Automotive component producers’ success in diversifying into other sectors defies the doomsday predictions for the industry, says director of the SA Centre for Economic Studies Michael O’Neil.
Speaking ahead of the release of the centre’s next economic briefing at the end of this month, O’Neil said the best and most competitive firms were already moving into other areas – ranging from defence and security systems to health and food production.
While acknowledging that help for workers losing their jobs as a result of the closure of car manufacturers was the top priority, he said assistance for SA auto component makers to diversify into new product areas or export markets should be priority number two.
“The way in which you offer it is not a handout to companies, but encouraging companies to apply for assistance funding where they say they have a business plan to move into providing products in another area,” he said.
“And [it should be] a commercial decision where they are putting in some financial capital as well. Here you assist companies that can demonstrate they have made a commercial decision, rather than just handing out money to keep them going for another year, like we have been for the automotive industry.”
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Although some predictions put total South Australian job losses as a result of the carmaker closures as high as 15,000 or more, the SA Centre for Economic Studies believes it will be closer to 5000 – working on the belief that not all automotive suppliers will close.
O’Neil said an article this week about the diversification of automotive parts supplier Bosch Australia illustrated the flaws in “doomsday” economic modelling. The Melbourne-based company had been at risk because of the closure Holden, Ford and Toyota, but has undergone major restructuring and investment in new technologies so that its local automotive division now represents only 10 per cent of its Australian business.
Many South Australian manufacturers had already diversified into other products and export markets, O’Neil said, citing Codan, Philmac and Sage Automation as examples. Others have been investigating new markets, with potential sectors including energy, “green” technologies, infrastructure, medical/health and food production.
“We have companies in South Australia that can become internationally competitive.
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“South Australia is very good at electronics.”
O’Neil said the diversification of companies was one reason – along with the growth of food-processing manufacturers and wine exports – that employment in manufacturing in SA had increased and could continue to do so, adding that the craft beer industry was an area offering excellent potential.
He believes there has been too much “scare-mongering”.
“It creates a negative culture; it worries people.
“It’s better to be illustrating that there is a positive future … but you need to face the reality that you have to help displaced workers find jobs.”
Editor’s note: a minor amendment has been made to this article to clarify that Codan and Philmac are not part of the automotive sector. Michael O’Neil intended them as general examples of companies that had diversified into other markets.
