There are relatively few surprises in Holden's submission to the ACIS (Automotive Competitiveness and Investment Scheme) industry review.
The submission, released to the media last week, nominated the strength of the Australian dollar -- as much, if not more than tariffs -- as the principal issue affecting the competitiveness of local manufacturing. Not only does the value of the 'Aussie' potentially lead Holden's parent company to reconsider exports from the Elizabeth plant, but it also places hurdles in the path of attracting R&D efforts in Australia.
In the submission, Holden admits that the local market is increasingly diversified (or "fragmented" as it's explained in the executive summary) and this is detrimental to 'scale', meaning relative profitability of a locally-built product range limited to perhaps one market segment.
Holden is calling for wage restraint and effectively points the bone at the mining industry, an industry that has provided the impetus for the economy's recent growth -- but with unskilled labour frequently being paid massively more than the market could justify in a slower growing economy.
The high cost of labour throughout the country is rippling out from the mining industry and is forcing the adoption of increased automation in manufacturing industry -- in turn placing a cost burden on the car companies to remain competitive in both domestic and export markets.
With local manufacturing accounting for just 0.5 per cent of the automotive production, it's important, says Holden, that local manufacturers can integrate with their respective global partners to develop new models as cost-effectively as possible and be equal partners in R&D efforts, even to the extent of taking on the mantle of a global centre of expertise -- as Holden has done with GM's global large rear-wheel drive platform.
The downside to that argument is that it places companies like Holden in direct competition with other plants around the world to attract investment from the parent company.
From the government, Holden is looking for tariffs to remain fixed at 10 per cent, better taxation arrangements (including the removal of indirect taxation like payroll tax from the supply chain), a 'policy mechanism to dampen the effects of a strong currency', a "funding assistance scheme" to fund new investments and an increased commitment to purchase locally manufactured cars.
In addition, Holden submits that the government should continue to encourage innovation within the OEM parts supply industry, shoring up viability and international competitiveness of Tier 1 suppliers, through Automotive Supplier Excellence Australia (ASEA).
The company also requests the federal government consider expanding the purview of ACIS.
Finally, Australia's ratification of the Kyoto Protocol under the Rudd Labor Government places local manufacturers in the unambiguous position of needing to reduce CO2 emissions and fuel use further for locally manufactured cars -- endeavours that will cost more and may require additional assistance from the government.
Holden has invested $3 billion locally, during the past five years, of which one third was allocated to the development and production of the VE Commodore range and derivatives. Over half that investment returned in 2007 as revenue from exports ($1.56 billion).
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