation certainly demonstrated why there is so much belief in innovation being the solution to Australian Manufacturing malaise.  Mike Brown’s presentation on Renishaw’s latest product in additive machining gave a very good insight into why there is so much interest in this new and emerging technology.

Yet again the future of Australia’s automotive industry dominated the news over the last month.  Holden’s announcement of a further 500 job losses seems to fly in the face of the government’s insistence that the purpose of financial handouts was to protect jobs.  In addition, the news about the success of the imported Mazda 3 must add to the public’s confusion about whether the industry can really survive even with the subsidies.

The government’s approach to funding the Gonski reforms by removing funding from the university system must also, in an indirect way, cast a shadow on the future of manufacturing.   With the teacher’s union running funded adverts in support of the proposals, it would be easy to believe that Gonski was the total solution to lifting our school performance rather the reality that its purpose is only to identify the extra funding for the system.  To this editor it seems to put the cart before the horse; what are the actions that need to be taken to really lift the standards of education in this country?  These need to be clearly defined, planned and costed before a budget should be approved.  In addition, we have the ludicrous situation of removing money from our tertiary university sector to pay for Gonski.  The recently announced, aspirational plan from the Business Council of Australia for Australia to be a top 5 country in the next 10 years may be widely ambitious but it should really be seen as cuckoo if we are not prepared to invest in the real source of a country’s prosperity – its total education system.  While we may have 6 universities in the top 100, we need to have at least 1 in the top 20 to demonstrate our real educational leadership.

The other significant issue is the collapse of the carbon price in Europe to $3 a tonne.  It makes Australia’s inflated $23 a tonne look stupid and yet another huge cost disadvantage Australian industry has to withstand.  It seems that what Labor described as a courageous and world leading action is now shown by the rest of the world as nothing more than a foolish act of self sacrifice.  Adding insult to injury, the PM has recently announced that despite the resulting further drop in revenue that will result, the compensation payouts will continue! It will also be very interesting to see how the first grants from the $10b alternative energy fund, which are announced in July, will affect this debate.  
Car Industry Update

The announcements by the two ex-Ford Chairmen expressing doubts about the long term future of the automobile industry and their suggestion that the demise of one would probably have a domino effect on the whole of the supply industry because many suppliers are geared to all three companies is of concern.  This pronouncement by Ford without promoting the need for further Ford funding could suggest there will be an inevitable announcement of Ford’s closure by 2016.  Holden have also been actively publicising the value of, and the necessity for, the current subsidies to continue while Toyota has again, in true Oliver Twist style, asked for more; at least under the guise of developing a new car.  The Herald Sun has been running articles that support the union’s insistence on the government’s mandatory purchase of Australian built cars for its own fleets, while an interesting letter in the Age asked whether Holden’s announcement of building the fastest road car in Australia, the GTS, was good publicity for how our tax dollars are being spent.

Switzerland proves innovation is a driver

Just as it was announced that Swiss robot manufacturer ABB had won a contract to supply 2,400 robots to BMW, the AFR ran an article declaring that while the Swiss Banking giants UBS and Credit Suisse had shed 10,000 employees over the last 10 years, the country’s manufacturing sector was still going strong.  The country has an unemployment rate of 3.1%, the lowest of the top 10 European economies and for a nation of only 8 million people is increasing employment numbers in manufacturing companies that make electrical equipment, airline seating, toilets and drugs.  For a country renowned for its banking and insurance industries, this sector only employs 152,000 people compared to an industrial sector that employs 588,000 people.  “Switzerland is like a Silicon Valley for the manufacturing industry” quotes one expert.  “Given the high cost base, no Swiss manufacturer would survive, if it were not world leading or top quality.”  According to the AFR, pressures to stay ahead have pushed Lantil textiles to lead in air cushion aircraft seats and drug-maker Novaris and watchmaker Swatch to top the global rankings for 2012 patent applications.  Universities such as Zurich’s ‘Swiss Federal Institution of Technology’ and a pro- business regulatory environment have helped make Switzerland a home for research hubs of US companies like Google and IBM.

This Month’s Manufacturing  News ( thanks to Manufacturers Monthly)

  • Manufacturing activity has improved this last quarter but is still running negative.
  • BAE Systems is set to lose 450 more jobs after losing a land maintenance contract from the Department of Defence.
  • Manufacturing Focus’s MD Mark Fusco (a consultancy company) has proposed that Australian automotive manufacturers should consider sharing facilities and resources as with successful examples set by Daimler Chrysler in the US and Mitsubishi and Volvo in Holland.
  • Boeing plans to cut back 1700 jobs worldwide following down turns in production.
  • Deakin University expects to lose up to $16m of funding over next two years and this could affect projects in the Geelong area, including the Future Fibres R&D Centre and the Advanced Manufacturing Cooperative Research Centre.
  • Visy have just built an $86m new facility on the Gold Coast as part of their expansion plans into Asia.  The facility will produce 1.6 billion aluminium beverage cans and 600 million steel food cans.
  • The AFR reports that the country’s universities spend $280m on meeting the compliance requirements of federal and state governments according to Universities Australia submission to the Federal Opposition’s Deregulation Taskforce.
  • The AFR reports that AWU National Secretary Paul Howes has stated that an “Accordstyle” emergency summit of government, business and unions was needed to save manufacturing and Australia has to decide between market forces or temporary government assistance.
  • Chanticleer in the AFR has reported that recent studies show Australia is the world’s most expensive offshore exploration and production location.  It is three times more expensive than the US Gulf Coast and slightly more expensive than Norway.

BOOK REVIEW

“Producing Prosperity – Why America needs a manufacturing Renaissance” by Pisano and Shih, Harvard, Library of Congress 2012.

Another insightful book from two Harvard Professors who argue passionately for America not to give up on its’ manufacturing sector.  As the authors clearly recognise in their very first line, there are now quite a number of books on why manufacturing matters to America.  As with many academic researchers they have to find a new emphasis for why it is so important (and of course to give their book a new edge) and so Pisano and Shih develop the idea of an ‘Industrial Commons’.  In the past, this was common land in the middle of a village where villagers met and grazed their animals, shared ideas and built a collective and collaborative spirit.  The authors see the “industrial commons” in their words as exerting a powerful gravitational pull on the location of industries and innovation (and how conversely the absence of an appropriate commons creates a chasm).

Their argument for manufacturing’s importance, as with Vernier’s argument and in fact all who believes in the prime importance of manufacturing, is built around two highly relevant facts drawn out in the first pages of the book.  In 1950, manufacturing represented 27% of US GDP and employed 31% of the American workforce.  By 2010, manufacturing was only 12% of GDP and employed 9% of the workforce.  When you blend this with the fact that 75% of the world’s trade is made from manufactured goods, how can manufacturing not be seen to be so vital to the economy?

The ‘Industrial Commons’ is the focus for innovation, the ability to take a product from concept development to market.  Future innovations, along with high productivity are the key drivers of economic success and growth.  Again the message is consistent with others who believe innovation is the key and Pisano and Shih emphasis the important point that if you lose manufacturing you lose this ability to innovate.   Their argument is very much about this collective ‘commons’ and in many ways endorses the recent Australian policies of clusters and collaboration.  While they support the free market, they believe this does not preclude judicious government support.  They also make the strong points that management policies are instrumental to this process and that the short sighted polices of separating design and manufacturing and looking at short termism in results, rather than long term building are all issues that have to be readdressed.

While there is no specific reference to the automotive industry in America they use a number of references to the automotive industry to endorse their points.

  • If a prime industry like automotive declines many core capabilities will also atrophy.
  • Electronics now comprise about one third of the cost of materials and labour to produce an automobile and most of this technology and manufacture is now based in Asia.
  • Product quality is a key differentiator in the auto market.

They also raise another interesting point about those who (particularly economists) seek salvation in a post industrial world, in a knowledge work world.  Rather than service intensity being a direct driver of growth per capita; causality should be seen to run the other way, where greater wealth and development tend to drive greater consumption of services.

Overall the book is an easy and challenging read that all Vernier members should consider to endorse their passion about industry and manufacturing.

OTHER NEWS:  Australian Soccer Transfer News

While the Australian Soccer League transfer period does not official start until the 14th of May and closes on the 14th of September, there is already a lot of transfer speculation around a whole series of high profile changes.

One of the most predicted moves will be the coach of the Australian national team Jose Gollard, who is almost certain to move on after a very disappointing and taxing term.  But Gollard is expected to quickly find another national side after interest was expressed by Greece, Spain and Cyprus.  The head of the Greek Soccer Association when asked why the strong interest in a coach whose side were known to score a lot of own goals stated, “Our latest style is boring and we want to return to the old ways.  The Greek fans like a game with plenty of goals, regardless of who scores them.  Life is much better even to lose 9-0 than make a 0-0 draw.”  On a much distorted phone link to Wales, the Welsh Soccer Association was asked about utilising their former countryman seemed to suggest they were quite happy with their current mascot.  There is also speculation about a reasonable fit with the Russian national team, but owner Vad Putitin said that he preferred a more balanced style rather than the Australian style of playing everybody wide on the left.

It is also clear that many of Gollard’s backroom staff and players will also be moving on or retiring.  It is widely speculated that now badly injured but previously star striker, K Hudd, who made the 07 shirt so popular in the club shop, will retire and start a new career in films.  He is being tipped to star in a remake of the old TV favourite “The Clampits”; the hilarious story of a very successful Sydney family, forced to pack up and move back to Rural Queensland.  Another star, Bruce Springswan will join the coaching ranks of the new team OECD where he is highly regarded.  When asked about this move, Bruce said that he saw this as a logical move for such a talent.  Asked about the need to improve player’s skills and tactics at his new club, he said that while these could be regarded as important, the first thing the club must have is a new, well insulated sports hall.  There is also a lot of speculation about specialised ‘striker’ coach Bill Longon who is the originator of the successful game plan “Fair Play Australia” where the creative players of the opposition are stifled by over marking. He is surprisingly being considered for a role in the next series of TV soap “Footballers Wives”.  Star player Tan Plebiscite is however, expected to quickly find another club.  The ability to miss a so many easy goals but still look extremely arrogant and condescending is seen as a real advantage in the modern game.  One of the games veteran coaches Doug Macaroon is being linked with a return to his native Scotland but this has been squashed by both Rangers and Celtic.  Speaking through an interpreter, the club spokesperson’s said that the style of playing the man and not the ball was no longer relevant to the modern game.  The legendary Iron Man of English Soccer coaching, Sir Alex Thatcher who fired Macaroon in the 70’s said that this style was probably still only appropriate for emerging soccer counties like Australia and Macaroon would be better staying put.  Some of the other players expected to move on are Garrett Oil and Asian star Yuen Wong.  So far there is no interest at all in Oil but a few clubs who appreciate Wong’s communication skills on the pitch are concerned about him affecting the character of the dressing room.

There is also speculation about some of the leading names in Australia’s feeder club “The Green Old Woods”.  Coach Bob Milne’s style of playing with 11 centre forwards has been described by some as ‘forward thinking’ but without a win all season it is unlikely this will result in a high profile appointment.  One player who has definitely had offers to move to TV work is GOW’s player Sam Handsome – Old, well known for shooting wildly whenever the goals are in sight.  While it would be a big gamble to throw him in as a soccer pundit, both channel 7&9 see SHO as an ideal weather person.  One insider said “with SHO doing the forecasting there will never be any complaints when we missed getting the weather right!”  Finally, because of the high number of players who left under Gollard’s abrasive style, there is a buzz around that some could be tempted to take over after his departure.  Two names are being strongly mentioned; one is a past player with the cash rich Health Services team and while able to inject new funds into the club, his past disciplinary record may be a negative but a name highly tipped is Nick A.G. Noxon.  However, when approached for a comment NAG said that a comeback was out of the question.  “All that training and pressure was just too much for my body to take.  After all, with my payout I can now live the high life for the rest of my life – no I do not miss it one bit”.  The great Liverpool hero once said “Soccer is not about life or death, it is much more important than that”.  Seems like for Australia’s main players there will be a lucrative life after soccer death!