Ideas@TheCentre
Ignoring the writing on the wall
Ford’s recently announced departure from Australian manufacturing may be the only signal strong enough to convince Holden management and the union that severe cost cuts are needed if the company has the slightest chance of continuing to operate in Australia.
Given the public nature of the difficulties that plague automotive manufacturing, it is surprising that the head of Australia’s peak union body, the ACTU, continues to ignore the writing on the wall.
Dave Oliver, secretary of the ACTU, remarked that ‘to hold the implied threat of a job loss over workers’ heads if they refuse to take a pay cut is a dangerous precedent.’
Oliver was responding to a claim made by Holden chairman Mike Devereux on ABC’s Inside Business that pay cuts and job losses must be considered for the company to quickly and sharply reduce costs.
Devereux’s revelations were hardly surprising. When Ford Australia chief executive Bob Graziano announced Ford’s closure he had stated that car production in Australia was four times more expensive than in Asia and twice as expensive as in Europe.
Earlier this year, Holden revealed it had received $2.17 billion in assistance from the federal government over the last 12 years. That came after announcements at the end of 2012 that another 500 jobs would be shed to control costs.
So let’s get this straight. Even with assistance from federal and state governments, auto manufacturing is still 40% more expensive in Australia than in Thailand, for example. Holden has already begun a program of cost cutting and 170 jobs were shed late last year. And the ACTU is worried that the threat of job losses is somehow a dangerous precedent in convincing staff of the need for wage cuts?
It beggars belief that the head of the country’s peak union would be complaining that wage levels may have to be cut, in an industry and company in a state of decline.
Pay cuts are obviously not the only part of the equation. The industry needs to be able to create cars that Australians wish to buy and they need to cut other costs, such as material and logistics to alleviate the pressure on the bottom line.
But Holden’s management negotiated a deal with the union in 2011 that guaranteed 4,000 workers an 18.3% wage rise over three years, with some receiving as much as 22%. The deal also allows employees to bank up to 40 overtime hours on a voluntary basis, which can be cashed out whenever the employee wants.
Soon after, Holden were in the midst of negotiations with state and federal governments for a new assistance package.
What will the ACTU say if the Coalition is elected later this year and the car industry loses another $500 million in federal subsidies? Will they then concede that wage cuts are a necessary part of the drive to become competitive?
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
