Engineering & Manufacturing Influence News – Issue 12 June 2013

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ISSUE 12, May 2013

EDITORIAL:

This edition, issue 12, of the Vernier Newsletter signifies a year for the society attempting to promote the message that a vibrant manufacturing industry is vital to the future of Australia.  In the first edition the editorial subject was the introduction of the carbon tax.  12 months on it seems it has neither lived up to the doomsday predictions of the Coalition nor been the revenue raiser that justified the associated tax changes outlined by the Labor government.  At the ABC Press Club this week, Greg Combet laid out the argument for Labor’s policy on climate change being a roaring success and decried Tony Abbott as a complete climate change sceptic.  There seems no doubt that the world’s climate is changing and as the majority of scientists believes carbon to be the main source of pollution we cannot stand by and do nothing.  At the same time and equally important the world is running out of traditional energy sources so this alone should justify action.  However, the problem seems to be that all the information is spun to create the maximum political effect.  Take Minister Combet’s presentation.  Emissions from electricity generation have dropped 7.4% over 12 months seems impressive at first glance but what does this exactly mean?  Does it mean that this can be used as a trend and so electricity will be pollution free in 20 years?  And all this reduction came about in the last year because of the introduction of the carbon tax?  Researching the confusing information on total electricity generation it seems that total production since 2000 has risen nearly 20%, so the emission reduction does not even keep up with increased pollution.  Then there is the new wind farm built in Victoria with all the manufacturing in Australia according to the minister.  The turbines are produced by a Danish company Vestas, who do have a facility in Australia but as far as research shows, it is on level 12 in a building in St Kilda Road – seems a difficult place to manufacture such large components?  Then renewable energy is up 30% but 30% of what?  Research suggests it now provides 9.6% of total production.  Pleasing that it has increased by 3% absolute but comparing relative and absolute demonstrates how facts can be spun.  The success of AJ Bush’s project must be pleasing for them but did they not realise before that methane gas was being produced or could or would they not fund the project without grant assistance?  Either way the provision of grants for alternative energy projects seems eminently sensible, so there should be some concern over the coalition’s plans to scrap the whole program but will we get the truth from either party?

Talking of truth; this month saw the inevitable announcement of the closure of Ford manufacturing.  The newsletter does not feature any of the facts of this as it has been covered in separate Vernier articles specifically on the automotive industry. The question is though – how long has the government really known about the inevitable closure of the plant?  It is unimaginable that Ford had not made their intentions clear to the government several years ago and the anecdotal evidence from third parties is that there have been implicit signs in Ford’s behaviour for a long while now.  Secrecy was not unexpected and even the timing of the announcement can be seen as political but the interesting role in this is the one of the unions.  Are they not now just another political party as the new set of electoral advertisements shows?  The political aspirations of Kerney and Howes would seem to testify to this fact.  The role of the unions and their hold on the Labor party is certainly not good for the country and the latest bill (see below) has been passed takes industrial relations back to the 1970’s.  It will be fascinating to hear next month’s speaker on industrial relations because the power of the unions is absurd and something has to change if we are realistically to compete in this globalised world!

Finishing on a bright note; it was good to attend the Manufacturing Monthly’s Awards Dinner that coincided with Austech last month.  While the show’s attendance numbers reflected the declining state of Australian manufacturing, the dinner at least showed that there are quite a number of Australian companies who can produce excellent results. It shows that once the inevitability of globalisation is accepted, Australian manufacturing companies that demonstrate hard work, innovation and most importantly good leadership can succeed, even in an economy burdened with over regulation, excessive taxation, low productivity and high wage rates.  Good on you Aussie companies!

Monthly news

Manufacturing Monthly Endeavour Awards

Congratulations are in order to one of our latest members and co-founder of ANCA as the company not only took the “Exporter of the Year Award” at the recent Manufacturing Monthly Award Dinner but the top prize of “Australian Manufacturer of the Year”.  Many who were at the dinner and know ANCA see this as the justified culmination of many years work growing the Bayswater based CNC grinding Company into an international leader in its niche market.

On the night a total of 14 awards were presented to Australian manufacturers following a keynote speech from Sue Morphett of Manufacturing Australia who endorsed a proposal originally raised by Dow Chemical boss Andrew Liveris and reported previously in the Vernier newsletter that the federal government should allow industry to access the nation’s abundant gas resources at competitive prices to negate the expected rise of international natural gas prices.  One of the most pleasing issues of the night was that many of the awards seem to be won by companies who clearly saw innovation as the driver for success rather than let gloom and defeatism overwhelm a total industry struggling to transition to a new global manufacturing economy .  This fact was endorsed by opposition Industry spokesperson Sophie Mirabella who said there are no silver bullets and it needs a lot a lot of hard work ahead to turn manufacturing around.

Expert questions value of automotive industry to wider manufacturing sector

A former Vernier Speaker and past Chairman of the Automotive Industry Authority in the Hawke/Keating government Bill Scales, in an opinion piece in the AFR headlined by “Government must step back from manufacturing’s ‘death spirals” argues quite rightly that Ford’s strategy over many years to focus predominantly on the Australia/NZ market was never going create the volumes necessary to sustain automotive production in this country and so it should have been no surprise when Ford announced its closure.  He further posits that this is a good example for public policy in Australia in that governments should not provide company or industry specific assistance as it cannot guarantee that the strategic direction or intent of the government cannot be guaranteed to be in concert with the individual or company strategy.  Scales goes on to say that ‘we’ should not introduce policies that imply that some industries are better than others for our economy.  “There is no logical reason why the manufacturing elements of the automotive industry are more important than mining, tourism or the arts”.  He further argues that the so-called ‘positive spill offs’ from vehicle manufacturing on the rest of manufacturing and the broader economy as a whole are illusionary.  He concludes that if governments really want to help industries compete in this complex world; we need sound fiscal and monetary policies; labour markets that operate efficiently, a world class education system and world class social and economic infrastructure.

While this conclusion cannot be disputed, some of the previous points are certainly debatable.  70% of the world’s tradable goods are manufactured.  Many improvements in the quality of life are driven by innovative manufacturing, one only has to look at the advances in automotives to justify that point.  Infrastructure transports vehicles and the futuristic views are of guided vehicles, cars that fly, robots that perform daily tasks – these are the leading edge innovations of the promethean future.  There are several leading industries that will drive the future and an automotive industry is clearly key to many countries.  But investment has to be in an industry of the future, not the current strategy model displaced by Holden.  In addition, world class companies do create positive spill offs.  Swinburne University, of which Scales is Chancellor, leads in lean manufacturing training built upon the philosophies and methods derived from Toyota, probably the world’s leading manufacturer in efficient manufacturing.  There are industries that are vitally important and manufacturing – the process of making things – is absolutely one; just as tourism, the arts and education are equally vital.  Surely, it is the role of government to invest in key industries for the future but this investment has to be to support a well thought out future not as currently for political purposes.

Climate Change – one year on

The Minister for Climate Change, Innovation and Industry, Greg Combet addressed the ABC Press Club this week to report on the “Clean Energy Future – one year on.” Before turning the presentation into somewhat rambling and slightly desperate party political broadcast complete with the usual scathing attack on the coalition party policies, Mr Combet did manage to give some facts on the Australia’s position and the success of its implementation.

  • Australia is the 12th largest economy and the 15th largest polluter in more than 190 nations as well as the largest polluter per capita among advanced nations.
  • Emissions in the National Electricity Market are down 7.4%
  • Renewable energy generation is up almost 30%;
  • Generation from Australia’s seven most highly-polluting power stations is down by 14 per cent.
  • The Clean Energy Council estimates that 24,300 people were employed directly in Australia’s renewable energy industry at start of 2013
  • Top 370 companies in Australia have to have a permit for every tone of emission they produce.
  • AGL opened MacArthur Wind Farm in Victoria, largest in southern hemisphere – saves 1.7m tones of greenhouse gas emissions every year – $1b investment – all 140 wind towers were manufactured in Australia
  • More than 1m households have installed Solar systems under Labor’s scheme compared to only 7,472 rooftop solar systems in 7 years under Howard Government.
  • More than 220 clean technology projects are now underway at manufacturing plants under clean Technology Investment Programs – involve $338m of investment
  • Example – AJ Bush and Sons, one of Qld largest meat industry employers invested $12m to capture methane previously released into atmosphere.  This has cut energy costs by 46% and emissions by 64%.

Independent’s kill off Labor’s IR changes

The AFR (5 June) reported that independents Rob Oakeshott and Tony Winsor declared they would not support the controversial IR changes proposed by Labor’s Bill Shorton.  These included plans to reintroduce limited arbitration for deadlocked Greenfield resource projects.  The MP’s agreed only to support the family friendly parts of the bill and did not want to get in the middle of an election stoush as the Liberal’s formally opposed amendments to strike out provisions to designate employer lunchrooms for meetings between workers and unions and the provision that would have made the employer responsible for the costs of transporting union officials’ to remote sites as well as proposals to see bullying complaints referred to Fair Work Australia.  The BCA CEO Jennifer Westmacott had said that the independents were right to knock back amendments that “would have wound the clock back 30 years”.  Postscript – Astonishingly the following day 6th AFR reported that following amendments the bill had been passed with support of the independents.  This means that union meetings will be held in lunchrooms even though the vast majority of the workforce using the room may not be members and employers will be responsible for union costs to get to isolated sites!

Unions Advertising Campaign

At the same time the AFR announced a series of adverts to be ran by the ACTU starting with the State of Origin Rugby broadcast in the lead up to the general election that would focus on a campaign against ‘insecure work’ such as part time and casual jobs and short term contracts.  The ACTU Secretary has refused to say how much the ads would costs but said it was substantial.  The affiliated unions are already running a $2 levy on members in the run up to the elections, which is expected to raise $4m.  The theme, which is bound to be controversial and run close to the rules for election advertising, is said to be focused on employers and underpins a message of the unions standing up for a better life for all workers and their families.

News in brief:

  • The AIG’s Performance of Manufacturing Index, which is a summary of 200 companies rose in May to 44% compared with the April figure of 37% but as the index works on a nominal score of 50 as the line for expansion or contraction this score records the 23rd consecutive month of contraction.
  • The AFR ran an article showing that US manufacturing activity has shrunk to a four year low.  It stated that manufacturing is really stymied by slow corporate spending and government spending cutbacks.  The article claimed that manufacturing will grow at a modest pace this year but is unlikely to accelerate in the coming months.  Figures were released last week that showed US GDP rose 2.4% annualised for the first three months of 2013.  At the same time MM reported that China’s manufacturing index for May had reduced slightly from the previous months figure and was just showing a slight contraction of purchasing managers confidence.  However, in a separate report the NZ manufacturing index actually rose into positive territory in May perhaps boosted by the decline in the $ assisting export orders
  • Panasonic the Japanese conglomerate has announced the reduction of 5000 jobs from its Automation and Control division.  The cuts which will be largely from its overseas facilities are said to be as a direct result of the company making a near $Aus 8b loss last year which is said to demonstrate the increased competition the company is facing in its core markets as well as the costs of its recent purchase of Sanyo.  While Panasonic has shed around 20% of its workforce in recent years it still employs over a 111,000 in its automation division and a total of 293,000 across the whole company.
  • “Australian Made” has announced a new website and product directory that features thousands of Australian manufacturers.
  • The “Victorian Carpet Company”   based in Castlemaine Victoria has announced it will close with a loss of 21 jobs.  This follows last year’s reduction when the company shed over half its workforce.  The CEO said it was a continuation of manufacturing moving offshore in the industry.
  • There has been adverse reaction from the major gas companies Santos and Origin to the proposal by Manufacturing Australia to reserve gas, at competitive prices for domestic use.  The idea has also received scant support from the government.  The argument put forward is that the gas would remain in the ground  – talk of slowing the industry will slow the economy.
  • Boart Longyear has slashed over a 1000 contract mining jobs in reaction to the downturn in capital and mining exploration spending globally.  These losses reflect the continued downturn in the mining industry sector a spokesperson said.
  • MM reports at least one Labour MP wants to re-introduce tariffs to protect the Australian automotive industry.  The MP who seat covers Holden’s SA plant suggests that the high $ requires special attention through the reintroduction of temporary tariff measures.