Tag Archives: Judith Sloan

As the car industry dies

Yes, today is the nicest day of the week. After the weekend, after all done, it is again Monday morning. So, happy, happy, joy, joy!

I am waking up with the news ‘Shaken-up Aston Martin hopes to stir investors with a public offering‘. When it comes to cars, the Aston Martin is about the coolest car in existence. I would favour it over the Jaguar XF, the Infiniti Q60, the Tesla Roadster (2020) and the Lexus LC500, yet to be honest, I cannot afford any of them.

Now, I have nothing against cars, by themselves they killed each other. It was too much about ego, all about status and too few about what mattered, to get safely from A to B. So even as I have nothing against cars, the setting of those behind them? Yes, that matters a great deal, and most of them fuelling each other, most of them pushing for more models, more options and all financed in a try before the debt phase. Just like the PC industry. Makers having a dozen models every year, the market just could not sustain it and it collapsed. The same is happening here now in a few ways. We will always have a few exotic members (like Aston Martin), or a brand that is unique because of the niche they choose (like Morris Mini Cooper). For some of them, there will always be a market, they are established. The Japanese market made a mess of close to everything and now we see an entirely different kind of fallout. So even as we are treated to the ‘threat’: “Japan’s ambassador has warned Japanese companies will quit the country if a botched Brexit hits profits“, it is not a vague threat, but overall that does not matter and it has absolutely nothing to do with Brexit. You see, I discussed this in February 2014 when the Australians got confronted with ‘The last Australian car‘. Here we see: “The world’s largest car maker announced it would stop building cars in Australia by the end of 2017 and would operate in this country only as a sales and distribution company. One additional factor needs to be told, which will have bearing down the road. Namely “Toyota is Australia’s biggest vehicle exporter with around 70,000 of the 100,000-plus cars it builds here being sold in foreign markets”“. What is even more upsetting is the part that Business Insider gave with it and my response to it in the article (at https://lawlordtobe.com/2014/02/12/the-last-australian-car/) “The car industry is estimated to have received a total of $12 billion in direct subsidies and protections over the past 20 years, including $1.8 billion to Holden in the 11 years to 2012.” is at the heart of this. So basically, 4 car makers have enjoyed an annual $600 million in subsidies a year. This is so off the wall it is not even funny!” In addition, the Australian, via Judith Sloan gave us the overall view: “Australia has subsidised almost $1900 per vehicle produced. If we take that and we add the initial quote I mentioned “Toyota is Australia’s biggest vehicle exporter with around 70,000 of the 100,000-plus cars it builds here being sold in foreign markets” leaves me with the question whether we have been sponsoring that part too“. So here is the crux. This is not about mere profits; this is about subsidies and what I personally see as legalised slave labour. This is about maximised potential without accountability or taxation. In all this, let them move away, let other nations subsidise it all and when their coffers are empty, we will see another ‘Cars from Japan’ setting soon enough. From my point of view, let them move out and lose 65 million potential consumers. When those wells dry up, when they see that the free ride is over, they will suddenly offer some price package, or is that prize package?

The nice part is when those brands fall away; we will see a revitalisation of other brands, those who will grow inside the UK. It might be a harsh reality, but it is a reality none the less. Will consumers miss out? I do not know, their ego’s might, but in the end, if a decent affordable car gets you from A to B, does it matter? This goes beyond the British car brands and who owns then nowadays, Morgan is seemingly the only one still in British hands, but again a niche market. So if the Japanese walk away and Daewoo and Kia walk in, would that be such a hard thing? Then there is China and India. They might actually like having a much better spot in the UK car industry. Many brands left life over time, all killed by the subsidised markets and drowned by subsidised cheap options. Who even remembers the Dutch brand DAF, or the German brand NSU? We have options, there are opportunities and the bottom dollar that japan wants needs to be barred. In all that, the only acceptable conflicts were the ones that Honda and BMW offered, which are about customs delays. I believe that to be the valid part and for the most, it is not merely about custom deals. It is about the EU trying to pressure into a another vote, trying to get Brexit killed, because Europe has no actual solution for the debt now moving towards 3 trillion Euro that Mario Draghi created. Now with the Italian economy is an approaching freefall, unsurmountable debts, Greece still in a bad spot, Europe cannot survive without the UK, now that France is also lowering expectations via: “The French government has revised its growth forecast for 2019 downwards to 1.7 percent from 1.9 percent, Prime Minister Edouard Philippe told the Journal du Dimanche” also implies that the Economy is not really moving forward, creating a setting that the debts of Europe are becoming a much larger issue. All those interests, when they come due there will be no infrastructure. That is the setting and the 1500 voices in charge of all that money are seemingly now scaring 15,000 politicians into pressuring others, because their life of well-being is about to end and someone must pay for their way of life.

That is the setting that is behind the cars, not merely the cars, but when you realise that your taxes were funding cheaper build cars, please show me where you signed up for that part of the equation. You cannot, can you?

I do agree with Dr Paul Nieuwenhuis of Cardiff University. He is correct Aston Martin is making a move at the right time, and when the economy truly picks up, their fortune is set for close to two generations. They are in a niche, but one with a good margin and with the growing of millionaires all over the place, they are also creating demand, because getting seen in the 007 choice of wheels does count (as your ego is able to foot that bill) even as the car looks supercool regardless. And when you consider the quote: “Issues such as Brexit are quite different for Aston compared with mainstream manufacturers because it is not as reliant on the EU for sales as the volume producers“, when you consider transport and other elements, why were they in the UK anyway? With these brands margins were always the case, for well over a decade, so in all that, why were they here? Is the reason merely because there were 65 million optional consumers in the UK or because the EU was all about big business, and a lot less about the people living there? Well, that was a rhetorical question, because Reuters in 2016 gave us:  “Compensating carmakers in Britain for any post-Brexit tariffs on exports to Europe could see the government hand the companies more money than they need to pay the salaries of all their British workers, a Reuters analysis of corporate filings shows“, that was exactly the image that we saw in Australia and there is the crux, what is the use of having a company in the UK, when we see that the UK government is paying for the wages? Where was that ever a solution? A flawed presented image on the presentation of great industrial UK revenue whilst hiding some of the costs?

So many questions and in the end, merely a drain on the coffers, so let them leave, let them move to Germany (Mercedes & BMW will love that), or France (at the loving side of Citroen, Peugeot and Renault). So when the subsidies are demanded, will those local brands even accept that? I wonder how long until they move back east and let the reality of the cost of manufacturing hit these players full on. I wonder how many brands will still be around in 5-10 years. A lot less that seems almost certain, but that is pure speculation on my side.

 

Advertisements

Leave a comment

Filed under Finance, Media, Politics, Science

The last Australian car

Australian news has been all over the place. The one thing that is so expected is now on the fritz. Car makers are moving away from Australia. The events have not been out of the air, but what has been a revelation, is the amount of ‘subsidies’ the government had thrown into that direction to begin with. What can we (me, myself and my sources) tell you? First, the four big car makers in Australia were Ford, Holden, Mitsubishi and Toyota.

1. Ford
Last year, Ford announced plans to shut its two Australian plants in October 2016, blaming strong currency as well as high production costs that are hitting the manufacturer. These are all decent reasons, but I personally do not think that this was the whole picture. In addition Ford is cutting 300 jobs this June, which has some worried that Ford will leave before the 2016 announced point of departure.

2. Holden
Holden will be leaving Australia in 2017. Holden’s 2017 exit from its automotive assembly operations in Elizabeth put 13,000 jobs at risk in South Australia. (at http://www.theguardian.com/business/2014/jan/21/holden-exit-2017-sa-needs-330m).

3. Mitsubishi
Mitsubishi shuttered its assembly plant in 2008.

4. Toyota
The world’s largest car maker announced it would stop building cars in Australia by the end of 2017 and would operate in this country only as a sales and distribution company. One additional factor needs to be told, which will have bearing down the road. Namely “Toyota is Australia’s biggest vehicle exporter with around 70,000 of the 100,000-plus cars it builds here being sold in foreign markets” (at http://www.theaustralian.com.au/news/latest-news/toyota-to-make-major-announcement/story-fn3dxiwe-1226822810074).

So, by 2017 all carmakers will have bailed out of Australia. Why is this all a big deal?
Many will go directly for the job losses. ABC stated “The Australian Council of Trade Unions has warned the decision could cost as many as 50,000 jobs and wipe $21 billion from the economy as the impact rolls through the associated components sector” (at http://www.abc.net.au/news/2014-02-10/toyota-to-pull-out-of-australia-sources/5250114).

Is that all the truth? No! Listening to Labour leader Bill shorten is to hear a lot of misinformation and tweaked wordings. Labour had messed up a lot of issues. In my personal view, I personally think that Bill Shorten is not telling the whole truth because his lips are moving! Let’s not forget that the Liberals are not blameless either, the entire situation has covered both sides of the political aisle. Part of the disgrace can be read in the Business insider (at http://www.businessinsider.com.au/australias-car-industry-out-of-gas-after-billions-in-subsidies-that-were-always-going-to-lead-to-a-dead-end-2013-12) the quote “The car industry is estimated to have received a total of $12 billion in direct subsidies and protections over the past 20 years, including $1.8 billion to Holden in the 11 years to 2012.” is at the heart of this. So basically, 4 car makers have enjoyed an annual $600 million in subsidies a year. This is so off the wall it is not even funny! So our taxation goes to an industry who advertises a dozen times a day that they are so great? How can we take either the car industry, or the government in this regard serious? Let us not forget that Labour was part of this all as well. This also links back to the TPP (Trans Pacific Partnership). An interesting link we find is a Japanese site that had the following to say (at http://www.jama-english.jp/publications/tpp_pr_mar2013.pdf) “Japan’s auto market is completely open to other countries’ products. No restrictive customs or other regulations apply to imported vehicles.

What about the exported vehicle side of all this? If we see it in that light, we see that the TPP is opening up borders as it should, so, that from now on Japan (Toyota and Mitsubishi) as well as USA (Ford and Holden) have a dire reason to return to their home flock. The TPP is giving options to get these brands all home build. Whatever assurances we see now on support and spare parts will soon be removed too (like in the month as they leave). Yes, there will be a few ‘exclusive’ distributors, but as the TPP comes to full power, the entire online experience will not just hold books, movies and video games. they will likely include car parts soon enough. If you doubt this all (which would be fair), then consider the following article (at http://www.theaustralian.com.au/opinion/columnists/lies-damn-lies-and-car-subsidy-statistics/story-fnbkvnk7-1226824091831#), where writer Judith Sloan brings a case that Australia has subsidised almost $1900 per vehicle produced. If we take that and we add the initial quote I mentioned “Toyota is Australia’s biggest vehicle exporter with around 70,000 of the 100,000-plus cars it builds here being sold in foreign markets” leaves me with the question whether we have been sponsoring that part too.

Is this just the story? No! I think that there is more at play. Even though several sources are not making any mention of it, Ford and General Motors (Holden) are American companies and i think it is not just about removing plants, I personally think that members of the US government have had talks with all the big boys of industry. The American situation cannot continue. If America is to survive (which is slowly becoming less and less likely), they need taxable incomes. To get this done they will have to get the industry back. This will soon become an era of in-sourcing. This is not a new or a novel thought. It had been on the mind of many in 2012 and several articles had been written in 2013 that in-sourcing would grow big in USA. One of the people outspoken in that area had been Charles Fishman. Even though no one took him that seriously, the man appeared to have been right on the money. I personally think that it was the dumb spending sprees by both Japanese and American governments that forced the in-sourcing hand. This is also part of the pressure we saw in December as President Barack Obama spoke out for a quick closure of the TPP (it still think that the pharmaceutical patents are the largest part, but that I will cover at a later date).

Is it all a bad idea? No!

It is for us, but can you blame these two nations for thinking of themselves? It will however be important for us to find another solution. I already mentioned this on December 11th when I wrote about ‘The Holden circus’. If Toyota is leaving Australia too, then my thoughts on this are not just validated to some extent, they become a lot more important to follow up on. A nation of 23 million needs its own car industry. I do believe that it should not be subsidised, the designers just need to become really clever and we the people of Australia will need to support our own industry. If the Japanese and the Americans are all about nationalism (as we have seen on many occasion), then why not the Australians? If Japan and America walk away from a 23 million customer base, why should we keep any level of loyalty towards them?

We must all realise that we need to adjust our focus, we must change our way of working and thinking. We need to walk away from subsidies and sponsoring. We must move to an age where we design in a more clever way, we must bring to market in a brighter way and we must adhere to a different customer collective. The 4 brand approach to 12 models a year is just not sustainable. If these makers claim so, ten let them refund the subsidies!

When the last car is built in Australia, the eager beaver that launches their brand in Australia will start with the audience of a lifetime!

 

1 Comment

Filed under Finance, Media, Politics