This article originally appeared in The New Daily on February 11, 2014, here.
There is a lot of hand wringing and finger pointing regarding the collapse of Australia’s car manufacturing business. But in all this finger pointing, is Australia missing a positive way forward?
Rather than cry over the spilt milk of a lost car industry, could Australia be a vital component manufacturing industry and a vibrant design hub instead? Could we perhaps expand our high end component manufacturing instead of trying to build entire cars? Have other advanced economies done this?
Switzerland has an economy that has a higher cost base than Australia and a currency that grew faster and stronger than the Australian Dollar since the GFC (with the Swiss Franc nearly 28% higher against the dollar than early 2008) – yet Swiss high quality, high end and high margin manufacturing industry not only thrives but grows.
Indeed according to the Swiss Chamber of Commerce and Industry, Industrial production is now more important to the Swiss economy than banking (see http://www.sccij.jp/news/overview/detail/article/2013/05/06/switzerland-manufacturing-bigger-than-banking/)
The survival of Swiss industry is based on a formula that has worked very well: build specialized products such as motors, turbines, and watches; guarantee the delivery date; offer the necessary financing through an efficient banking network; provide effective after-sales service; sell the product all over the world and thus achieve economies of scale.
Switzerland does not beat itself up about not having a Swiss made car brand (the Smart is a small niche and recent invention in partnership with German based Mercedes Benz). Instead the Swiss are happy that there is hardly a top end car in the world that does not have with in it Swiss made vital components.
Can Australia learn from Switzerland, a landlocked country, further from the booming Asian markets, more expensive than Australia but somehow thriving in manufacturing?
Could Australia do this? Did you know that for a long time most BMW wheels were made in Tasmania, back in the days when Tasmania led the world in niche alloy manufacturing and aluminum welding? But no, Australia did not celebrate the island state’s success. Tassy only manufactured wheels, but Victoria made cars.
Australia should not let its component industry die. Rather lets support those components that are high end and high cost and support the creation and marketing into new territories. Like Switzerland, Australia could become a high quality producer, if only we focus on quality, flexibility and productivity.
What about design? When Mike Deveraux announced Holden’s end to production, and politician after politician lined up to chastise him, did anyone ask him for his alternative view? When I was CEO of Committee for Melbourne I asked Deveraux for his long-term vision for Holden. He said to me “what is wrong with ‘designed in Melbourne, built in the world’?”.
Deveraux outlined his vision for Holden Fisherman’s Bend to be one of the three main design hubs for General Motors globally. It would have made Melbourne critical to GM around the world. Deveraux’s vision was to work with authorities and redesign Fisherman’s Bend in Melbourne to be a cool place to live and a cool place to work.
In many ways his vision was to take Fisherman’s Bend ‘back to the future’. The suburb was designed originally to be the dormitory suburb for those working in the factories there. As the suburb gentrified, the Holden workers were priced out and many ended up commuting daily from Dandenong. But the gentrification made the suburb cool and could attract the designers and artists necessary for a thriving design hub.
When in 2010 we at the Committee for Melbourne raised the prospect of re-developing Fisherman’s Bend and took this idea to the Brumby and then Baillieu Governments. We received a good hearing. But when the redesign for Fisherman’s Bend came out it specifically excluded areas occupied by Holden.
At CfM we organized for the Holden Government Affairs staff to meet Minister Guy’s staff. We strongly supported the ‘designed in Melbourne, built in the world’ concept. It would give Melbourne and Australia great relevance and a high employing industry.
But the government failed to listen and stuck to the government view didn’t want to spook Holden away from manufacturing. Melbourne lost manufacturing and lost the opportunity to build a new suburb hand in hand with a global company that would have made it one of its three most important design hubs. An opportunity was lost.
Australian governments and Australian people have been so fixated on having an entire Australian car industry, that the country may have let slip the opportunity to be a vital part of a global industry in design and component manufacturing.
Australia should not fight the losing battle for an entire small cake, rather the country should fight for a good slice of a very big one instead. The country, so strongly against population growth, needs to recognize it choses to be a small domestic market. The only way its industry will survive is to be high quality, cost competitive and work much harder on niche marketing globally.
The Swiss have done it, why can’t the Aussies?