The recent well publicised problems of Australia’s three carmakers has led to another round of politically opportunistic finger pointing at an alleged “industrial culture” that fosters low productivity and high wages.
According to this well-trodden argument, Australian manufacturing workers have had it too good for too long, and are to blame for the predicament their industry now finds itself in.
This is a gross slur upon Australian manufacturing workers who are not only among the most highly-skilled and productive in the world, but have never baulked at adapting to structural changes when a convincing business case can be made for it.
Once again, with GM Holden facing some unpalatable decisions, employees and their union representatives are prepared to work constructively to find solutions, but this won’t be helped by politicians and media commentators taking potshots at working conditions, and by implication, at workers.
And it is the height of hypocrisy for the senior management of GM Holden to be seeking pay cuts from their workforce, while declaring their own salaries won’t be touched.
A complex mix of circumstances has led to this crisis the Australian auto industry now finds itself in.
These include the impact of the high Australian dollar and foreign currency manipulation; the failure of the domestic manufacturers to adjust to the reality of a relatively small domestic market that has expressed a preference for small, fuel-efficient cars; the opening of trade barriers here that have allowed foreign makers to flood the market while new barriers have been erected overseas; and – in the case of Ford – the lack of a plan to produce cars for export to overseas markets.
The uncertainty created by the Coalition’s pledge to rip $500 million out of auto industry co-investment also cannot be underestimated.
To boil this down to a crude argument that it is all to do with labour costs and inflexible working conditions is simply wrong.
Wages and salaries make up roughly 17% of the cost of making a car in Australia – well below the figures of 60-80% that have been bandied around.
Cutting auto workers’ wages by 10% would save less than 1.7% of a firm’s expenses in the short term – a saving which is swamped by fluctuations in the value of the Australian dollar.
Australian unions have never been afraid to have a robust discussion about productivity.
We understand that higher productivity benefits everyone because it creates economic growth and wealth.
When the Australian auto industry underwent major structural reform in the 1980s and 1990s, it was achieved through constructive collaboration between industry and unions.
But with the election of the Howard Government in 1996, that approach shut down overnight, and over the next decade the Coalition government, for purely ideological reasons, encouraged employers not to engage with unions. That mistake must never be made again.
We will seek to engage with auto industry employers to achieve greater productivity through the high road of high performance and high trust workplaces, not the low road of cutting wages and conditions, or creating a more insecure workforce.
Innovation and R&D, investment in infrastructure and technology, skills development and training, and better management are the keys to increasing productivity.
A simplistic race to the bottom on wages and conditions is a dead-end strategy.
An edited and shorter version of this article was published in the Australian Financial Review on 24 June 2013.