New horizon for Australian manufacturing is there, if it can think global

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This was published 6 years ago

New horizon for Australian manufacturing is there, if it can think global

By Nick Toscano and Eryk Bagshaw
Updated

Rob Trubiani - or No.4, as they call him - sits in the driver's seat, eyes straight ahead. He courses off the bitumen onto an all-gravel track, charging at 135km/h, and getting even faster.

"For me," he says, loudly enough to be heard over the car's roaring engine, but completely calmly, as though he is sitting at a desk, "near enough is never good enough."

Trubiani is nicknamed No.4 because he was once rated the fourth-best driver in the country. He is also a brilliant vehicle-dynamics engineer, responsible for road-testing cars and fine-tuning the ultra-specific details of ride and handling performance.

And he is one of the about 1000 people who will keep working for General Motors Holden beyond next Friday (there will be nearly 6000 working across the dealer network).

The car he is driving is a Holden Commodore. But it's not for sale yet. Nor was it manufactured here in Australia.

The next-generation Commodore - a V6 all-wheel-drive - is the first-ever Commodore to be built overseas, in a factory in Germany.

For Australian-made cars, the end of the road is finally here. On Friday, October 20, the last remaining manufacturer, Holden, will shut its historic factory in Adelaide and mark the end of an extraordinary 90-year period of pride and prosperity.

"It's hugely significant," says Geoff Gwilym, of the Victorian Automobile Chamber of Commerce.

"The automobile is among the most complicated things to make, other than things that can go to the moon, and we were one of only 13 countries that could design and build them.

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"There is a reputation lost, and a loss of skills and capabilities, which is a real shame."

Rob Trubiani puts the new Commodore through its paces.

Rob Trubiani puts the new Commodore through its paces.Credit: Jason South

The manufacturing challenge

The manufacturing industry, once the titan of Australia's economic growth, is now a shadow of its former self. Since 2007, it has shed more than 132,000 jobs and gone from the single biggest contributor to the national economy to fourth, behind finance, construction and education.

"The cost to the economy will be multiplied many times the public investment we put into the industry in social security and social distress," says Labor's industry spokesman, Kim Carr

"The question is now how do you maintain skills levels and how do you secure participation in the global supply chain?"

With the closure of major auto-manufacturing plants, there will be a drastic reduction of Australia's future manufacturing capability, according to UTS professor Roy Green.

"Our research tells us that while 50 per cent of components suppliers will be out of business by the end of the year, 10-15 per cent will have successfully diversified into defence electronics, aerospace, medical technologies, renewable energy, as well as alternative car industry supply chains," he says.

Fairfax Media took a tour of the Lang Lang proving ground, which will remain part of Holden/GM's global network.

Fairfax Media took a tour of the Lang Lang proving ground, which will remain part of Holden/GM's global network.Credit: Jason South

Australia's national science organisation, the CSIRO, was envisioned by former prime minister Billy Hughes a century ago to "lead the manufacturer into green pastures by solving for him problems that seemed to him insoluble". It's now got an awfully large task ahead of it.

High labour costs, geographical remoteness, a small domestic market, a risk-averse culture, a segregated national agenda, a lack of infrastructure, the public's perception of a dying industry and a shortage of leaders are just a few of the hazards cited by the agency as impediments to Australia developing a manufacturing market.

But, just as globalisation has led to the industry's contraction, now, some say, it offers its greatest opportunity.

"Emerging economies in Asia and other developing regions are rapidly expanding the size of the consumer pool, adding an additional 1.8 billion people by 2025," the CSIRO's Advanced Manufacturing road map found.

Australia cannot compete on mass-produced products, but it can in niche, bespoke areas that appeal to the Asian middle class, like smart products on the "internet of things" - the smartphone-connected lock, for instance, or highly specialised medical products such as 3D printed organs used in transplants.

Our domestic market is simply too small to sustain industry. Exports are where survival lies, but we have been historically fearful of taking on local operators in their own backyards.

"Australia's strong fear of competition, particularly from local competitors, needs to be overcome in order to successfully operate in future global markets," the CSIRO warned.

"Only 16 per cent of Australian businesses have an innovation and outward-orientated culture," according to the Office of the Chief Economist.

"Australian manufacturing will need to undergo substantial cultural change in order to realise sustainable growth," the CSIRO said.

That innovation push must start in China, where the middle class alone is expected to rise from 300 million to 630 million by 2022, accounting for 45 per cent of China's population.

The man with the golden mics

The founder of Sydney-based Rode Microphones, Peter Freedman, says China has now become his biggest market.

Portrait of Peter Freedman, Founder of Rode Microphones, at its factory in Silverwater.

Portrait of Peter Freedman, Founder of Rode Microphones, at its factory in Silverwater.Credit: Wolter Peeters

"I don't have a fear of doing business, so I went for it. I knew I was onto a winner when I sold 100 microphones to a store in LA," he says. "You can't sell LA anything, they buy finished products for less than you can buy the parts for, now we are selling in 116 countries and growing."

It nearly didn't happen. Two decades ago Freedman was newly married, had two kids to support and had just lost his house.

"I had to walk to work because l couldn't afford a car," he says, "which was good because I was a fat bastard and wanted to lose some weight."

Freedman took one last gamble before he was going to give up his family's sound company for good, the audio entrepreneur bet it all on parts for 500 microphones from China.

This year he says he will sell 1.7 million.

"When I kicked off I had a $20 drill and three people, now we have got hundreds," he says. "Because we've built everything in-house, we've now got a good barrier to entry, you wouldn't take us on."

Minister Michaelia Cash is more optimistic about the industry's future.

Minister Michaelia Cash is more optimistic about the industry's future.Credit: Alex Ellinghausen

Employment and acting industry minister Michaelia Cash is bullish about the industry's prospects, with people like Freedman leading the way for new, niche manufacturers, and the yet-to-be-budgeted Australian Space Agency opening up new opportunities.

She cites the latest figures from the Australian Bureau of Statistics, which showed - for the first time in nearly a decade - manufacturing actually added jobs to its workforce, rising by more than 14,000 workers since May 2016.

"Government had invested a lot by way of subsidisation in [automotive manufacturing] for a very, very long period of time," she says. "Australia has transitioned before, and we will do it again."

Retuning our carmaking future

Gone will be the days of our vast car-making plants, once beating hearts of industry, crawling with generations of blue-collar workers.

But what will remain in Australia is a lesser-known but very important side of the global automaking economy: teams of highly specialised designers and engineers working on things like calibration and tuning, building global show cars and thinking up exciting concepts for the cars of the future.

For many of the world's best-known car companies, automaking has become a truly global operation and, in that context, Ford and General Motors have decided to retain on-the-ground workers at multiple locations across Victoria in order to remain a vibrant part of it.

One of these sites is the top-secret proving ground at Lang Lang, south-east of Melbourne, home to GM's "global product development team". Here, crews work on the next wave of vehicles, and carry out thousands of tests on dozens of different models for GM's domestic and overseas brands each year: Cadillacs, Buicks, Chevrolets, Opels and Holdens.

Emissions Contoller Robert Acs works in a testing bay at minus 30 degrees at Holden's Lang Lang facility

Emissions Contoller Robert Acs works in a testing bay at minus 30 degrees at Holden's Lang Lang facilityCredit: Jason South

"We had to completely retune suspension and steering," says Trubiani of the next-generation Commodore, as he continues driving it extremely fast around the circuit.

"This car didn't handle anywhere near as well as it handles now."

Many of the products now being worked on at Lang Lang began as thought bubbles inside a gleaming studio occupying what was once the drafting floor at Holden's decommissioned Port Melbourne plant.

There a team of 150 people, mainly industrial designers, is run by a man named Richard Ferlazzo.

He appears from the elevator wearing a black suit, a silver pendant of the Holden lion fixed to his lapel. To the side of where he is standing is a large window with a wide view of the outside: Holden's old factories, industrial fans and rows of disused smokestacks.

It's a vista in stark contrast to the inside of this building, which is ultra-modern. The floor is filled with galleries of concept cars, scale models and prototype models. The rooms all around are Ferlazzo's studios, filled with cutting-edge equipment, fabricators in black T-shirts and secret cars they are working on.

Richard Ferlazzo, Holden GM's director of industrial design, will continue to lead a team out of the company's Port Melbourne HQ working on international prototypes.

Richard Ferlazzo, Holden GM's director of industrial design, will continue to lead a team out of the company's Port Melbourne HQ working on international prototypes.Credit: Jason South

"It may not make sense economically to make cars in this country anymore," Ferlazzo says, "but it absolutely makes sense to design and engineer them here, because we have that skillset, developed over many decades, and Australian designers are well-revered around the world."

Perched high on a wall in one of the rooms are five clocks, showing the times in Melbourne, Detroit, Seoul, Shanghai and Russelsheim.

General Motors, Ferlazzo explains, is a worldwide operation, and this studio an integral part. It's one of a network of GM design hubs in Detroit, Los Angeles, Brazil and the Asia Pacific region. But Melbourne is the only one outside of Detroit that is capable of developing a concept car from scratch and taking it through to fabrication.

"Going from a clean sheet of paper to presenting it at a motor show, the entire process," he says. "And we remain one of the main design studios for General Motors, designing cars for all of its brands."

Eric Huang uses virtual reality goggles to help design car interiors at Holden's Port Melbourne plant.

Eric Huang uses virtual reality goggles to help design car interiors at Holden's Port Melbourne plant. Credit: Jason South

Holden's design and engineering divisions will retain more than 300 local staff. Ford is keeping even more, with more than 1100 employees across sites in Broadmeadows, Geelong and its proving grounds in Lara.

"We've got plenty of work to do," says Dave French, Ford's Asia Pacific programs director, "a full book of work that goes out for many years."

Australian technical staff will remain responsible for Ford's global Ranger and Everest vehicles, which are sold in 199 different countries.

"In Australia, we have the suite of product development capabilities," French says, "a fully functional design studio that can take ideas and turn them into virtual and clay models, we have engineering which can take the designs and concepts."

Industry leaders in Australia say the decision to retain local design and engineering was a "recognition of Australia's prowess".

"I think it's commendable that the manufacturers have decided to do that, Gwilym says, "and I hope it's a long-term strategy not a short-term one."

Plugging into a new economy

The end of Australian carmaking, it must be said, does not spell the end of the automotive industry here as a whole.

An industry report, released this year, forecast that the sector would remain robust, with more than 68,000 automotive retail, repair and services businesses that will be untouched by the plant closures and their flow-on effects.

Certainly, the industry will downsize somewhat. It currently employs 379,365 people, which, over the coming three years, is forecast to shrink by 15,000.

Electric cars are part of the design revolution in automaking.

Electric cars are part of the design revolution in automaking.Credit: Pat Scala

The industry's $37.1 billion contribution to Australian GDP (2.2 per cent) will downsize by about $2 billion.

More change, however, is on the horizon: electric cars, connected cars and eventually autonomous, self-driving cars are now inevitable.

Of the 1.1 million cars sold in Australia last year, the numbers of hybrid and electric car sales barely made up 1.5 per cent. But change, many believe, is coming fast.

China has plans to scrap petrol-powered engines altogether, by as early as 2030. General Motors has revealed plans to launch 20 new all-electric vehicles by 2023.

"Our chairman talks about the industry changing more in the next five years than the past 50 years," says Mark Bernhard, GM Holden's managing director. "It's an exciting time to be in the auto industry."

Gwilym says the gradual shift towards electric cars meant it was possible that Australia might one day re-enter auto manufacturing.

"As we enter into a broader consideration around electric vehicles, we should also think about how you should build vehicles that don't have internal combustion engines," he says.

"It would be a niche market - low numbers, high quality - but I wouldn't rule out Australia ever making cars again."

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Dave Smith, of the Australian Manufacturing Workers Union, agrees it's a possibility.

"You never want to say never," he says.

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