What is the future of automotive component manufacturing in Australia, why is Australian manufacturing losing ground as recently reported by the Boston Consulting Group (Sirkin et al August 2014*)?
- Why is US manufacturing more competitive than it was a few years ago?
- Why is the UK the lowest cost producer in Western Europe?
- Why is Mexico now cheaper than China?
- Why is Australia in the same category as France, Belgium, Italy and Switzerland?
Competitive Manufacturing Strategy
The Boston Consulting Group analysed the competitiveness of countries based on four key dimensions: manufacturing wages, labour productivity, energy costs and exchange rates. No matter where you are located, based on these factors most companies should be looking to re-evaluate their sourcing and manufacturing strategies to remain globally competitive.
Can a company wait for the government to do something about the automotive industry? Do Australian companies need hand-outs and subsidies to be competitive? The automotive industry is facing huge changes and consequential challenges. Owners can rue poor government policy over decades, poor decisions by car manufacturers in terms of products and production programs, labour productivity, the exchange rate and many other factors affecting the industry.
The key question is what is your company doing about it, what is your company changing to be competitive in the global market? The automotive industry is a global industry and how are Australian companies looking to compete on a global basis. What is your competitive advantage? How can you execute on a world stage.
In many instances once a company looses customers such as Ford or Holden in two or three years’ time, it is the end of the road. The company will have little if any value and what value is left is auction value of equipment for which there will not be many buyers! This will happen to a number of companies. Multinationals will however walk away to compete in other markets but locally owned business will have little place to go unless they embark on a focussed strategy to participate in the global market.
To achieve success internationally, requires:
- World class production facility and cost base – there are successful examples of this in Australia where companies will continue to manufacture competitively and profitably and export to a global customer base at global volumes.
- A product or technology which provides a competitive low manufacturing cost advantage or royalty stream for products produced elsewhere by others
- Critical mass. This will require local industry consolidation to establish companies which can overcome the loss of the local markets but aggregates technology, products and staff and which can then compete effectively in a global market.
What is your strategy for a successful future in automotive component manufacturing in Australia ?
*August 19, 2014 by Harold L. Sirkin, Michael Zinser, and Justin Rose