* Australian car industry doom and gloom overplayed
* Manufacturers diversifying at home and abroad
* Aftermarket products growing 3 pct yr-on-yr
* Govt support could boost aftermarket value to A$6.6 bln
By Jane Wardell and Maggie Lu Yueyang
SYDNEY, Dec 16 Harrington Industries Ltd, a
94-year-old privately-owned car parts maker, should be crushed
by the coming implosion of Australia's auto manufacturing
But Harrington is one of a savvy breed of engineering firms
that saw the writing on the wall long before General Motors
announced last week it would follow Ford Motor Co,
Mitsubishi Motors and Nissan Motor in halting
manufacturing in Australia.
Harrington recently completed work on a new plant in
Thailand, where there is a strong car manufacturing sector, and
from there plans to produce parts for GM, Ford, Futuris SA
and others. "We have tried to work around the fact we
knew the Australian auto industry was very vulnerable," Managing
Director John Harrington said. "We've sought to pick up extra
Similar diversification by Harrington's peers and solid
growth in the aftermarket sector - supplying anything from
fluffy dice to racing stripes - suggest fears that the collapse
of the auto industry will trigger economic Armageddon are
Australians have been bombarded with doom and gloom
scenarios since GM's affiliate Holden said last week it would
stop making cars in Australia by 2017 due to high costs and a
Ford announced in May it would shut its two Australian auto
plants for similar reasons in October 2016, while Mitsubishi
shuttered its assembly plant in 2008 and Nissan quit in 1992,
leaving Toyota Motor Corp as the last man standing.
But the dark mood belies a quiet transformational shift in
Australian manufacturing over the past decade or two.
While the number of vehicles manufactured has halved from
2003/04 to a projected 200,000 this year, automotive aftermarket
manufacturing is growing at 3 percent year-on-year, according to
independent advisory firm Grant Thornton.
"The industry has been transitioning for a while," said Mark
Phillips, a partner at Grant Thornton in Sydney. "It's just that
the pace of the transition has got a little bit faster than
SOUPED-UP CAR BOOM
The aftermarket sector is a significant growth area as more
Australians, flush with cash from the country's boom years,
customise their vehicles - from performance enhancing parts for
sport utility vehicles and 4-wheel drives to retrofit components
such as suspension for towing caravans.
Reflecting a passion for soup-ed up cars, Australians
elected an independent from the Australian Motoring Enthusiast
Party to the Senate this year. He has vowed to push for rights
to customise cars and to drive in national parks.
The aftermarket sector represents 36 percent of all
automotive manufacturing in Australia, providing direct jobs to
16,000 of the 45,000 people employed by the auto industry,
according to the Australian Bureau of Statistics.
With A$4 billion ($3.6 billion) in annual sales, it is less
exposed to factors driving the decline of the vehicle
manufacturing supply chain, including the strong Australian
dollar and phased tariff reductions.
"We have almost got a two-speed economy when it comes to
auto manufacturing," said Phillips, who produced a report on the
aftermarket for a government review into the industry this year.
"You have got the long-run suppliers that will suffer when
Holden goes. And then you have got the very nimble, short-run
innovative manufactured products where Australia still has a
massive competitive advantage."
Despite its small size, Australia ranks alongside Japan, the
United States, China and South Korea in production and
innovation in the subsector.
Its complex auto market - some 62 brands of vehicle are sold
in Australia, double the number on offer in the much larger U.S.
market - makes it adept at delivering products that work across
a large range of vehicles.
It is also a forward-looking industry, spending 1.4 percent
of sales on research and development, leading many companies to
branch out into non-automotive sectors, such as rail, defence,
mining and marine.
Harrington now makes products including hot water heater
components and lawnmower base plates. It also won the design and
manufacture tender for the Sydney 2000 Olympic torch.
Around half the company's sales are to the automotive
sector, of which 25 percent go to Holden. But John Harrington is
confident that both diversification at home and the company's
new facility in the Thai province of Rayong - an area dubbed the
"Detroit of the East" - will pick up much of the slack.
Car parts maker MTM Pty Ltd is also looking overseas,
deciding during Australia's last recession in 1992 to reduce its
reliance on local automakers and the boom/bust cycle they were
enduring even then. MTM took five or six years to win its first
export order, but now makes an all-terrain vehicle called the
Tomcar, sold to military forces, and Steelsafe, a device that
protects trucks from being stolen when parked.
"If we hadn't done anything for over the past 20 years, we'd
be in the same situation as everyone else," said MTM Managing
Director Mark Albert. "Thankfully, we've taken a lot of steps to
move outside the automotive industry in Australia."
Carbon Revolution, the maker of the world's first one-piece
carbon fibre wheel for cars, has signed a supply contract with a
global carmaker to start in early 2015, and is in talks with
airplane manufacturers. CEO Jake Dingle declined to give
details, citing client confidentiality, but said the company
planned to boost its workforce to more than 300 people in 3-4
years from just 40 today.
That's good news for GM and Ford workers.
"Their discipline, their understanding of automotive
manufacturing quality standards and manufacturing processes mean
it's very easy to train people to do the sort of work we need,"
Still, the experts say government support is needed to
"The priority is to direct resources that might be available
to the component supplier companies, to prevent as much as
possible the collapse of the supply chain on the back of Holden
collapsing," said John Spoehr, executive director of the
Australian Workplace Innovation and Social Research Centre at
the University of Adelaide. "A good number of the component
suppliers, with support, hopefully, will be able to withstand
Grant Thornton's Phillips said some simple policy changes,
such as harmonising federal and state laws covering aftermarket
products, could boost the sector's value by around 27 percent to
As in most advanced economies, manufacturing accounts for a
declining proportion of Australia's GDP, reflecting the growing
influence of services and information-based industries.
Australia's manufacturing sector has fallen to around 7
percent of GDP, according to World Bank figures, well below the
25 percent levels seen in the 1960s, and contrasting with 11-12
percent in the United States and Britain, and around 30 percent
But it remains a major employer, with 88,000 manufacturing
businesses employing some 940,000 workers - far more than the
mining industry, and similar to levels five decades ago.