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Library Fellowship Paper - Transition to Where

Introduction

The demise of car manufacturing in Australia is a highly significant moment in the country's economic and social history. From late 2017 onwards, Australia will become the only G20 nation, other than Saudi Arabia, which does not host domestic car manufacturing operations. Consequently, Australia is in the middle of a transition within manufacturing, as domestic car manufacturing operations wind down. While domestic car production volumes have been falling for many years in Australia, the current transition commenced with the May 2013 announcement by Ford Australia that it would cease car manufacturing by October 2016, primarily affecting operations and employment at its Broadmeadows assembly factory in Melbourne's northern suburbs and its engine and stamping plants in Geelong.

This was followed seven months later, in December 2013, by General Motors Holden's (GMH) announcement that it would cease car manufacturing by late 2017, primarily affecting workers at its Elizabeth assembly plant in South Australia and its engine plant at Port Melbourne, which is due to close by December 2016. Finally, in February 2014, Toyota Australia—the largest domestic car manufacturer—announced that it, too, would cease car manufacturing at its Altona plant in Melbourne's south-western suburbs by late 2017. These decisions have effectively sealed the coming end of car manufacturing in Australia.

There have been numerous claims about the negative impact of these decisions from sections of government, business, trade unions and academics. Claims have focused on various aspects of the transition away from car manufacturing, such as the impact on economic output and manufacturing as well as the impact on technology, product innovation and workforce skills, on the employment prospects and wellbeing of retrenched workers and on economic activity, living standards and social cohesion in closure-affected regions.[footnote 1]

Impact on the workforce

There have been numerous claims about the number of workers likely to be retrenched as a consequence of these closures. Ford Australia previously stated that its cessation of car manufacturing will likely affect up to 1,200 workers, including about 650 workers in Broadmeadows and over 500 in Geelong.[footnote 2] This total also includes 300 workers who took redundancy packages in June 2014.[footnote 3] However, the company is retaining significant employment in research, testing and design, including at its You Yangs Proving Ground north of Geelong. In mid-2016, Ford announced its plans to forestall a significant minority of redundancies by retaining workers in product development roles until June 2017, with the possibility of further extensions.[footnote 4]

Prior to its December 2013 closure announcement, GMH claimed a national workforce of about 3,660 (not including dealerships), including 1,900 in Victoria.[footnote 5] Most of its South Australian workforce (1,760) will be retrenched and close to 200 workers will be retrenched from its Fisherman's Bend engine plant in Port Melbourne. However, GMH will retain a workforce at its GM Australia Design Centre in Melbourne and its proving ground at Lang Lang, nearly 100 km south-east of Melbourne.

Prior to its February 2014 closure announcement, Toyota claimed a national workforce of around 4,000, including 2,500 directly employed in manufacturing. Toyota is the largest domestic manufacturer, representing 46 per cent of domestic car production volume and 74 per cent of export volume in the year prior to the first closure announcements. Australia is significant as the first Western country to produce Toyota vehicles, back in 1963.[footnote 6] Over 2,500 workers will be retrenched by the company, overwhelmingly from its Altona plant when it closes in late 2017. However, Toyota says it will retain a workforce of around 1,300 at its national headquarters in Port Melbourne.[footnote 7]

Thus, a reasonable cumulative estimate for direct job losses for car manufacturing employees is 6,000-7,000, including up to 5,000 in Victoria or about three-quarters of the projected national total.[footnote 8] However, it is more difficult, and has proved to be more controversial, to calculate the indirect job losses as a consequence of the closures. Most workers in the car manufacturing industry are employed in the supply chain rather than directly employed by the carmakers. The automotive industry is complex and multi-layered, with the main branded manufacturers like Ford, GMH and Toyota—known as Original Equipment Manufacturers (OEMs) in industry parlance—purchasing and subcontracting components from a wide range of manufacturers. These companies operate in different 'tiers', with OEMs purchasing primarily from tier-1 manufacturers, who purchase from tier-2 manufacturers, who purchase from tier-3 manufacturers, and so on. Hundreds of companies are locked into commercial relations with OEMs who operate as global production networks (also known as global value chains).[footnote 9] The presence of an OEM in a region has a major influence over manufacturing and employment trends, due to its demands for design and engineering specifications, technology standards and product quality. In recent years, the three Australian-based OEMs have sourced 30­-50 per cent of their components from Australian-based suppliers.

Estimating job losses in the supply chain is difficult because many suppliers also manufacture products for companies in other industries, while others have tried to diversify their product base so they will be less reliant upon demand from carmakers. In Victoria, some data already exists which suggests that the majority of suppliers will not be cutting jobs, although nearly half of smaller firms (tier-3 and tier-4) had not been contactable to government at the time of writing. While some suppliers have closed already and many are likely to close in the coming 12 months, others will continue operations and remain financially viable. Of these companies, some are likely to lay-off workers as car-related orders atrophy. Despite the challenges of measurement, there are various estimates of cumulative job losses that take supply chain effects into account. The most widely-cited arguably comes from the Productivity Commission's 2014 report into auto manufacturing which claimed an 'upper bound estimate' of 40,000 direct and indirect job losses nationally by 2018. This assumes that 80 per cent of OEM employees and 40 per cent of components manufacturing employees across 160 companies will lose their jobs.[footnote 10] The peak auto industry body, the Federal Chamber of Automotive Industries (FCAI), put the total estimate at 50,000 job losses.[footnote 11] Another publicised figure by South Australia-based researchers is 198,826, including 98,483 in Victoria,[footnote 12] although this figure has been criticised as an exaggeration by industry advocates.[footnote 13]

In this report, the true figure is assumed to lie between these estimates. An estimate of 40,000-50,000 is reasonable, although it is entirely possible that the cumulative impact on retrenchments will be higher than this.[footnote 14] Of this, some have suggested that up to 25,000 job losses—at least half of the national total—are likely to occur in Victoria by 2018,[footnote 15] although the significant number of suppliers claiming they will retain workers suggests that local job losses may eventually be lower than this.

Whichever figure is accepted, it will be difficult to quantify the exact impact over time due to the complexity of linkages between auto manufacturing and other economic and social activities. As Craig Ondarchie, Shadow Minister for Investment and Jobs, has stated:

I think there needs to be a broader appreciation of what the automotive manufacturing market means. When I have talked to people in the past, they often quote the number of employees at Ford, [footnote GMH] and Toyota. But we know the industry extends much further than that. It extends right throughout the supply chain and to… ancillary services; like the people who cut the grass at the Ford plant, like the people who run the industrial café in the supply chain precinct [footnote and] people who are consultants. [footnote It includes] the broad range of people who support that industry who may not be directly connected to the supply chain. I don't think there's a full appreciation of what the full impact is going to be.[footnote 16]

The need for longitudinal research

A key claim of this report is that policymakers should focus on the quality-of-life issues that threaten to emerge or worsen in closure-affected communities. This, it argues, is a more important question than the debates about the exact number of job losses likely to occur. Central to this concern is the quality of work that retrenched workers move into as part of this transition. Grappling with this problem will mean studying and gathering data about affected workers, businesses and communities over several years. While the impact of industrial decline, factory closures and mass retrenchments have been extensively studied in Australia and globally,[footnote 17] there are relatively few studies that utilise a longitudinal research methodology—i.e. researching a site multiple times over many years.[footnote 18] Arguably, the best examples of longitudinal projects on retrenched workers and industrial transformation in Australia are studies of the Textile, Clothing and Footwear (TCF) industry[footnote 19] and the 2001 collapse of Ansett Airlines.[footnote 20]

While these are highly valuable studies, we cannot rely upon them to predict the future for people affected by the current transition in the automotive industry. This is for three reasons. First, the occupational and skills profile of auto manufacturing is different from previously-studied sectors. For example, TCF workers are historically more likely to be female, with fewer formal skills. Auto manufacturing is male-dominated and involves a mix of highly-skilled, semi-skilled and less-skilled workers. While there are skilled tradespeople employed in the airline industry in maintenance roles, like the auto industry, most workers in that sector are engaged in service-based or white-collar roles. Second, the geographical profile of workers varies between industries. The decline of the TCF industry affected workers who were broadly dispersed across many urban and semi-rural regions. In contrast, employment in auto manufacturing tends to be heavily concentrated in fewer regions. In Victoria, this is primarily in four regions: the southeast suburbs of Melbourne (especially in Dandenong); the northern suburbs nearby the Ford Broadmeadows plant; Geelong; and the western suburbs of Melbourne nearby Toyota's Altona plant, although there are also some auto supply chain jobs in smaller regional areas.

The final reason why we need longitudinal observations of the current transition is that economic circumstances at a national and a regional level have significantly changed in the decade since the last major closure in auto manufacturing (Mitsubishi). When Mitsubishi closed in Adelaide, some workers were able to find new jobs in auto manufacturing—such as GMH in Elizabeth—and, moreover, general economic conditions, especially growth and employment, were far more vibrant. While the car manufacturers will retain many jobs and some components manufacturers will continue operations through diversification, redeployment within the auto industry is a far less likely option for retrenched workers today. In total, manufacturing employment in Australia declined by 17 per cent in the period from 2005 to 2015.[footnote 21] Thus, we should not assume that retrenched workers will undertake a transition similar to those workers who lost jobs in previous closures.

Accordingly, this report should be seen as part of a longitudinal study on the auto industry transition in Victoria. As well as the policymakers and program managers interviewed for this report (24 in total), this project uses preliminary data from a longitudinal study of union members in the Victorian auto industry. This project began with a representative sample survey of 400 workers in August/September 2016 (see Section 3 below). In addition to tracking the progress of these workers, in terms of future employment and well-being, the project will analyse the evolution of components manufacturing in three closure-affected regions (Melbourne Southeast, Melbourne North and Geelong). The project will also trace the evolution of transitional policy assistance for businesses, workers and communities in these three regions. Ongoing studies of the policy transition will document and analyse the design, implementation, evolution and effectiveness of Federal Government and Victorian Government policies in these regions as well as the role of cooperation and policy facilitation between federal, state and municipal levels of government.

This report represents an initial intervention as part of this broader project. It is based primarily on interviews with key individuals involved in policy design and implementation at all three levels of government in these closure-affected regions, although it also utilises some preliminary results from the recent survey of auto manufacturing workers. This introductory section outlines the broad impacts on the workforce, the need for longitudinal research and clarifies some definitions. Section 1 offers a brief outline of the policy response of governments at a Federal and Victorian Government level to the challenge of the auto industry transition. Section 2 looks in more detail at assistance from government for auto components manufacturers. Section 3 focuses on the transitional policy mix for auto manufacturing workers. Section 4 looks at place-based assistance for closure-affected regions in Victoria. Section 5 explores the strategic position of manufacturing in transitional policy design before, in the final section, the report is concluded with thoughts about a 'successful' transition for Victoria.

Sections 2-5 conclude by offering key questions for discussion. While these questions will hopefully provoke thought among all readers, they are offered especially to assist those involved in transitional policy design and legislation to critically reflect upon the usefulness of intended outcomes, upon any gaps that may emerge between policy design and policy implementation and to acknowledge and reflect upon the underlying assumptions embedded in the policy design process.

Before outlining the broad policy approach available at a federal and state government level in Victoria, it is necessary to clarify some of the terminology used in this report and by stakeholders engaged in the transitional policy conversation:

What does 'transition' mean?

As a noun, 'transition' is a 'passing or passage from one condition… to another' or, simply, a 'change'. As a verb, the term refers to an action 'to make or undergo a transition' or, variously, 'to change over', 'switch' or 'to convert'.[footnote 22] As a noun, the concept of transition in the auto industry implies relative passivity—that an economic and political process is happening to or forced upon affected individuals, families and communities. Arguably, this usage also implies that this process is relatively path dependent—that, once the transition begins, it follows its own inexorable logic towards a given outcome.

As a verb, transition implies that there is a process underway in which people and institutions intervene within a sector or region (or both) in order to influence outcomes. This usage is arguably more dynamic because it suggests that, once transitioning has commenced, there will be a period of time—or a window of opportunity—in which further interventions can be made in order to modify or even reverse the effects of past actions. It also implies that people and institutions directly affected by change have an active interest in outcomes and are themselves capable of influencing the process of transition. At the same time, due to unequal access to economic resources or social and political power, some people and institutions are more capable of influencing this process than others. This usage equally assumes that, while individuals can influence events, their actions are shaped and constrained by the consequences of past interventions.

One finds examples of both uses of the term in the ongoing dialogue about the auto industry transition. Despite the overall decline in manufacturing output as a share of total economic output and employment in recent years and the cessation of car manufacturing, 'transition' is the term used in this report as a more generic alternative to the concept of 'industrial decline'. As argued by George Osborne, Manager of Economic Development at Hume City Council, a Local Government Area affected directly by Ford's closure of car manufacturing at its Broadmeadows plant:

[footnote Industrial decline is] the headline grabber, that's the dead body in the middle of the street. But I'm not sure it accurately or fairly or usefully [footnote describes] what's actually happening. It's a dramatic transition. But I'm not sure that term is correct. It [footnote reflects] too [footnote much] doom and gloom.[footnote 23]

Transitioning also involves multiple actors and levels of analysis. As reflected in the structure of this report, there is transitioning at the level of:

§ business: for auto components manufacturers whose businesses have been affected by the cessation of car manufacturing. Possible outcomes include workplace closure, diversification or continuation of existing operations due to past diversification.

§ workers: for auto manufacturing employees whose livelihoods are affected, as well as their family members and social networks. Possible outcomes include re-employment, education, retirement, leisure, self-employment or a combination over time.

§ regions: for regions or places where there is a concentration of businesses and people affected by the closure of car manufacturing. However, as argued in Section 5, there is no singular 'regional interest'. While people and institutions with different and, sometimes, conflicting interests can act within specific regions and can influence the process of transition, regions themselves do not act.

§ policy: for specific levels of government, for policymakers and for program managers, there are various options which can assist the transition of businesses and workers based in particular regions towards stated goals and objectives.

What is the 'automotive industry'?

This question is deceptively simple. Whereas much of the popular narrative about the auto industry transition phrases the carmakers as 'leaving' Australia, the reality is that all three carmakers will remain in Australia and retain significant workforces in Melbourne and the Geelong region after 2017. In this report, the idea of a transition refers specifically to the process instigated by the decision of the carmakers' global parent companies to cease car manufacturing and assembly operations. But car assembly and related operations like engine manufacturing, chassis and components casting and stamping is just one—albeit critically important—section of the industry. OEMs in the auto industry, like Ford, GMH and Toyota, tend to dominate global production networks in which they exert control over the entire process of production and distribution, from initial conception and design through to final use by consumers.

The auto industry thus includes the development, research and design of vehicles and automotive products, the manufacturing of specific components and final assembly, the marketing, sale and distribution of motor vehicles, as well as the design, manufacture and sale of direct-to-consumer parts and accessories via the aftermarket. Equally, the idea of 'motor vehicles' is often used as a proxy for passenger cars, though on a global level it also includes motorcycles, scooters, three-wheeled vehicles, tractors and other agricultural vehicles, military-grade and off-road vehicles and truck and bus manufacturing. Some of these global activities are also based in Australia. To take two examples, in Melbourne, truck manufacturing facilities continue to operate in Dandenong (Iveco) and Bayswater (Kenworth). While the cessation of passenger car manufacturing is highly significant, it is important to note that this is not the same thing as the car companies 'exiting' Australia.

What is 'diversification'?

As outlined below, one of the key industry and policy questions in the current transition concerns the idea of diversification. Like 'transition', diversification can be defined as a process that happens over time (noun) or as an act with the aim of transforming practices (verb). Within dialogue about the auto industry transition, the term is generally used in one of three ways. Firstly, companies can diversify their customer base by seeking new markets or new clients. Companies can be incentivised to diversify by market signals or government policies that encourage them to invest the time and money needed to research and investigate new markets or products. Secondly, diversification can take on an inter-industry connotation by companies diversifying their customer base to markets or clients in new or different industries. If a sufficiently large number of auto components manufacturers act in this way, then we can talk of a section of the auto industry diversifying into non-automotive industries and global production networks.

The third use of the term refers to the diversification of regional economies. In this usage, diversification refers to a process of structural economic change in which the proportional contributions of broadly-defined economic sectors (manufacturing, services or agriculture) to regional economic output and employment adjust over time. One can think of this structural economic change occurring on a broader national level, such as the historical decline of manufacturing relative to services in the Australian economy as a whole. However, the regional dimension is critical in the case of the auto industry transition. Regional adjustment funds at both a Federal and Victorian Government level have been designed in recent years with a core assumption that output and employment growth should be encouraged in multiple sectors—not just in manufacturing—and, moreover, that industry and employment policy can help to diversify economic activity in defined regions.

In addition, policy development at both levels of government has identified specific industries to facilitate. Most recently, the Federal Government has identified strategically important 'future industries' as part of the Commonwealth Growth Fund established in response to the auto industry transition. Similarly, the Victorian Government recently established a Future Industries Fund to encourage investment in defined areas of the state's economy (see Section 4). It is important to recognise that the first two uses of 'diversification' above primarily assume that manufacturing is and should diversify. However, the third use of the term implies a broader concept of regional and structural economic change in which there can and, perhaps, should be diversification away from or beyond manufacturing as well as within manufacturing (see Section 5).

 

 

1. The role of government in industry transitioning

The Federal Government policy agenda

Ford Australia's May 2013 closure announcement occurred in the final year of the Gillard Labor government, which orchestrated the initial policy response. This included regional adjustment funds for the closure-affected regions in Melbourne's northern suburbs and the Geelong region, implemented in collaboration with the Victorian Governments and several local governments (see Section 4) alongside continuation of the Automotive Transformation Scheme (ATS). The ATS was originally designed by the Rudd Labor government under the Automotive Transformation Scheme Act 2009 in order to maintain car manufacturing in Australia by subsidising car and components manufacturers' investment in plant, equipment and, especially, Research and Development (R&D). In 2011, the Federal Government budgeted $2.5 billion until 2020 under the ATS.

In September 2013, the Abbott Coalition government was elected, initially planning to cut $500 million from the ATS budget, and initiated a Productivity Commission enquiry into government assistance for the Australian auto industry.[footnote 24] The appropriate funding level for the ATS became a controversial political issue which was exacerbated by GMH's December 2013 closure decision. Toyota's February 2014 closure announcement, which heralded the coming end of car manufacturing, came during the Productivity Commission's enquiry and less than two months before its final report was submitted to the government. In 2014, policies previously based upon ATS efforts to retain car manufacturing operations in Victoria and South Australia now shifted towards Federal Government management of the transition toward car manufacturing's cessation. While the Abbott Coalition government continued the regional adjustment funds in Melbourne's north and Geelong, it did not extend similar funds into regions affected by the GMH and Toyota decisions.

The Federal Government's policy response was represented by the Commonwealth Growth Fund, which is comprised of different schemes designed, variously, to assist the transition for auto workers, subsidise product and market diversification by auto components manufacturers and stimulate innovation-based economic activities, primarily outside the auto industry, in Victoria and South Australia.[footnote 25] In total, the Growth Fund represents $155 million of investment and potential investment,[footnote 26] including $101 million from the Federal Government, $15 million each from GMH and Toyota and $12 million each from the Victorian and South Australian governments. The various elements of funding under the Growth Fund include: $20 million for the Automotive Diversification Program (see Section 2); assistance for workers, based on $15 million from the Automotive Industry Structural Adjustment Program administered via Jobactive providers and $15 million each allocated by GMH and Toyota under the Skills and Training Initiative to assist their employees with retraining and reskilling (see Section 3); and $90 million allocated to the Next Generation Manufacturing Investment Program to subsidise private sector investment in high-value manufacturing in Victoria and South Australia (see Section 4).

The Victorian Government policy agenda

The Victorian Government was centrally involved in the Federal Government's response to the three closure announcements, initially under the Napthine Coalition government which worked with the Gillard Labor and Abbott Coalition governments through the regional adjustment funds in Melbourne's north and Geelong and the Growth Fund's framework for assisting retrenched workers. Elected in December 2014, the Andrews Labor government continued this engagement with federal initiatives and, in December 2015, announced a transitional policy, known as Towards Future Industries: Victoria's Automotive Transition Plan.[footnote 27] Part of a broader agenda for encouraging employment growth via the Back to Work Act 2015 and investment growth in strategically-targeted industries, the plan allocated over $46 million to the auto industry transition, including $5 million for the Automotive Supply Chain Transition Program to assist diversification among auto suppliers (see Section 2).

The plan also includes $33 million allocated for new regional adjustment funds—the Local Industry Fund for Transition (LIFT)—to succeed, modify and extend the soon-to-finish federal/state-established adjustment funds in Melbourne and Geelong (see Section 4). The LIFT program extended this funding to Melbourne's western and southeast suburbs which were not previously part of this regional response. In the southeast, an additional $8.4 million was allocated as part of the Auto Transition Plan to assist workers with skills, training and job seeking in this previously-neglected region (South East Automotive Industry Transition package, or SEAT). Finally, the Andrews government announced a system of wage subsidies under the Back to Work Act to include payroll tax concessions of up to $7,000 for employers who hire retrenched auto workers and an additional incentive to provide these workers with new training. This approach runs parallel with existing wage subsidies provided by the Federal Government via the Jobactive system, including higher subsidies aimed at encouraging employers to hire workers aged 50 or over. This policy is relevant to auto workers as many are in this age category—for example, the average age of workers in the ACU project on trade union members in the auto industry is 50 (n = 385) (see Section 3 below). More recently, the Victorian Government has extended the Jobs Victoria Employment Network (JVEN) to retrenched auto manufacturing and supply chain workers.

The Victorian Government's policy response has attracted some criticism from the Opposition. For example, Craig Ondarchie has argued:

I think it's a little too late. One of the challenges that the Victorian government will have to deal with [footnote is] a tsunami of employees who are going to be out of a job. I don't think they fully appreciate what that means.[footnote 28]

On the other hand, the plan has been framed as a 'whole-of-government response' by a senior Victorian public servant interviewed for this report:

Clearly we have a dedicated response [footnote to the auto industry transition] which involves a significant number of people… A whole industry [footnote is] going. That distinguishes it from just an individual company closing which might affect a few hundred people who could reasonably be expected to cope with the usual support mechanisms through to other employment.[footnote 29]

In summary, the policy response to the auto industry transition by successive Federal and Victorian Governments appears to be broad and comprehensive. However, discussion and debate about the composition, design and implementation of these policies is ongoing, especially among key stakeholders in closure-affected regions. The remainder of this report looks in more detail at key policy areas targeting manufacturers, workers and regions. The aim of each section is to pose critical questions that arise from ongoing debate and discussion rather than to advocate for any particular policy view. In some cases, however, possible gaps and shortfalls in policy design or implementation might encourage stakeholders and decision-makers to re-evaluate and, potentially, modify previously-held views and assumptions.

Finally, it is worth noting what the report does not do: it does not delve into prior debates about industry policy or the underlying reasons that caused the three carmakers to wind-down car manufacturing.[footnote 30] Rather, it takes these decisions as given and focuses on the auto industry transition and its impact on business and workers. Nor does it attempt to offer a historical (i.e. pre-2013) or comparative analysis with other regions experiencing 'industrial decline', whether globally or in Australia, including Adelaide's northern suburbs where GMH's Elizabeth plant is set to close. Nor does it claim to draw information from an exhaustive list of stakeholders and research participants. The report draws primarily upon interview material from policymakers and program managers at a federal, Victorian and a municipal government level in three closure-affected regions (Melbourne's southeast, north and Geelong) (see references for full list). Of course, there is much to learn from key stakeholders outside government, some of whom have been included in this report although many more—including employers, trade unionists and other community organisations—will be the subject of future research. In addition, the report draws upon some initial preliminary data from a major survey of trade union members in the Victorian auto industry, conducted in August/September 2016.

2. Assistance for Automotive Manufacturers & Suppliers

One conservative, Australia-wide estimate is that at least 160 separate auto components manufacturing companies will be affected by the transition.[footnote 31] As argued above, the auto supply chain is highly complex and based upon companies in multiple tiers. Consequently, there are a wide variety of auto supply companies, which are differentiated by their relationship to client firms in different global production networks, by product type, level of diversification and ownership structure ­as well as other variables, like sales and employment levels. Some suppliers are large captive operations with strong global reliance on a single OEM customer operating within a single global production network. These companies are likely to close local manufacturing operations when car manufacturing ends.

Other components manufacturers are similarly large, transnational companies in their own right but operate as independent suppliers with a more diverse client base. Bosch Australia based in Clayton in southeast Melbourne, is one such example. Bosch is a subsidiary of the German engineering conglomerate, Robert Bosch GmbH and, in addition to supplying various automotive products to car manufacturers, also makes household appliances, power tools, heating systems, security systems, building ventilation, engineering services and software products.

Several local suppliers have already succeeded in diversifying their production and client bases over several years. Many already manufacture a range of non-automotive products, such as:

§ Hella, based at Mentone in southeast Melbourne and part of a German parent company, which manufactures lights for mines, commercial builders and street lighting as well as car lighting for Toyota;

§ Backwell IXL, a Geelong-based Australian company, which also supplies products in the solar energy and building industries as well as for Ford and Toyota;

§ Socobell, an Australian plastic injection moulding manufacturer based in Melbourne's west, which has diversified into medical instruments and consumer products; and,

§ Venture DMG, a plastic parts manufacturer with Victorian sites in Keysborough (southeast Melbourne) and Campbellfield (Melbourne north) that has also shifted into building products and shopping trolleys as well as fuel containers.

Despite these trends, many Australian-owned components manufacturers are smaller, less connected to global production networks and more likely to struggle with the auto industry transition and diversification processes than the larger Tier-1 and 2 suppliers.

The Federal Government policy agenda

As part of the Commonwealth Growth Fund, 13 per cent of total allocated funding—or $20 million—was set aside for the Automotive Diversification Program (ADP). ADP funding has now been allocated in three rounds to 32 companies in Victoria and South Australia, at a total cost of $18 million. This funding was allocated on the basis of co-investment for capital equipment costs aimed at enabling manufacturers to diversify their product and client base. Under the ADP, funding of between $50,000 and $1 million could be allocated for up to 50 per cent of a total investment.[footnote 32] Victoria-based recipients of funding under the ADP are listed in Table 1 below. The total investment in Victorian-based companies represents 52 per cent of nationally-allocated funding under the ADP. Note that some companies, like Backwell IXL and Venture DMG, were able to access the scheme more than once, based on guidelines which allowed for multiple applications with a cap of $1.5 million on total funding.

Table 1: Victorian companies offered Automotive Diversification Program funding, Federal Government, 2014-2017

Round 1

Company

Location

Project

Grant amount

($ '000)

Total expected investment

($ '000)

Public contribution (% of total)

Backwell IXL

Geelong

Heating, venting and lighting units

205

410

50

Ceramet

Ballarat

Solar, electronic and building products

340

980

35

Dolphin Products

Heidelberg West

Mining equipment

540

1,160

47

GTS Industries

Doveton

Work cells for steel products in construction

1,000

2,850

35

Venture DMG

Keysborough, Campbellfield

Light display panels

500

1,400

36

Round 2

Australian Precision Technologies

Berwick

Aerospace and defence components

1,000

3,170

32

Backwell IXL

Geelong

Mounts for commercial solar rooftops

450

900

50

Luna Nameplate Industries

Bayswater

Emblems

109

261

42

MHG Glass

Geelong

Architectural glass

1,000

3,922

26

MTM

Oakleigh South

Door checks for Tomcar off-road utility vehicle

355

710

50

Venture DMG

Keysborough, Campbellfield

Hybrid shopping trolleys

499

998

50

Round 3

Harrop Casting

Preston

Copper heat exchanger castings

517

1,050

49

Bosch Australia

Clayton

Diode exports

1,000

6,209

16

Backwell IXL

Geelong

Components for heaters

345

707

49

Luna Nameplate Industries

Bayswater

Consumer exports

441

882

50

Premcar

Campbellfield

Milling machine

300

620

48

Total Tooling

Croydon

New manufacturing system

816

2,406

34

TOTAL

9,417

28,635

Average = 41

Source: Australian Government, Automotive Diversification Programme, business.gov.au website.

The Victorian Government policy agenda

The Andrews Labor government has mirrored and extended a similar approach to the ADP at a state level, known as the Automotive Supply Chain Transition Program (ASCTP), with $5 million in allocated funding. The total amount of funding available for firms is lower than the ADP, with a maximum grant of $71,000 targeted to assist manufacturers to develop a 'business transition plan' for new markets, customers or products. Eligible recipients must have been trading prior to May 2013 and claim at least 20 per cent of revenue from sales to car manufacturers. Elements of business plans can include new product development, management skills, sales and marketing, financial planning and market access. Unlike the ADP, grants cannot be used for capital expenses.[footnote 33] In total, 29 businesses have received grants so far, with most accessing the basic $16,000 grant for the cost of developing a business transition plan.[footnote 34] Seven recipients previously also received ADP funding (Backwell IXL, Ceremet, Dolphin Products, GTS Industries, MHG Glass, Premcar and Venture DMC). Of these 29 companies, the largest group (12) is based in southeast Melbourne.

Questions for discussion

1. Is there a case for extending/restarting diversification assistance like that represented by the Federal Government's Automotive Diversification Program (ADP) or, on a smaller scale, the Victorian Government's current Automotive Supply Chain Transition Program?

2. Given that some ADP recipients accessed funding more than once and some of these have subsequently accessed ASCTP funding, what mechanisms might be needed to spread the benefits of funding of this kind to a wider group of components manufacturers? To what extent are barriers to access a problem for small-to-medium sized businesses?

3. What additional assistance, if any, might be needed to help components manufacturers to access schemes like the ADP or ASCTP? Is greater 'hands-on' assistance—for example, involving greater support for municipal government economic development or business networking groups—a way to help small-to-medium sized businesses access these and other schemes?

 

3. Assistance for Automotive Industry Workers

Most commentary on workers employed in the auto industry since the closure announcements in 2013/14 concurs that many will face major challenges transitioning to post-automotive work and life. There are disagreements about how severe these challenges will be and whether or not we can rely upon extrapolations from studies of past large-scale closures to predict the likely future for ex-auto workers (see Introduction). While this report acknowledges that many workers will remain employed in the auto industry after 2017, it rejects the idea that we can know in advance what is likely to happen to workers and strongly emphasises the need for longitudinal research methods to capture the transition for affected workers. To this end, the author and colleagues at the Institute for Religion, Politics and Society (at Australian Catholic University in Melbourne) have partnered with three trade unions—the Australian Manufacturing Workers Union (AMWU), the Electrical Trades Union (ETU) and the National Union of Workers (NUW)—to monitor work outcomes and socio-economic well-being for workers over three years from mid-2016 until mid-2019.

This study aims to be a useful contribution to ongoing dialogue about the impact of the auto industry transition, in part due to its objective of exploring workers' access to available assistance through Federal and State Government policies and their satisfaction levels, as well as work and quality-of-life outcomes more generally. The study began in August/September 2016 with a randomly-sampled, mail-out survey of all AMWU, ETU and NUW members employed in automotive manufacturing in Victoria. At the time of writing, 423 workers had participated in the survey, the majority of which are AMWU members. This is a representative sample of union members employed in auto manufacturing jobs in Victoria.[footnote 35]

While analysis of the survey data has not yet been completed at the time of writing, some initial preliminary data is available (Table 2). This provides a strong indicative picture of the workforce, including some of the challenges they will face post-closure/retrenchment. The large proportion of workers employed by components manufacturers (43 per cent) indicates how important the supply chain is for employment and diversification strategies and assistance for employment retention.[footnote 36] These results also show the strategic importance of Toyota—the largest single employer in the industry—and Ford to total industry employment.

Some key demographic indicators suggest that many auto workers align with the key disadvantages facing jobseekers. Previous studies of retrenched workers suggest that particular groups experience major socio-economic and cultural disadvantage in local labour markets: women, people from a Non-English Speaking Background (NESB), people aged 45 years and over and those who have been with the same employer for a long period of time all tend to find it harder to find new work. They also tend to take longer to achieve re-employment following retrenchment and, in many cases, achieve poorer quality work outcomes relative to their previous employment.[footnote 37] For example, it is likely that many workers in these categories will move into jobs with lower pay, fewer good working conditions or lower job tenure and employment security. Nearly one in five (19 per cent) mainly speak a language other than English at home. This is likely to be an underestimate as many people from a NESB speak English at home, either as the primary language or in combination with their first language. The average age of workers in the sample is 50 (n = 385) and the average length of time with their current employer is 19 years.

Interestingly, the majority of workers are not currently looking for work. This is for a variety of reasons. Firstly, nearly one quarter of workers (24 per cent) expect to remain with their employer after car manufacturing ends, either in the same role or redeployed into a different role. Secondly, a further 27 per cent of workers are still unsure what will happen to their job. While nearly half (46 per cent) expect to be retrenched, many of these workers are not yet actively looking for work and appear to be waiting to do so, either until their post-redundancy period or until much closer to this date. This finding highlights concerns that large numbers of workers will join regional labour markets as jobseekers within a relatively short space of time when each car manufacturer closes, including in Melbourne's northern suburbs and Geelong when Ford ends car manufacturing in October 2016 and, on a larger scale, the south-eastern and western suburbs of Melbourne when Toyota ends car manufacturing in late 2017.

For those workers facing redundancy, the key issue is the need for jobs. Nearly two-thirds (62 per cent) of respondents say they want to find a new job if they are made redundant. This compares to eight per cent who say they will retire, six per cent who will 'take a break from work', three per cent who will enrol in TAFE or university instead of working and one per cent who wish to start their own business. Similarly, two-thirds (67 per cent) said it was important that they receive at least the same level of pay in any new job. The challenge of maintaining material living standards is likely to emerge in the coming months and years as workers struggle to find re-employment with wages and working conditions commensurate with their current job. This prognosis is likely to be related to workers' skill and occupational profiles, especially for those workers who lack marketable or transferrable skills—for example, 48 per cent do not have a trade qualification.

Table 2: Selected preliminary results, IRPS/ACU survey of trade union members in Victorian automotive industry, August/September 2016 (n = 399)

Data

Percentage of total (%)

Employer

Ford Australia

17

General Motors Holden

7

Toyota Australia

28

Components manufacturer/supplier

43

Other

5

Average number of years with current employer

19

When car manufacturing ends, do you expect to…

Stay in the same job in the same workplace?

18

Be made redundant?

46

Stay with the same company but do a different job?

6

Don't know yet

27

No answer

3

If you are made redundant, what will you do?

Look for a new job

62

Take a break from work

6

Start own business

1

Retire

8

Enrol at TAFE/Uni instead of working

3

Other

3

Didn't answer

17

How important is it that you stay in the same or a similar occupation?

Not important

32

Quite important

19

Very important

23

Essential

8

Not sure

11

No answer

8

How important is it that your new job is close to your home?

Not important

13

Quite important

26

Very important

38

Essential

9

Not sure

5

Didn't answer

9

How important is it that your new job pays as much/more than you're currently earning now?

Not important

13

Quite important

19

Very important

34

Essential

14

Not sure

6

Didn't answer

14

Gender

Male

89

Female

11

Average age of participants

50

What is the main language you speak at home?

English

81

Other

19

Highest level of education

Below Year 10

13

Year 10 or 11

32

Year 12

34

University degree

11

Postgraduate university degree

4

Didn't answer

6

Do you have a trade qualification?

Yes

50

No

48

Didn't answer

2

Do dependent children live in your home?

Yes

52

No

48

For those with dependent children, average per home is:

2

Source: IRPS-ACU survey of auto workers, August/September 2016.

What assistance is available to retrenched workers?

There have been a wide range of policies and programs made available to assist retrenched workers under Federal and State Government schemes in Victoria. For the car manufacturers, major company-based programs have been rolled out since 2013/14 which have, variously, assisted workers by providing retraining and reskilling opportunities, assistance with CV-writing and interview skills, job-search training and additional services, such as financial advice or referrals to employers. While the assistance on offer seems to be broadly comparable between the companies, there are some notable institutional differences which have resulted, partly, from the policy transition at a Federal Government level. When Ford Australia first announced its intention to close car manufacturing during the Gillard Labor government, it contributed $10 million to regional adjustment funds in Melbourne's north and Geelong (see Section 4). A further $5 million was contributed federally to hire training provider, Automotive Skills Australia (ASA), to run the Ford Transition Project (FTP) for workers.[footnote 38] In contrast, GMH and Toyota were each asked to contribute $15 million by the Abbott Coalition government, with the bulk of this funding going to similar assistance provided through the federal Skills and Training Initiative. Under this scheme, career counselling and advice was provided directly by the companies, rather than via a third-party model like the FTP.

While there are differences between these schemes, each one has incorporated four basic elements. Firstly, information sessions have been made available to all workers. Second, there has been a process in which attendees at information sessions are encouraged to register for careers transition and support, via the FTP, GMH's Holden Transition Centre and Toyota's Drive program, so that future career paths can be identified. Third, these discussions have been translated into the possible skills and training needs of workers. The fourth phase, which occurs closer to the time of retrenchment, is employment placement.

This final phase is somewhat different between the different companies. For Ford workers, 'outplacement' services are offered for several weeks, post-closure. In Geelong, for example, this is at the Cloverdale Community Centre for a month following closure:

Those first four weeks will be crucial at the outreach centres for social interaction, for somewhere to go after closure, so that people can still carry on meeting people… even if it was just for a cup of coffee or a chat.[footnote 39]

For GMH, employment placement consultants have been hired to undertake a direct job-matching role for workers. In contrast, Toyota appears to be offering labour market and jobs information without implementing exactly the same employment placement process. For supply chain workers in Victoria, employment placement efforts are being offered through the Jobs Victoria Employment Network (JVEN).

Another difference between these schemes is the level of funding available to workers for skilling and training. At Ford, workers have been eligible to access up to $2000 for training, comprised of $1000 from ASA and another $1000 from Ford, funded by the Federal Government. At GMH, workers can access up to $3000 for training under the Skills and Training Initiative. Toyota has been more generous, committing to funding any form of training or education for its employees if approved as part of a career transition plan.

However, training initiatives that involve over $2000 of funding in a given financial year have raised the unforeseen problem of Fringe Benefits Tax (FBT) obligations. According to interview participants, this problem has been partially recognised and the Federal Government has agreed to provide some FBT relief so the benefit of Skills and Training Initiative funding can be fully realised. However, subsidised training also creates the issue of inflating workers' incomes, potentially affecting taxable income, welfare entitlements and obligations, and even acting as a disincentive for workers to engage in new training or re-training.

Other differences between these schemes include ASA's use of a 'skills and jobs audit' relatively early in the Ford Transition Project.[footnote 40]

At Ford in Geelong, 430 employees have been through ASA's career counselling process. According to ASA's Area Coordinator for Geelong:

We've never turned anybody away. Operationally we've been able to do that because of the luxury of time. We've had the time to work within the FTP and support workers to build relationships. Normally, with a redundancy [footnote process], if it was weeks or in some cases, months we wouldn't have that luxury. So we've taken advantage of that time and helped as many people as possible.[footnote 41]

In October 2014, ASA began following-up workers who had participated in initial meetings. At Geelong, a total of 23 follow-up meetings were arranged for the remainder of 2014. In 2015, there were 678 follow-up meetings and, from January to September 2016, 1,851 meetings.[footnote 42]

In addition to company-specific programs, the Federal Government has offered tailored assistance to retrenched auto workers through the Automotive Industry Structural Adjustment Program (AISAP), which falls under the Growth Plan umbrella of policies and is scheduled to run until June 2018.[footnote 43] Like the company-specific programs, the AISAP offers basic assistance like CV-preparation, interview skills and advice about training opportunities. It also forms part of the Federal Government's general package of assistance for retrenched workers from various (not just auto manufacturing) companies, such as steel workers in New South Wales and South Australia or forestry and mining workers in Tasmania. Under this scheme, workers must register with a local Jobactive provider within six months of their retrenchment.[footnote 44]

Similar assistance for supply chain workers is offered by state governments via the Automotive Transformation Taskforce in South Australia and, in Victoria, the Skills and Jobs Centres.[footnote 45] In Victoria, thousands of supply chain workers have been able to access the Career Transition Assistance Scheme (CTAS) through career coaching provided by recruitment agency, Hudson[footnote 46]

The Skills and Jobs Centres are effectively the renamed Workforce Development Centres, which were established through federal/state government collaboration in response to Ford's closure announcement in 2013. The new centres have now been expanded—with 16 in total across Victoria, linked to the TAFE network—although the key auto industry transition centres remain located in the closure-affected regions, particularly Dandenong and Broadmeadows where there is a larger concentration of supply chain workers than elsewhere.[footnote 47]

Thus, there are a comprehensive range of retraining subsidies and career advice services available to retrenched workers through both Federal and Victorian Government policies. These include the company-run transition programs at GMH and Toyota, the ASA-run Ford Transition Project and the comparable assistance offered to supply chain workers, especially in Melbourne's northern and southeast suburbs via the Victorian Government-run Skills and Jobs Centres. The question remains what impact these services are likely to have on the probability of retrenched workers finding new jobs and the relationship, if any, between the nature of assistance provided and quality-of-work outcomes. Given that the auto industry transition is far from over, and formal evaluation of these programs is mostly yet to occur, there are still several years to analyse the results of these policies.

Questions for discussion

1. What, if any, additional or targeted assistance is needed to assist groups of retrenched workers who are more likely to be socio-economically disadvantaged and more likely to confront barriers to reemployment (such as women, workers from a Non-English Speaking Background (NESB) or older workers)?

2. What, if any, mechanisms are being put in place to monitor future employment and quality-of-work outcomes for retrenched workers?

3. What, if any, policy adjustments are necessary in light of the evidence that the majority of workers, including workers who expect to be retrenched, are not yet actively seeking work? What is the expected impact of skill and occupational supply on regional labour markets at the end of 2017, when the largest cohort of retrenched workers is likely to emerge rapidly in Melbourne's west and southeast?

4. Comparative assessments of the different transitional policies available to workers in different companies (including the Ford Transition Project, Holden Transition Centre and Toyota's Drive Program, as well as assistance for auto supply chain workers orchestrated through the Skills and Jobs Centres and, more recently, the Jobs Victoria Employment Network) should explore the extent to which a combination of these programs' strengths denote 'best practice' and the extent to which these lessons be applied to workers retrenched in other industries and sectors.

 

4. Assistance for Closure-Affected Regions

One of the features of automotive manufacturing in Australia—and globally—is its geographically-concentrated character. Competitive markets on a global scale have compelled most branded manufacturers to implement their own versions of 'lean manufacturing'—pioneered by Toyota in post-war Japan—in order to cut costs by transforming work organisation to speed-up production and outsourcing components manufacturing to multiple tiers of suppliers. The imperative to reduce inventory costs and enhance market responsiveness has also compelled auto components manufacturers and auto assemblers to operate 'just in time' production relations in which components are delivered in response to shorter cycles of production rather than through stockpiling. Consequently, key components suppliers tend to locate within relatively close proximity—usually within 100 km—of assembly operations. As a rule, the existence of an auto assembly operation in one region will foster the growth, technological development and innovative capacity of dozens, and often hundreds, of manufacturing businesses and create thousands of job opportunities.

Consequently, the closure of car assembly operations in Melbourne and Geelong is likely to have an impact on output, growth, innovation and employment. As mentioned above, there are four main regions affected by the closures in Victoria: Melbourne's southeast suburbs, Melbourne's northern suburbs, Melbourne's west and the Geelong region. This geographic concentration underpins the strong regional element to transitional policies. The first response to Ford's closure announcement from the Gillard Labor government was to establish two place-based or regional adjustment funds—the Melbourne North Innovation and Investment Fund (MNIIF) and the Geelong Region Innovation and Investment Fund (GRIIF), with combined funding of nearly $50 million to stimulate jobs growth in each region (see below for details).

However, the validity and usefulness of regional adjustment funds is not universally accepted. One of the core arguments made by the Productivity Commission, in its 2014 report on auto industry assistance, was that regional adjustment funds represent a sub-optimal allocation of public resources. This led to inefficient economic outcomes by lowering future national economic output (Gross Domestic Product): 'Regional adjustment funds are likely to be a costly and ineffective approach to alleviating adjustment costs in regions affected by impending closures in the automotive manufacturing industry'.[footnote 48]

A related assumption in the Commission's modelling—one which directly informed its unemployment forecasts—is that labour markets have the characteristics of so-called 'perfect competition', which means that workers are always aware of where the most-productive, highest-paid jobs are and can access them without constraints.[footnote 49] This assumes that workers will move to find new employment opportunities and, consequently, that there is no welfare imperative to redistribute investment resources to closure-affected regions.

The evidence from the IRPS/ACU auto workers survey (see Table 2 above) challenges this logic. Nearly three-quarters of participants (73 per cent) say it is important that any new job is close to their home. This highlights the importance of employment growth in closure-affected regions, including areas with relatively high levels of socio-economic disadvantage. Workers' inter-regional mobility is constrained by a number of factors. While a minority of workers are prepared to commute longer distances to work and even, in some cases, relocate their home to attain the right job, evidence from previous studies of retrenched workers suggests that workers who are paying off a mortgage, whose spouse or partner has a career, or who have school-age children, will all struggle with mobility demands for re-employment.[footnote 50]

Among the IRPS/ACU survey sample, over half (52 per cent) had dependent children living in their homes. Of this group, the average was two children. A similar finding was made in the study of retrenched Mitsubishi workers in Adelaide ten years ago. These workers had a high rate of home ownership, were long-term residents of Adelaide and 80 per cent of that sample (n = 373) did not expect to move out of the area post-retrenchment.[footnote 51] A further point against the Commission's underlying view that redistributive policies place an unwarranted burden on national economic growth was put succinctly by the Government of South Australia in its submission to the Commission's enquiry: 'It is very likely that most regional adjustment programs would not be supported if assessed against a whole-of-economy perspective but equity is also an important policy consideration'.[footnote 52]

The Federal Government policy agenda

After receiving the Commission's recommendations in early 2014, the Abbott Coalition government decided to maintain the MNIIF and GRIIF programs. These regional adjustment funds equally divided $49 million of combined federal, state and $10 million of private funding from Ford Australia between Melbourne's northern suburbs—bounded by the Local Government Areas (LGAs) of Hume, Whittlesea, Moreland and Darebin—and the Geelong region, covering five LGAs (Greater Geelong, Queenscliff, Surf Coast, Colac-Otway and Golden Plains) which span 9,000 square kilometres. In addition to the $24.5 million allocated to the GRIIF, $5 million was contributed by Alcoa, which closed its Point Henry aluminium smelting plant, near Geelong, in 2014.[footnote 53]

Originally designed under the Gillard Labor government, the MNIIF and the GRIIF were influenced by previous regional adjustment funds, such as the Structural Adjustment Fund for South Australia implemented in response to the closure of Mitsubishi's Lonsdale factory in Adelaide in 2004, and the South Australian Innovation and Investment Fund, implemented in response to Mitsubishi's closure of its Tonsley Park facility in 2008 (also in Adelaide). The GRIIF was also influenced by the previous Geelong Investment and Innovation Fund (GIIF), which had been rolled out in 2007 in response to Ford's plan to close its Geelong engine plant, a decision later reversed (until its most recent closure announcement in May 2013).

The minimum grant under the MNIIF/GRIIF was $50,000 and could be used to provide up to 50 per cent of funds in schemes to create 'sustainable new jobs' by July 2017. The emphasis was on new jobs—projects could not be about continuing older investments or retaining jobs. Nor could investment be used to squeeze out local competitors or to relocate jobs from one region to another. Ford and other automotive industry companies were not eligible to apply. To be eligible for funding, applicants had to provide detailed projections about the number of full-time jobs expected to be on-line before July 2017, a timeline for the investment and funding, and details about the company, including management experience, revenue and current assets and liabilities.

Applications were assessed against, among other things, the number of new jobs projected, the 'type' of jobs, salary level, where the workforce will be recruited from, estimates of indirect job creation through backward linkages, and how many opportunities the investment would generate for retrenched Ford and supply chain workers.[footnote 54] Offers of GRIIF and MNIIF funding are listed in Tables 3 and 4, including information about: the level of government assistance; the total expected investment; the ratio of government funding to total investment; the total number of jobs expected to come on-line before July 2017; and, the location of the investment.

Table 3: Companies offered grants under the Geelong Region Innovation & Investment Fund, 2014-2017

Company

Project

A. Grant ($'000)

B.

Exp. total investment

($'000)

A/B

Ratio

(%)

Exp. new jobs (by 30 June 2017)

Location

Round 1

Carbon Revolution

New facility to manufacture carbon fibre wheels for auto industry

5,000

23,827

21

108

Waurn Ponds

Pickering Joinery

Expansion of custom timber/door manufacturing facility

230

560

41

8

Belmont

Accensi

New agricultural chemical manufacturing plant

1,600

18,800

9

45

Lara

Round 2

Australian Lamb

Expansion of lamb/mutton processing, exports

3,250

21,827

15

125

Colac

Farm Foods

Sausage hamburger products for export

525

1,050

50

27

Breakwater

Organic Dairy Farmers

Cream/cheese processing at new facility

600

1,200

50

23

Nth Geelong

Cotton On Clothing

Expansion of head office for global operation

3,400

8,725

39

300

Nth Geelong

Quickstep Operations

New carbon fibre composites centre for global auto industry

1,767

5,065

35

30

Waurn Ponds

Ridley Agri-products

New animal feedmill servicing poultry/pig industries

800

20,000+

4

20

Lara

Round 3

Phoenix Fabrication & Welding

Expanded manufacturing facility

159

319

50

7

Moolap

Air Radiators

Manufacture industrial aluminium heat exchangers

1,543

3,086

50

30

Lara

Associated Kiln Driers

Upgrade sawmill/drymill technology

3,500

26,716

13

20

Colac

Caronlab Australia

Wax beading machine and cosmetic cream line

225

505

45

8

North Geelong

The Edge Glass (Aust)

New CNC vertical machine

630

1,400

45

16

Newtown

Jeff Sykes & Associates

Manufacture rowing equipment

135

326

41

11

Breakwater

Irrewarra Estate

Natural food manufacturing

385

926

42

20

Colac

M.C. Herd

Semi-automated meat cutting room

3,000

6,000

50

40

Corio

TOTAL

26,749

140,332

19

838

 

Source: Australian Government, GRIIF project funded, business.gov.au website.

Table 4: Companies offered grants under the Melbourne North Region Innovation & Investment Fund, 2014-2017

Company

Project

A. Grant ($'000)

B.

Expected total investment

($'000)

A/B

Ratio

(%)

Proposed new jobs (by 30 June 2017)

Location

Australian Brewers Guild

Upgrade beer manufacturing

700

1,451

48

11

Reservoir

Altimate Foods

Food products

424

983

43

15

Campbellfield

Concept Caravans

New caravan line

764

3,338

23

20

Campbellfield

Harice

Ice cream

1,200

3,000

40

30

Hadfield

Integra Systems

Fibre-optic laser cutting equipment

300

970

31

5

Broadmeadows

Kestrel Manufacturing

Oil/chemical spill equipment

1,500

5,853

26

45

Melbourne North

Bertocchi Smallgoods

New slicing equipment

2,000

9,000

22

69

Thomastown

ABBE Corrugated

Printers & reengineering

1,175

5,815

20

25

Coolaroo

Kingspan Insulation

Thermal insulation manufacturing

3,000

34,377

9

50

Melbourne North

New Age Caravans

Robotic chassis manufacturing

1,000

3,729

27

65

Epping

PMI Imageworks

Digital printing

2,600

6,083

43

69

Brunswick

Bon Appetit Australia

Robotic equipment for gelato

370

985

38

7

Reservoir

Everest Colonial

Blast freezer for ice cream

283

1,252

23

5

Reservoir

Taylor Ferguson & Co

Bottle production

700

2,073

34

14

Preston

Koko Black Group

New Asia-Pacific headquarters

3,000

10,930

27

46

Melbourne North

Sparkling Beverages

Beverages

993

2,339

42

27

Campbellfield

Machinery Automation & Robotics

Cardboard packaging

1,193

2,937

41

26

Campbellfield

Lakeside Packaging Management

Advanced robotics

400

2,380

17

10

Tullamarine

Premier Extrusion

Foam polyethylene products

321

722

44

6

Melbourne North

Topcat Installations

Stone kitchen bench tops

600

1,200

50

15

Campbellfield

Colonial Farm

New manufacturing facility

1,100

4,349

25

25

Broadmeadows

Cottage Cheese Farm

Cheese/yoghurt manufacturing

765

5,726

13

17

Broadmeadows

TOTAL

24,388

109,492

22

602

 

Source: Australian Government, Melbourne's North Innovation and Investment Fund, business.gov.au website.

In total, the Federal Department of Industry anticipates that close to 1,300 jobs should emerge before July 2017 as a consequence of the grant-making process.[footnote 55] This includes up to 17 recipients in the Geelong region and up to 22 recipients in Melbourne's northern suburbs. Interestingly, while both schemes could fund up to half of a total investment, the average for the GRIIF and the MNIFF has been 19 and 22 per cent respectively. Only six companies across both schemes received 50 per cent (i.e. matching) funding.

Also significant is the industry mix of recipients. While the imperative to re-employ retrenched Ford and auto supply chain (and, in Geelong, Alcoa workers) was embedded in the selection criteria for applicants, not all recipients were in industries with a similar skill or occupational profile as auto manufacturing. If we total recipients and anticipated employment across both schemes, 28 per cent of anticipated jobs (n = 415) are comprised of companies creating service sector employment. Of this, garments producer, Cotton On, in Geelong, has by far the largest share with 300 jobs anticipated. A further 18 per cent of jobs (n = 255) are in agricultural, forestry and related industries, especially in the Geelong region. However, manufacturing retains the largest share of anticipated jobs with 54 per cent of the total. Fourteen per cent of the total is represented by advanced manufacturing (n = 199), including state-of-the-art, high value capital equipment and highly capital-intensive production processes. Fifteen per cent is represented by food and beverage manufacturing (n = 215), with a particular concentration in Melbourne's north. The remaining 25 per cent is represented by a range of other manufacturing companies (n = 356).

The diversity and types of jobs generated through regional adjustment funding has stirred controversy in closure-affected regions.[footnote 56] For example, some interview participants argue that only a small minority of Ford workers (and, in Geelong, Alcoa workers) have benefited directly from these programs. In Geelong, some participants stated that 10 percent or less of the jobs generated through GRIIF grants by mid-2016 had been received by ex-Ford or Alcoa workers. Others strongly suggest that employment should be generated for retrenched Ford and auto supply chain workers in a more direct sense. According to Federal Member Calwell, Maria Vamvakinou, whose electorate includes the Ford Broadmeadows plant

I think you have to oblige employers to employ the people who that program is designed to help… Why are they not getting jobs? If I have to keep asking that question and people can't get jobs then something isn't right.[footnote 57]

According to State Member for Geelong, Christine Couzens:

There was a lot of discussion around what that money should target. There was a strong voice from Geelong that [footnote it] should be manufacturing, creating jobs for the transition. [footnote But] that didn't eventuate… [footnote The] original idea was that it would create jobs for the auto industry workers to move into. A lot of us in Geelong would argue that that never happened…[footnote 58]

According to Victorian Shadow Minister for Investment and Jobs, Craig Ondarchie:

[footnote The] reality is that in some cases we are giving grants in industries where the skill set is completely different [footnote to the automotive industry]. I think when we're using taxpayer money to assist these companies—under so-called 'co-investment', even though there's not necessarily a direct equity arrangement—that we need to tie the skills of these transitioning workers, not just to 'a job'.[footnote 59]

In contrast, others argue that these regional adjustment funds were never designed to directly transition auto workers into new work. According to one Federal Public Servant:

The response was not about the workers so much as about the regions…From the outset, there was a view that these programs should be about creating jobs for Ford workers… Whilst altruistically you will get jobs that some Ford workers could fill, in some sectors it was actually interpreted as a job matching thing. The timing of job creation by companies when Ford workers come out of work was always going to make this unrealistic. If you look at the program, it was really about creating confidence for the community… That's quite an important distinction I think. I don't think it's been fully grasped by everyone... [footnote This is] a realisation that we're dealing with businesses and we can't dictate to businesses who they should employ. [footnote The government] wasn't going to have a situation where an employer would only get a grant if they employed a certain person. The reality is that [footnote it is] very difficult, if not impossible, to time a program so that it actually creates jobs [footnote when the closure happens]… But it still comes down to the issue that the employer should be able to exercise their own rights in employing people.[footnote 60]

According to a Senior Victorian Public Servant:

[footnote It is a challenge to] create a sufficient number of jobs at the right time and the right kind of jobs. Getting the timing right and also whether or not it is a good idea to attract an industry or a project to a region that might provide a substantial number of jobs to a region even if they are not exactly the sorts of jobs that auto workers or ex-auto workers might get. They might be the sorts of jobs that their wives get or other in the community get [footnote instead]. I think that both formally and politically, at least some of the judgement will be how successful they have been at attracting projects that can provide employment opportunities for auto workers… [footnote But] specifically requiring a project to employ auto workers, I think, risks putting a level of burden on the project that might defeat the purpose of the project.[footnote 61]

Another Victorian Public Servant expressed a similar view:

Have you seen any other fund where it says, if you want the money, you have to employ this person? ... In an ideal world, [footnote you could do this]. But then you'd be really starting to control the labour market. The best thing you can have is a lot of activity so there is lots of choice.[footnote 62]

The variety of perspectives on the design and implementation of these regional adjustment funds reflects underlying issues with 'place-based partnerships' in which different levels of government, businesses and community organisations collaborate in order to achieve regional objectives.[footnote 63] This collaboration can be highly significant. For Melbourne's northern suburbs, for example, Ford's 2013 closure announcement 'was the casus belli that made politicians forget what colour tie they wore and [footnote ask] what we needed to do to provide a good outcome for the affected communities.'[footnote 64] But conflict about program outcomes also reflects underlying disagreements.

On the one hand, the claim that governments can and should stimulate economic activity and employment 'for the region' ahead of managed pathways for specified groups of individuals, such as retrenched auto workers, places relatively greater faith in the capacity of private decision-making—i.e. market forces—to guide the transition to the fairest possible outcome for people who live or work in the region. In this sense, government can stimulate economic activity in a general way and the process of private initiative will do the rest.[footnote 65] However, some interview participants who expressed a view similar to this were also concerned that regional adjustment funds had generated insufficient direct employment for retrenched auto workers. For example, some argued that the proportion of jobs should approximate the multiplier effects of auto manufacturing on regional economies—so, consequently, the proportion of jobs for ex-auto workers should not be lower than one in four or five of total jobs generated through public stimulus. On the other hand, several policymakers also suggested that there is a balance to strike between the imperative to generate new, dynamic and job-creating investment and the imposition of investment-constraining 'compliance' on private firms.

One response to this problem is to rethink the 'reward' for companies—i.e. the total and proportional size of the grant and the available pool of public resources—as a trade-off against more burdensome compliance rules. Another response is to emphasise the optimal policy mix—if regional adjustment funds do not create sufficient jobs for the workers whose retrenchment stirred the policy in the first place, then it may be possible for complementary policies, including transitional assistance for automotive suppliers and skills and training incentives for workers, to partially fill this policy 'gap'.

There have been two further regional policy developments that emerged after the rollout of the GRIIF and MNIIF programs. Firstly, the Federal Government allocated $90 million, the largest feature of the Commonwealth Growth Fund, to the Next Generation Manufacturing Investment Program. This policy, which subsidised private investment in capital equipment for high value manufacturing, is focused on businesses in Victoria and South Australia. Under the scheme, businesses can apply for $500,000-$2.5 million for up to one third of the total cost of a project.[footnote 66] Table 5 lists funding for the 24 successful Victorian grant recipients under the two rounds of the scheme, totalling about $43.6 million, or nearly half of the funding allocated for the scheme nationally.

Table 5: Companies offered Next Generation Manufacturing Investment Program grants, Victoria, 2014-2017

Company

Project (text adapted)

Grant amount

($ '000)

Location

Round 1

HeiQ Australia

Additives manufacturing

1,259

Geelong

Marand Precision Engineering

Vertical tails for F35 Joint Strike Fighter

5,000

Moorabbin

Bombardier Transportation Australia

Assembly line upgrade for rail manufacturing

3,200

Dandenong

Aluminium Industries of Australia

New aluminium components facility

2,258

Dandenong South

Walkinshaw Automotive Group

Vehicle modifications

5,000

Springvale

Radial Timber Australia

New radial saw mill

1,500

Yarram

Trajan Scientific Australia

Equipment to manufacture glass tubing for medical/scientific instruments

756

Ringwood

Reinforced Concrete Pipes Australia

Dry cast products for sewerage/drainage

2,613

Kilmore

Catalent Australia

Upgrading facility for medical instruments/pharmaceutical industry

3,380

Braeside

Turrisi Enterprises

Caravan chassis and suspension systems

1,586

Campbellfield

Rollspack

Upgrade facility for packaging products

850

Braeside

Round 2

Sealite

New centre for manufacturing marine navigation aids and aviation ground lighting

1,085

Tyabb

MiniFAB (Aust)

Medical diagnostic products

664

Scoresby

RayGen Resources

New facility to manufacture ultra-photovoltaic modules for renewable energy systems

1,626

Blackburn

Xlam Australia

New cross laminated timber facility

2,500

Wodonga

Meyer Timber

New facility to manufacture timber panels for construction industry

1,555

Dandenong

Textor Technologies

New automated equipment

784

Tullamarine

Third Zeton

New assembly line for manufacturing road transport tankers

664

Campbellfied

Australian Lamb (Colac)

Robotic technology for slaughter floor

516

Colac

Wilson Transformer Company

New assembly line for small transformers

1,000

Wodonga

Intervet Australia

Veterinary vaccine manufacturing

2,500

Bendigo

Universal Biosensors

Diagnostic test strips for blood clotting

575

Rowville

Asaleo Care

Female health/hygiene products

520

Springvale

SNF Australia

Liquid acrylamide monomer and solid polyacrylamide plant

2,173

Lara

TOTAL

43,564

 

Source: Australian Government, Next Generation Manufacturing Investment Program, business.gov.au website.

The scheme did not specify that operations should be based in closure-affected regions. Although the majority (13) are based in closure-affected regions, 11 grant recipients are based in other regions of Victoria, including regional towns. Also, unlike the GRIIF and the MNIIF, Next Generation recipients were not assessed primarily on the basis of employment creation or growth but, more generally, on 'net economic benefit', contribution to 'new or expanded high value activity' and 'value for money' from the perspective of government funding:

In the GRIIF and the MNIIF, there was a very strong focus on job creation… [footnote The new policy] moved that focus from job creation to new investment in high value manufacturing…. Thinking about that tension, that new investment in new technology doesn't necessarily mean a large increase in jobs, as much as everyone would love that to happen.[footnote 67]

The second follow-up policy to the GRIIF and MNIIF came at a Victorian government level with the announcement of the Local Industry Fund for Transition (LIFT). This allocated $33 million of funding as part of the December 2015 announcement of the Towards Future Industries policy. Like the GRIIF and the MNIFF, the LIFT is a place-based adjustment fund for regions affected by the end of car manufacturing.[footnote 68] Funding for the scheme is not as large as the GRIIF/MNIIF stimulus. Unlike the previous funds, which could grant up to 50 per cent of a total investment, the LIFT will fund a maximum of 25 per cent for a project worth at least $200,000 in total investment, with a $2 million cap on grants. While the LIFT is an ongoing program, the investment and job targets must also be met within 18 months of a successful grant. The Federal Government is not part of this policy, largely ending the three-tier governmental approach that characterised the early response to Ford's closure announcement.

However, the LIFT continues the policy space left by the winding down to the GRIIF and MNIIF—it allocated $7.5 million and $10.6 million for the Geelong region and Melbourne's north, respectively—and also funds previously neglected regions, with $10 million allocated for Melbourne's southeast suburbs and $5 million for Melbourne's west. It also abolishes the round-based scheme used under the MNIIF and GRIIF. Under the LIFT, businesses can apply at any time, first by submitting an expression of interest—which is much easier and cheaper than writing a full funding application—and then, if deemed to be eligible, can be guided through the process of full application. In addition, the policy forges a 'clearer line of sight' between new investment plans and retrenched auto workers by requiring funding recipients to advertise jobs through the Skills and Jobs Centres.[footnote 69]

Despite the differences, the underlying premise of the LIFT is the same as the GRIIF and the MNIIF: to stimulate investment and 'new and sustainable' employment, a portion of which will hopefully employ retrenched auto workers. The policy is also similar to previous regional adjustment funds in its minimalist requirement to employ retrenched auto workers. While the grant application considers the ability and willingness of an employer to recruit retrenched auto workers, there is no specific target to employ auto workers forced upon grant recipients.

Comments from interview participants in this research suggest that, while the LIFT is still in its infancy, the level of interest from businesses in closure-affected areas has been uneven. In Geelong, where successive regional adjustment funds have operated since 2007, some participants suggest that the 'pipeline of ready-to-go projects' has been exhausted for the time-being: 'When I say 'ready to go', that means projects that have capital sorted and have clear access to markets and contracts…[footnote The] message is out there. It's really a case of companies' capacity to be able to undertake projects'.[footnote 70]

In contrast, the LIFT policy appears to have received a more enthusiastic response in Melbourne's southeast:

When LIFT was announced, it was welcomed on the basis that finally we had an area-specific focus. We'd targeted the other areas that will be impacted by the closures but in the southeast, there was a feeling for some time—and I hear this on a weekly basis—that we had been forgotten in a lot of these conversations. This is quite remarkable when you think that we've got over half the supply chain in the southeast…[footnote 71]

The challenge of job losses and job creation in the southeast is particularly focused around the health of manufacturing. Dandenong has the country's largest cluster of auto components manufacturers. Dandenong is a major hub for truck, tram and train manufacturing, as well as auto components manufacturing: '[footnote It is often said that] you wheel it in and you wheel it out of Dandenong. If it's on wheels, it's generally made here'[footnote 72]. Managing the transition in this strategically important corridor underpins the extension of regional adjustment funding to the region, as well as the additional $8.4 million allocated to retrain, reskill and job-place workers in the southeast as part of the Automotive Transition Plan.

Municipal governments in the southeast region also have played an active role liaising with manufacturing businesses affected by the auto industry transition, in a context in which there has not previously been a multi-government regional approach to the transition unlike Geelong or Melbourne's north. The City of Greater Dandenong's business networking arm, South East Business Networks (SEBN), has surveyed local businesses, most of which are manufacturers, and received responses from 40 companies seeking advice or assistance with the transition. About 20 companies 'felt that they might be impacted enough that they wouldn't be able to get out of it on their own'.[footnote 73]

A further issue at a local level is the ongoing demand for manufacturing occupations and skills. According to the Manager of South East Business Networks for the City of Greater Dandenong

We import most of our workers [footnote from outside the southeast region]—about 60 per cent of our workers. We're a net provider of jobs but we have a very low uptake of local people getting these jobs. We have a community with high unemployment and we need to get them employed. But they don't have the skills to get the jobs that are out there on offer for any jobs but including manufacturing. There is mismatch of skills supply and demand.[footnote 74]

Dandenong thus represents a potentially major opportunity for high- and semi-skilled workers who exit auto assembly operations in Melbourne over the 12 months from October 2016 onward.

A final issue for regions with major car manufacturing sites—Geelong, Broadmeadows, Fisherman's Bend and Altona—is the repurposing of auto manufacturing sites. American research on ex-automotive sites suggests that most repurposing has taken the form of re-parcelling land for new manufacturing industries, although there are a variety of other uses including secondary and tertiary educational institutions, warehousing and logistics and commercial and even residential real estate development.[footnote 75] There are a range of views about industrial repurposing in Victoria. There are ongoing discussions about future uses for Ford's car manufacturing facilities in Melbourne and Geelong, although no public decision has been made.[footnote 76]

However, many participants argued that these sites may be best served for future industrial or manufacturing use. For example, Christine Couzens argues:

[footnote Ford's Geelong site] should remain industrial land. One of the problems I could see happening… [footnote is]there is nothing left when you want to bring new industry in. So I'd be against getting rid of that as industrial land… But, generally speaking, from what Ford has said, they've made no decision about what will happen to the land and the building.[footnote 77]

Questions for discussion

1. Should regional adjustment funds like the MNIIF, GRIIF or LIFT require grant recipients to employ quotas of retrenched automotive workers (or workers retrenched from any other industry regarded as strategically important by government)? Would such a requirement impose an unwarranted or self-defeating burden on employers?

2. Can there be an optimal balance between employment creation for workers retrenched from strategically-important industries and the regulation of private business (and public sector) decisions? To what extent is this balance shaped by constraints on funding and by the competing responsibilities of Federal and State Governments in this policy area?

3. Can the problem of transitioning retrenched workers be adequately managed through a mix of transitional policies, of which regional adjustment funds are a feature, or it is simpler and more effective to embed workers transitioning into the funds themselves by, for example, incorporating the above-mentioned employment targets or quotas?

4. What is the case for and against enabling regional adjustment funds to target employment retention as well as 'new and sustainable jobs'? Is the current focus insufficiently flexible for employers who might otherwise access these schemes?

 

5. A Transition Within or Beyond Manufacturing?

Fifty per cent of participants in the IRPS/ACU auto workers survey reported that it was important (either somewhat important, very important or essential) that they stay in the same or a similar occupation (see Table 2 above). This finding highlights the challenge of continuing to create and locate work in manufacturing occupations. Manufacturing will continue to play a key role in several regional economies of Victoria after car manufacturing ends. Furthermore, manufacturing continues to play a strategically important role in policy development at both a federal and state government level. At both levels of government, advanced manufacturing is regarded as important and, federally, manufacturing intersects with strategic priority areas like food processing and biomedical products. In Victoria, manufacturing is important for several designated 'future industries', including medical technology, energy, food and fibre, defence and construction and transport technology.

But exactly how important is manufacturing in the policy mix? In part, this question is shaped by the region in question. For Geelong, substantial growth in services-based employment has been associated with rising health services, especially through Barwon Health, as well as aged care and disability services associated with the rollout of the National Disability Insurance Scheme (NDIS); Australian Bureau of Statistics (ABS) and WorkSafe Victoria jobs have shifted to the region and, in the private sector, Cotton On's global headquarters. According to ASA's Geelong Area Coordinator:

Geelong is moving from a manufacturing city—with the loss of Alcoa and Ford jobs—to a health services city. So a lot of people [footnote going through the Ford Transition Project] have been interested in moving into those service industries… Mainly, there are small-to-medium [footnote sized] businesses left in Geelong offering manufacturing roles. However, there will be opportunities in infrastructure, warehousing and health. If you had a look at the instances of training [footnote among Ford workers], you would find everything from funeral services entrance training, health services assistant to sterilisation/theatre technician, Bowen therapy, visual arts, aged care and remedial massage, training across the board. It's pretty amazing the diversity of the training that people take up…[footnote 78]

In some cases, regional economic diversification is framed as synonymous with a transition beyond manufacturing and a process that should be encouraged through regional adjustment funds. According to a Senior Victorian Public Servant:

All of those programs, [footnote including] the GRIIF, the MNIIF and the LIFT programs, do not specify the kinds of projects that have to be attracted. They have merit criteria about the type of employment that might be provided and the extent to which it would be auto workers who could access those jobs. But they're not [footnote solely] targeted at manufacturing.[footnote 79]

But manufacturing is also framed by some as more strategically important at a general level. According to Christine Couzens:

[footnote Manufacturing] is still a big part of our economy in Geelong. [footnote In] some areas, it's been touted as manufacturing being gone and having to focus on white-collar jobs [footnote such as] hospitality and health. Sure, they are growing industries but there are still a lot of manufacturers out there who want to continue. A lot are moving into that advanced manufacturing area. You just have to look at what's happened at Deakin University and projects like [footnote GRIIF recipient] Carbon Revolution.[footnote 80]

Similarly, manufacturing continues to be framed as central to economic prosperity in Melbourne's north and in the southeast. Dandenong's cluster of manufacturing companies, for example, remains crucial to the region and to the possibility of a successful auto industry transition for businesses and workers. According to Gabrielle Williams:

I think manufacturing has a great future in this region. If we're talking about diversification programs, whether that's diversification in manufacturing or in other areas as well, I think there has been an acknowledgement that not everyone who is currently employed in manufacturing or the auto supply chain will necessarily continue to work in a manufacturing job… [footnote But if] you look at the manufacturing precinct in Dandenong South, there are massive opportunities to diversify into other manufacturing areas. So predominantly my conversations with business and business networks are about how we diversify the manufacturing sector more specifically.[footnote 81]

This logic emphasises the transition as a process occurring within the broader manufacturing sector as companies and workers grapple with the challenge of sustaining livelihoods, occupational identities, skills and technological know-how without a car manufacturing industry to stimulate regional businesses:

[footnote We] have quite a big transport manufacturing hub in Dandenong South where trains, trams, trucks and buses are made. You name it, if it's on wheels or tracks, we make it. There's a perceived crossover there where a lot of the skills coming out of auto [footnote manufacturing] might be transferred to these other areas. But equally there's a growing emphasis on advanced manufacturing. You'll often hear said out here, traditionally, we talk about manufacturing as the three D's – dirty, dumb and dangerous – but it isn't. Increasingly, it's clean and clever. It doesn't look the same as what we might think when we think of manufacturing and that's a good thing. There are new opportunities there, whether it be in medical manufacturing or other opportunities… [footnote Manufacturing] can have a huge future in this country but at a policy level we have to be encouraging that.[footnote 82]

Questions for discussion

1. To what extent will the cessation of car manufacturing by late 2017 and the ongoing requirements of manufacturers (automotive and non-automotive), especially in northern and southeast Melbourne, create a mutually advantageous situation for jobseekers and employers?

2. Is there an additional role for government in assessing, monitoring and managing this process?

3. Should government (at all levels) be playing a more proactive role in encouraging young people—for example, high school students—to consider careers in manufacturing?

 

6. Conclusion: What Might a 'Successful' Transition Look Like?

As argued at the beginning of this report, the auto industry transition can be seen as an objective, relatively passive process in which social and economic changes are forced upon individuals and businesses in closure-affected regions or, alternatively, it can be seen as a process of actions and interventions in which all stakeholders—especially government—can act, not only to pursue goals and objectives, but to rectify past problems and modify existing approaches. The questions posed throughout this report, based on interviews with policymakers and program managers as well as preliminary data from the IRPS/ACU survey of auto workers, are offered to help think through what a successful transition might look like, what mechanisms will be needed to achieve this and whether there are elements of existing policy design and implementation which might impede this.

For components manufacturers and suppliers, this report has posed questions about the possible need for further assistance with business diversification and issues of access and relevance to small-to-medium businesses. For workers, this report has outlined some of the basic disadvantages likely to be faced by new jobseekers and the need to use extensive and longitudinal research methodologies to monitor the progress of retrenched workers over the coming years as they grapple with the challenges of regional labour markets.

The problem of current automotive employees waiting to actively look for work, despite the wide range of schemes designed to assist career planning and job-seeking, has been identified in this report. This problem highlights the problem of timing in regional labour market supply and demand and raises questions about what, if anything, government can do to manage this process so that the labour market transition within manufacturing is as smooth as possible. At the same time, much of the transitional assistance that has been made available to workers is comprehensive. There is a strong case for government consolidating knowledge from these programs and calculating a best-practice approach for future interventions in other sectors and industries.

This report highlights the debates and discussions that have occurred locally about the design and rollout of regional adjustment funds. All participants in this conversation, regardless of their differing views, have raised valuable and cogent arguments about the rationale, as well as the strengths and weaknesses, of this policy approach. This process of argument and counter-argument should be taken seriously. Finally, this report has highlighted the discursive use of 'diversification' in policy and political dialogue and the extent to which manufacturing investment, occupations, skills and jobs are still central to economic prosperity in Victoria. This report concludes that it is central and will continue to be so after car manufacturing ends in 2017. Consequently, it asks whether the appropriate policies are in place to match the occupational and skill profile of retrenched automotive workers with the demands of employers and, more broadly, whether enough is being done by all levels of government to facilitate active engagement and interest in manufacturing skills and careers for the next generation of workers in Victoria.


References

List of interviews

All interviews took place June-September, 2016. Some participants elected to speak anonymously. The author conducted interviews with a range of other stakeholders who, while not cited in this report, will be included in future research.

Peter Canavan, Department of Education and Training (Victoria), 29 June

Christine Couzens, Member for Geelong, Victorian Legislative Assembly, 28 June

Paul Dowling, Network Facilitator, South East Business Networks, City of Greater Dandenong, 22 September

Federal Public Servant A, 23 August

Sandra George, Manager, South East Business Networks, City of Greater Dandenong, 22 September

Robert Hope, Ford Transition Project, Area Coordinator (Geelong), Auto Skills Australia Ltd, 20 September

Craig Ondarchie, Shadow Minister for Investment and Jobs (Victoria), 19 June

George Osborne, Manager, Economic Development, Hume City Council, 19 September

Maree Polglaise, Department of Education and Training (Victoria), 29 June

Senior Victorian Public Servant A, 6 July

Senior Victorian Public Servant B, 8 June

Maria Vamvakinou, Federal Member for Calwell (Labor), 19 September

Gabrielle Williams, Member for Dandenong, Victorian Legislative Assembly, 30 June

Works Cited

Australian Bureau of Statistics (2015) Employed Persons by Industry Division of Main Job (ANZSIC), Catalogue 6291.0.55.003, Canberra

Australian Government (2015) Geelong Region Innovation and Investment Fund (GRIIF) Factsheet, Canberra, Department of Industry and Science, March

Australian Government (2016) Growth Fund, Grants and Assistance, business.gov.au website

Australian Government (2016a) Automotive Industry Structural Adjustment Program, business.gov.au website

Australian Government (2016b) What's Next? Support for retrenched workers, business.gov.au website

Australian Government (2016c) Skills and Training Initiative, business.gov.au website

Australian Government (2016d) GRIIF project funded, business.gov.au website

Australian Government (2016e) Melbourne's North Innovation and Investment Fund, business.gov.au website

Australian Government (2016f) Next Generation Manufacturing Investment Program, business.gov.au website

Allen, J., D. Massey & A. Cochrane (1998) Rethinking the Region, London, Routledge.

Australian Manufacturing Workers Union (2014) Final Submission to Productivity Commission Review of Australia's Automotive Industry, February

Barbaro, B., J. Spoehr & National Institute of Economic & Industry Research (NIEIR) (2014) Closing the Motor Vehicle Industry: The Impact on Australia, Adelaide, The University of Adelaide

Barnes, T., J.M Roose, L. Heap & B.S. Turner (2016) 'Employment, spillovers and 'decent work': Challenging the Productivity Commission's auto industry narrative', Economic and Labour Relations Review, 27(2), pp. 215-230

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Dundas, G. (2014) MPs hit back at union jibe over use of GRIIF, Geelong Advertiser, 20 November

Eklund, E. (2002) Steel Town: The Making and Breaking of Port Kembla,Melbourne, Melbourne University Press

Federal Chamber of Automotive Industries (2013) Submission to the Productivity Commission's Review of the Australian Automotive Manufacturing Industry

Ford (Ford Motor Company of Australia Ltd) (2013) Submission to the Productivity Commission Review of the Australian Automotive Manufacturing Industry, November

Government of South Australia (2013) Response to the Productivity Commission's Position Paper for the Review of the Australian Automotive Manufacturing Industry, February

Gretton, P. (2013) On Input-Output Tables: Uses and Abuses, Staff Research Note, September, Canberra, Productivity Commission

Harris, C.C. and the Redundancy and Unemployment Research Group, University College of Swansea (1987) Redundancy and Recession in South Wales. Oxford, Basil Blackwell

Holden (GM Holden Ltd) (2013) Submission to the Productivity Commission Review of the Australian Automotive Manufacturing Industry, 27 November

McDonald, C.S., L. Frost, A. Kirk-Brown, A. Rainnie & P.A. Van Dijk (2010) 'An evaluation of the economic approaches used by policy actors towards investment in place-based partnerships in Victoria', Australian Journal of Public Administration, 69(1), pp. 9-21

Milkman, R. (1997) Farewell to the Factory: Auto Workers in the Late Twentieth-century, Berkeley, University of California Press

Morris, L. (1995) Social Divisions: Economic Decline and Social Structural Change, London, UCL Press

O'Neill, P. M. (1996) Capital, Regulation and the Region: Restructuring and Internationalisation in the Hunter Valley, NSW. Unpublished PhD thesis, Macquarie University

Patty, A., C. Jenkins & N. Toscano (2014) Toyota job losses: Sydney office to be closed, Sydney Morning Herald, 4 December

Productivity Commission (2014) Australia's Automotive Manufacturing Industry, Inquiry Report No 70, 31 March, Canberra

Rubery, J. & F. Wilkinson (eds) (1994) Employer Strategy and the Labour Market, Oxford, Oxford University Press

Sathe Brugeman, V., K. Hill & J. Cregger (2011) Repurposing Former Automotive Manufacturing Sites: A report on closed auto manufacturing facilities in the United States and what communities have done to repurpose the sites, \ Ann Arbor, Michigan, Center for Automotive Research, November

Spoehr, J. (2014) Foundations for Industrial Rejuvenation: Lessons from International and National Experience, Adelaide, Australian Workplace Innovation and Social Research Centre, The University of Adelaide

Sturgeon, T., J. Van Biesebroeck & G. Gereffi (2008) 'Value chains, networks and clusters: reframing the global automotive industry', Journal of Economic Geography, 8, pp. 297-321

Toyota (Toyota Australia) (2013) Initial Submission to the Productivity Commission Review of the Automotive Manufacturing Industry, November

Victorian Government (2016) Victoria's Automotive Transition Plan, business.vic.gov.au website

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Webber, M.J. & I. Campbell (1997) 'Labour market outcomes among retrenched workers in Australia: a review', Journal of Sociology, 33(2), pp. 187-204

Weller, S.A. & M.J. Webber (1999) 'Re-employment after retrenchment: evidence from the TCF Industry Study', Australian Economic Review 32, pp. 105-129

Webber, M.J. & S.A. Weller (2001) Re-fashioning the Rag Trade: The Internationalisation of the TCF Industries in Australia, Sydney, UNSW Press

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About this publication

This research report was written by Victorian Parliamentary Library Fellow Dr Tom Barnes, from the Institute for Religion, Politics and Society at the Australian Catholic University in Melbourne. Dr Barnes is an economic sociologist, with a background in political economy and development studies. He forms part of a team of academics at the ACU currently engaged in a research project called 'Cities and Successful Societies', which examines the impact of social and economic changes on happiness and well-being. For more information, visit http://irps.acu.edu.au/.

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[footnote 1] Government of South Australia (2013) Response to the Productivity Commission's Position Paper for the Review of the Australian Automotive Manufacturing Industry, February; Australian Manufacturing Workers Union (2014) Final Submission to Productivity Commission Review of Australia's Automotive Industry, February; J. Spoehr (2014) Foundations for Industrial Rejuvenation: Lessons from International and National Experience, Adelaide, Australian Workplace Innovation and Social Research Centre, The University of Adelaide.

[footnote 2] Ford Motor Company of Australia Ltd (2013) Submission to the Productivity Commission Review of the Australian Automotive Manufacturing Industry, November.

[footnote 3] See Ford Transition Project, Ford Transition Project website.

[footnote 4] C. Couzens, Member for Geelong, Victorian Legislative Assembly, Interview with author, 28 June 2016; R. Hope, Ford Transition Project, Area Coordinator (Geelong), Auto Skills Australia Ltd, Interview with author, 20 September 2016.

[footnote 5] GM Holden Ltd (2013) Submission to the Productivity Commission Review of the Australian Automotive Manufacturing Industry, 27 November.

[footnote 6] Toyota Australia (2013) Initial Submission to the Productivity Commission Review of the Automotive Manufacturing Industry, November.

[footnote 7] A. Patty, C. Jenkins & N. Toscano (2014) Toyota job losses: Sydney office to be closed, Sydney Morning Herald, 4 December.

[footnote 8] See also Productivity Commission (2014) Australia's Automotive Manufacturing Industry, Inquiry Report No 70, 31 March, Canberra.

[footnote 9] T. Sturgeon, J. Van Biesebroeck & G. Gereffi (2008) 'Value chains, networks and clusters: reframing the global automotive industry', Journal of Economic Geography, 8, pp. 297-321; N.M. Coe & H.W. Yeung (2015) Global Production Networks: Theorising Economic Development in an Interconnected World, Oxford, Oxford University Press.

[footnote 10] Productivity Commission (2014) op. cit.

[footnote 11] Federal Chamber of Automotive Industries, Submission to the Productivity Commission's Review of the Australian Automotive Manufacturing Industry, 2013.

[footnote 12] B. Barbaro, J. Spoehr & NIEIR (2014) Closing the Motor Vehicle Industry: The Impact on Australia, Adelaide, The University of Adelaide.

[footnote 13] J. Dowling (2014) Why 200,000 car jobs won't be lost, CarsGuide, 15 April.

[footnote 14] In response to FCAI (2013), the Productivity Commission (2014) claimed that 50,000 was an overestimate because their analysis included significant layoffs from truck, bus and trailer manufacturers, their suppliers and aftermarket (i.e. retail components, spare parts and accessories) producers. The Commission claims that these companies will not be severely affected by the cessation of car manufacturing. Equally, however, the Commission's analysis was primarily focused on the auto assembly and supply companies likely to close and is less sensitive to the numbers of employees likely to be cumulatively retrenched by supply companies that choose to continue operations with fewer workers.

[footnote 15] Senior Victorian Public Servant A, Interview with author, 6 July 2016.

[footnote 16] C. Ondarchie, Shadow Minister for Investment and Jobs (Victoria), Interview with author, 19 June 2016.

[footnote 17] B. Bluestone & B. Harrison (1982) The Deindustrialisation of America: Plant Closings, Community Abandonment and the Dismantling of Basic Industry, New York, Basic Books; C.C. Harris and the Redundancy and Unemployment Research Group, University College of Swansea (1987) Redundancy and Recession in South Wales, Oxford, Basil Blackwell; J. Rubery & F. Wilkinson (1994) Employer Strategy and the Labour Market, Oxford, Oxford University Press; L. Morris (1995) Social Divisions: Economic Decline and Social Structural Change, London, UCL Press; P.M. O'Neill (1996) Capital, Regulation and the Region: Restructuring and Internationalisation in the Hunter Valley, NSW, Unpublished PhD thesis, Macquarie University; R. Milkman (1997) Farewell to the Factory: Auto Workers in the Late Twentieth-century, Berkeley, University of California Press; J. Cowie (2001) Capital Moves: RCA's Seventy Year Quest for Cheap Labor, New York, The New Press; E. Eklund (2002) Steel Town: The Making and Breaking of Port Kembla,Melbourne, Melbourne University Press. For details from the major study of Mitsubishi's closure of car manufacturing in Adelaide a decade ago, see A. Beer et al (2006) An Evaluation of the Impact of Retrenchment at Mitsubishi Focusing on Affected Workers, Their Families and Communities: Implications for Human Services Policies and Practices, HSRIP Report, Flinders University, Adelaide.

[footnote 18] S. A. Weller & M. J. Webber (1999) 'Re-employment after retrenchment: evidence from the TCF Industry Study', Australian Economic Review, 32, pp. 105-129.

[footnote 19] M. J. Webber & S. A. Weller (2001) Re-fashioning the Rag Trade: The Internationalisation of the TCF Industries in Australia, Sydney, UNSW Press.

[footnote 20] S. A. Weller (2009) 'Critical events and labour mobility: Relocations in the wake of the Ansett Airlines collapse', Geographical Research, 47(3), pp. 242-55.

[footnote 21] Australian Bureau of Statistics (2015) Employed Persons by Industry Division of Main Job (ANZSIC), Catalogue 6291.0.55.003, Canberra.

[footnote 22] Oxford English Dictionary, www.oed.com.

[footnote 23] G. Osborne, Manager, Economic Development, Hume City Council, Interview with author, 19 September 2016.

[footnote 24] Productivity Commission (2014) op. cit.

[footnote 25] Australian Government, Growth Fund, Grants and Assistance, business.gov.au website.

[footnote 26] $30 million of this total investment, initially earmarked for a Regional Infrastructure Program, was withdrawn by the government.

[footnote 27] Victorian Government, Victoria's Automotive Transition Plan, Department of Economic Development, Jobs, Transport and Resources website.

[footnote 28] Ondarchie (2016) op. cit.

[footnote 29] Senior Victorian Public Servant A (2016) op. cit.

[footnote 30] T. Barnes, J.M Roose, L. Heap & B.S. Turner (2016) 'Employment, spillovers and 'decent work': Challenging the Productivity Commission's auto industry narrative', Economic and Labour Relations Review, 27(2), pp. 215-230; S. Clibborn, R.D. Lansbury & C.F. Wright (2016) 'Who killed the Australian Automotive Industry: the Employers, Government or Trade Unions?' Economic Record, 35(1), pp. 2-15.

[footnote 31] Productivity Commission (2014) op. cit.

[footnote 32] Australian Government, Automotive Diversification Programme, business.gov.au website.

[footnote 33] Victorian Government, Automotive Supply Chain Transition Program, Business Victoria.

[footnote 34] Victorian Government, Funded Recipients, Automotive Supply Chain Transition Program, Business Victoria.

[footnote 35] This finding is based on a 95 per cent confidence level and a five per cent margin of error. Further findings will be outlined in future reports and academic articles, including the level and type of assistance provided by employers for re-employment options and workers' access to available assistance under Federal and State Government auto transition policies, as well as satisfaction levels with this assistance and future work and wellbeing outcomes for those who have accessed assistance versus those who have not. Furthermore, while it would be preferable to achieve a representative sample of all auto workers—not just trade union members—the only way to do so would be to obtain the cooperation and collaboration of employers. This has proved to be impractical, not only because the car manufacturers have not been convinced to participate in this type of research but also because the large number of components manufacturing companies, which employ the majority of workers, would make access to achieve a random sample extremely difficult. Thus, partnering with the trade union movement represents the most feasible option to undertake this project.

[footnote 36] This proportion would arguably be higher if we were able to include non-union members in the study since workers are less likely to be union members in the smaller, lower-tier components manufacturers.

[footnote 37] M. J. Webber & I. Campbell (1997) 'Labour market outcomes among retrenched workers in Australia: a review', Journal of Sociology, 33(2), pp. 187-204.

[footnote 38] Ford Transition Project (2016).

[footnote 39] Hope (2016) op. cit.

[footnote 40] ibid.

[footnote 41] ibid.

[footnote 42] ibid.

[footnote 43] Australian Government, Automotive Industry Structural Adjustment Program, business.gov.au website.

[footnote 44] Australian Government, What's Next? Support for retrenched workers, business.gov.au website.

[footnote 45] P. Canavan & M. Polglaise, Department of Education and Training (Victoria), Interview with author, 29 June 2016.

[footnote 46] Canavan (2016) op. cit.

[footnote 47] Polglaise (2016) op. cit.

[footnote 48] Productivity Commission (2014) op. cit., p. 205.

[footnote 49] ibid.; P. Gretton (2013) On Input-Output Tables: Uses and Abuses, Staff Research Note, September, Canberra, Productivity Commission; Barnes et al (2016) op. cit.

[footnote 50] A. Beer (2008) 'Risk and return: housing tenure and labour market adjustment after employment loss in the automotive sector in Southern Adelaide', Policy Studies, 29(3), pp. 319-30; S.A. Weller (2009) 'Critical events and labour mobility: Relocations in the wake of the Ansett Airlines collapse', Geographical Research, 47(3), pp. 242-55.

[footnote 51] Beer et al. (2006) op. cit., pp. 62, 65.

[footnote 52] Government of South Australia, op. cit., p. 16.

[footnote 53] Australian Government (2015) Geelong Region Innovation and Investment Fund (GRIIF) Factsheet, Canberra, Department of Industry and Science, March.

[footnote 54] ibid.

[footnote 55] This total is lower than the 1440 jobs listed in Tables 3 (838 jobs) and 4 (602 jobs). These tables indicate the funding that the Federal Government has offered companies, not the funding that has been taken-up by companies. The actual number of jobs expected to materialize is lower than indicated in these tables, with an estimate of just over 800 jobs for the Geelong region and nearly 490 for Melbourne's North—hence the stated figure of around 1300 jobs (Federal Public Servant A, Interview with author, 23 August).

[footnote 56] G. Dundas (2014) MPs hit back at union jibe over use of GRIIF, Geelong Advertiser, 20 November.

[footnote 57] M. Vamvakinou, Federal Member for Calwell (Labor), Interview with author, 19 September 2016.

[footnote 58] Christine Couzens, Member for Geelong, Victorian Legislative Assembly, Interview with author, 28 June 2016.

[footnote 59] Ondarchie (2016) op. cit.

[footnote 60] Federal Public Servant A, Interview with author, 23 August 2016.

[footnote 61] Senior Victorian Public Servant A, op. cit.

[footnote 62] Senior Victorian Public Servant B, Interview with author, 8 June 2016.

[footnote 63] C.S. McDonald et al (2010) 'An evaluation of the economic approaches used by policy actors towards investment in place-based partnerships in Victoria', Australian Journal of Public Administration, 69(1), pp. 9-21.

[footnote 64] Osborne (2016) op. cit.

[footnote 65] For critical reflections on this 'new regionalist' thinking, see J. Allen, D. Massey & A. Cochrane (1998) Rethinking the Region, London, Routledge; S. Christopherson & J. Clark (2007) Remaking Regional Economies: Power, Labor and Firm Strategies in the Knowledge Economy, London, Routledge.

[footnote 66] Australian Government, Next Generation Manufacturing Investment Program, business.gov.au website.

[footnote 67] Senior Federal Public Servant A (2016) op. cit.

[footnote 68] Victorian Government, Local Industry Fund for Transition, Program Guidelines, Department of Economic Development, Jobs, Transport and Resources website.

[footnote 69] Senior Victorian Public Servant B (2016) op. cit.

[footnote 70] ibid.

[footnote 71] G. Williams, Member for Dandenong, Victorian Legislative Assembly, Interview with author, 30 June 2016.

[footnote 72] S. George, Manager, South East Business Networks, City of Greater Dandenong, Interview with author, 22 September 2016.

[footnote 73] ibid.

[footnote 74] ibid.

[footnote 75] V. Sathe Brugeman, K. Hill & J. Cregger (2011) Repurposing Former Automotive Manufacturing Sites: A report on closed auto manufacturing facilities in the United States and what communities have done to repurpose the sites, Ann Arbor, Michigan, Center for Automotive Research, November.

[footnote 76] Osborne (2016) op. cit.

[footnote 77] Couzens (2016) op. cit.

[footnote 78] Hope (2016) op. cit.

[footnote 79] Senior Victorian Civil Servant A (2016) op. cit.

[footnote 80] Couzens (2016) op. cit.

[footnote 81] Williams (2016) op. cit.

[footnote 82] ibid.