Automotive Transformation Scheme Motions

I, too, rise to talk on this notice of motion because it is important for Australia, and for South Australia in particular where, as the media has been highlighting, unemployment is an issue. We are seeing numbers there that are the worst in the country and we need to be working to see those numbers reduce. Indeed, that is what the federal government is doing, and we encourage the state government to be working with us, as they are in some programs. We also encourage those opposite and those on the crossbench to work with us in terms of shaping the environment that allows people the confidence to invest in and create jobs in South Australia. I think it is important that we recognise that that environment is important as we come to talk about the automotive industry, the transformation scheme, and importantly the future that this government is seeking to shape.

I will briefly talk about that context before I go on to the initiatives that the government is putting in place for the future because those opposite have been making a number of claims that really do need to be put in context. The claim has been made that the closure of the automotive sector has occurred under this government’s watch. Having been in the lower house as the member for Wakefield, between 2004 and 2007, I know that even back then the large automotive companies were very focused on their global programs. I recall going to GM and seeking their cooperation so that we could invest as a federal government—then the Howard government—into research and develop production techniques and battery technology for electric cars so that Australia could play a leading role in developing what was then going to be a niche market. After a number of meetings it became very clear, in fact it was stated quite openly, that as far as GM were concerned they were a global operation, they had their research centres—I think Japan and the US were the two key ones—and no amount of incentive from Australia actually interested them in where they would change the focus of their research effort.

As we step forward, we see the response of the Australian consumer, who decides—and members opposite have acknowledged that people have voted with their feet and their wallets, and over the years they have increasingly moved to cars that are manufactured in Europe or Asia. Whether that is due to size or style or brand, who knows what the reason is? But the fact is that with the volumes that were being produced here, even when we worked hard—and both sides of politics have tried to work hard to get export markets for our manufacturers; Senator Gallacher correctly referred to the period when Holden in fact were able to increase their shifts again because we started to get an export market for cars into the United States—even with that, the global nature of those businesses meant that they made the decisions that it was not economic to continue manufacturing here in Australia. Mike Devereux, who was the CEO of General Motors at the time, said that a decision had been made because of their long-term business case that it just did not stack up and that those decisions were made quite separately from any government policies here in terms of the amount of subsidy or co-investment that we wanted to make.

So it is really important to recognise that there has been a change. Both sides can throw barbs. We can talk about things that the Labor Party did, and they can talk about our approach of supporting free markets, but the reality is that in the automotive sector the change has come about because of the global business model and the decisions—in my case, for South Australia—that General Motors made in the States.

The question is: what are we going to do about that? The Automotive Transformation Scheme is one of the responses that the coalition are sticking with, in that that scheme has been in place, and we are happy to stick with the guidelines on that to provide certainty to the industry because that enables people to plan for the future to transition and look for new opportunities. There are a couple of aspects that I think are important in that. One is that people who are involved in the component-manufacturing sector have opportunities that are being realised right now under the current scheme.

Let us look at Nissan Casting Australia. Everyone thought that, with the wind-down of vehicle manufacturing in Australia by 2017, they would be shutting up shop; their workforce would be dismissed, and those jobs would be lost to Australia. In fact, what has occurred is that, by working with the CSIRO, they have come up with new and improved manufacturing techniques. Working with overseas manufacturers from Nissan, they have made a decision now that they will continue to make parts for the Nissan LEAF, which is their electric vehicle—so that is a vehicle for the future that they will continue to manufacture parts for—and 38 other models. In fact, the demand is so high for them, because of their exports to Japan, the US, the UK, Thailand, Mexico and South Korea, that they are working three shifts, 24 hours a day, seven days a week to meet that demand. So even in this current environment—while people are saying, ‘The sky is falling; there’s gloom everywhere’—under the current rules, we see component manufacturers who are ramping up their production due to exports to the point where they have continuous operations.

And it is not only in Victoria. In South Australia, my own state, we are seeing the transformation scheme assist people who have been involved in the automotive sector to move from that sector into new sectors. Again, importantly, in terms of finding a market that is large enough that it will sustain production now and into the future, it is not domestic; that market is export. So we see that these people have moved from auto components. Heliostat SA, which is a subsidiary of what used to be Precision Components, now, using a $1 million grant, has moved into producing solar components for the Mitsubishi Hitachi Power Systems corporation. So they are now exporting advanced manufacturing, high-value components overseas to Japan as an alternative.

They are just two specific examples, but I would like to refer the Senate to an article by Peter Gill in March this year in the InDaily, which is a South Australian online publication, where he looks at research that has been done by an international research house into the automotive sector. This has been backed up by work done by the Productivity Commission. Their estimate is that after 2017, into the future, there will still be at least 50 per cent of the auto parts sector that will continue. They put that down to a number of things. One—as Senator Madigan, I think, or it might have been Senator Muir, mentioned—is the aftermarket sector, which is growing at around four per cent per year at the moment. There is the spare and replacement parts market. And, importantly, there is that export market, which, as we have seen, is not only existing but growing.

The potential is there for Australia because we are smart with our innovation. We make consistently high-quality products. That is why we see things like differentials that are made in South Australia being exported around the world—because we can provide consistent, high-quality products into markets in Europe and other places, and compared to Europe our labour costs are no higher. So those markets will continue and, if anything, they have the opportunity to grow, because this analysis that was being reported on by Peter Gill was done at a time when there was parity between the Australian dollar and the US dollar. As our dollar comes off, that makes our products even more competitive. What we are seeing there is that, in almost a worst case situation in terms of exchange rates, the industry will survive and in some sectors grow. They are saying ‘around 50 per cent’, but as our dollar comes off there is the potential for that to increase even further.

What are the other aspects of what the government is doing in looking to create jobs? The $155 million Growth Fund is one of the areas where we are seeking to work with industry and with state governments to put in place a balanced range of measures targeted to help the industry transition. Particularly for South Australia, one of the programs that has just been announced, which I am very thankful for, is the Next Generation Manufacturing Investment Program. Round 1 of that has been announced, with some $28.8 million to 15 businesses in South Australia. Importantly, one of the features of this program is that we needed to see co-investment by these businesses. They said, ‘Look, we have enough faith in what we’re doing and what we’re proposing in this new market that we’ll stump up our own capital.’ So these are leveraged complementary investments, and the total investment in new manufacturing capability is around $73.3 million. That is good news.

What it means is that we are providing the opportunity for people in South Australia who innovate to capture the market. We see large primes like BAE Systems, who have acted as a catalyst to feed funding and focus for defence programs—things like titanium milling to support the vertical tailfin production for the Joint Strike Fighter, which is then farmed out to a lot of other second-tier SMEs around Australia who contribute to that. We see companies like Leavitt Engineering, who have won funds under this program and are producing parts for the Joint Strike Fighter engine. We have seen their workforce not only grow but, importantly, grow in terms of the technology they are using and the complexity of the manufacturing they are doing. Not only do they have the Joint Strike Fighter program, they now have the design and manufacturing quality and capacity that opens up future markets for them.

One of the other significant recipients of funding under this program is Seeley International, which is a fantastic South Australian company. In fact, in the past Frank Seeley has been named South Australian of the year for his contribution not only to manufacturing but also to South Australia and our community more broadly. I particularly look at the investment he has made in things like the testing centre at Seeley International. This is an internationally certified and recognised testing centre. So for the first time we can compare different systems under controlled conditions and give very accurate results to companies that may want to design a specific system—and we see this going into everything from wineries, through to commercial premises and educational premises. Sometimes when they have specific moisture requirements, Seeley is able to tailor the design of a product to meet the customer’s needs.

Not only is this good for South Australia, but the export potential is huge. By using the natural cooling power of evaporation, this product—the Climate Wizard product that he has developed—dramatically reduces outdoor air temperature with very few moving parts. It is achieved with a ‘counterflow, water-to-air heat exchanger’—this is what I am reading from his website—and it is an innovation they hold a world patent on. The reason it is important is that it reduces energy by up to 80 per cent. The clients who have bought this technology can use it as a stand alone, or they can use it to precondition the air before it goes into a normal refrigeration-type system, and they are seeing the energy demand fall by nearly 80 per cent.

At a time when we are concerned about emissions; at a time when our society is, rightly, concerned about the cost of electricity, and about the capacity of our networks to provide, what we are seeing here is funding coming out of this transformation scheme and the next generation of advanced manufacturing investment. We are seeing support and development for this technology that has good environmental benefits; it has good technology benefits, in terms of supporting and growing that innovation; and, importantly, it is creating additional jobs that will benefit workers in South Australia and the South Australian economy. It supports that innovative approach.

The government is not resting on its laurels—it is keeping the Automotive Transformation Scheme in place; providing certainty to the sector; responding to the circumstances that it has inherited; and it is looking to the future. It is encouraging to see the companies that I have named—Heliostat and Nissan—and the study that is saying more than 50 per cent of the sector, in terms of the automotive parts, will survive. That is just in automotive—let alone those that transform into other areas, such as Heliostat. Importantly, the co-investment between industry and the state and the federal government means that we are moving ahead and creating opportunities for jobs, not just now, but jobs into an international market, which provides a much longer-term and more certain opportunity for export and manufacturing work in South Australia and around the nation.