Into the Fast Lane

The Australian automotive industry needs to pick up its game on industrial relations if it is to survive and justify continued taxpayer support.

The car industry has come a long way over the last twenty years.  It not only produces a world class product but has carved out a niche for itself in the tough world car industry.

There is no scope, however, for resting on it laurels.  The external environment is harsh.  The car industry world-wide has over-capacity in the vicinity of 25 per cent.  The Australian dollar has appreciated by around 30 per cent against the US dollar over the last eighteen months, with many pundits forecasting further appreciation over the next year.

The Government has also announced reductions, albeit slight, in the level of assistance to the industry.  Despite these reductions, the industry remains heavily subsidised at about $2,800 per locally produced car.  There is therefore no scope for additional support from Government.  Indeed there is strong need for the industry to justify its current level of taxpayer support.

This harsh climate means that the local industry must pick-up its game, particularly on the industrial relations front, if it is going to continue to thrive and even survive.

Over the last decade the industry has moved from industry-wide system to one based on enterprise bargaining agreements or EBA's.  The shift was designed to help erode the "them vs us mentality" that historically plagued the industry as well as to give workers an incentive to accept and gain from productivity improvements and to provide management with a greater capacity to manage and compete.

My recent study of the car industry found that the shift to EBAs is not working adequately.  The study, which examined 47 EBAs amongst the four large vehicle manufacturer and 43 components manufacturers, found that only four agreements allowed for increased capacity to manage.  Twenty three, or just less than half of the EBA's examined, yielded significant reductions in the managerial capacity.  Crucially, Toyota and Holden, two of the large manufactures, had respectively, the most and the third most restrictive EBAs.

One of the key needs of the industry is flexibility to respond quickly and efficiently to change in demand and workforce requirements.  Yet some 80 per cent of the EBAs studied restricted or eliminated the capacity of firms to use other than full-time collectively organised permanent employees.  These included prohibitions on the use of casuals, labour hire, contractors or individual agreements.

Consultative committee structures, which significantly reduced the decision-making capacity of management, were found in fully one-third of agreements.  These cover crucial decision-making processes including changes to production requirements, rostering, and occupational health and safety.  Some of the biggest names in the industry including Ford, Holden, Mitsubishi, Bridgestone and Toyota had particularly restrictive committee processes.

The clear conclusion of the study was that the move to enterprise bargaining in the car industry was, in general, reducing rather than as enhancing the capacity of the industry to compete.  This auger poorly, not only for the future of the industry, but for the billions of dollars invested annually in the industry by Australian taxpayers.

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