Unions must take blame for car factory closures
We all feel sorry for car factory workers ... but ‘industrial agreements from hell’ killed the industry.
While the unions and workers have only themselves to blame, the situation was not helped by a government in Canberra that believed the mining boom meant we did not need a motor industry. In addition, as I describe below, both General Motors and Toyota in Australia were hit hard by the so called “free trade” agreements with countries like the US and Thailand.
All three motor companies had what I called at the time ”industrial agreements from hell” in which not only were there generous wages but, more disastrously, the unions, not the mangers, controlled the shop floor.
In June 2013, I wrote these words: “Make no mistake, General Motors in the US is not bluffing. If there is no new labour agreement with its Australian workforce within six weeks then Australian manufacturing will cease.”
The then-GMH Australia managing director Mike Devereux had made this clear to an American Chamber of Commerce luncheon in Melbourne. Unfortunately the workers and the unions preferred to lose their jobs rather than adopt modern work practices and return control of the shop floor to managers. Accordingly I was right. General Motors in Detroit made the closure decision some six weeks later but the announcement was delayed until December 2013.
The managers knew they would also lose their jobs and had fought desperately to convince the unions and workers that the axe was about to fall. After the six weeks deadline had passed they started to make progress but it was too late.
Why had the game changed? First the governments of both parties had subsidised motor making, understanding that in part they were covering the cost of the work practices. Second, the mining boom had boosted the dollar, making the cost of those work practices even higher but also leaving the Coalition less willing to subsidise. A series of unhelpful statements by the then-Treasurer Joe Hockey sent a message (probably incorrectly) to Detroit that he did not care whether General Motors in Australia shut or not.
In the case of Ford, the axe had fallen earlier and with no warning. Crazy Ford workers had actually gone on strike to get a similar “agreement from hell” to GMH. The Ford workers “won” but for both the foolish Ford managers and the workers, signing that agreement was their death warrant.
Toyota was more complex. The Japanese made a serious mistake in taking old-style, inflexible people from its Port Melbourne plant to the new plant in Altona. They foolishly signed an agreement, which gave vast areas of plant control to the unions
With the Ford closure and General Motors thinking about closing, Toyota started to ponder leaving Australia. Unbelievably the unions responded by going to the courts to block a vote on changes to rosters and holidays.
Toyota executives in Nagoya said: “Why should we have a fight with Australian unions?” It was clear in Japan that Australian workers did not understand what was happening in the world. There are lots of other countries where workers want employment.
To be fair, in the case of Toyota there were other factors.
The first Toyota closure reason was actually the so-called “free trade” agreements that Australia signed. Probably these agreements had more of an effect on Japanese executives in Nagoya than anything else.
The Japanese could not understand why we kept signing “free trade” agreements that were not free trade agreements at all. John Howard signed the Thailand free trade agreement, which allowed free entry of Thai motor parts into Australia but whacked huge tariffs and other restrictions on exports of Australian motor parts and cars into Thailand. We were conned.
General Motors in Australia complained that the so-called US “free trade” agreement prevented unfettered access of Australian cars to the United States. Conned again.
In 2013-14, the Japanese believed that the looming Korean — and indeed Japanese — “free trade” deals would see the Australian motor industry unfairly disadvantaged once again.
Australia could overcome the effect of these “free trade” deals with massive subsidies. The Japanese could never work it out and assumed that Australians were either stupid or did not want a motor industry.
There is no doubt the Japanese would never have invested in Australia had they known the dollar was to rise in the wake if the mining investment boom.
It should be remembered that industrial agreements like those in the motor industry were prevalent across Australia. Qantas, the building industry, the steel industry (BlueScope and Arrium) and the food industry all had them.
Qantas made itself a modern airline thanks to chief executive Alan Joyce and his chairman Leigh Clifford; BlueScope did a similar exercise with top managers while Arrium had to go broke to make the changes. Some progress has been made in food thanks to tough action by the main customers, the supermarkets, but there is further to go
In commercial building industry the government is trying the overcome weak managers via legislation.
The paradox in the motor industry is that whereas scale was the main problem plaguing Australian motor making for most of the industry’s life, by 2012-14 that was ceasing to be a problem thanks to robots and the need for smaller scale specialised plants. Our time had come but we were too silly to take advantage.
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While all of us feel sorry for the personal plight of the General Motors, Toyota and Ford motor workers, don’t forget that it was the attitude of the workers of 2012-14 and their unions that was the main cause of the closures. It is both a personal and national disaster.