When the factory doors swing closed at General Motors Holden and
Toyota in 2017, it will mark the end of an era. Australian car
manufacturing—at least in the classic, heavy production line
sense—will be over.
But even before clang of the gates is heard, the ripples are
spilling outwards and suppliers and workers are being rocked by the
waves. Some will take on too much water and sink. Others are
setting a new course and rowing hard.
The issues industry decline raises for participants, including
planning for the new reality, managing staffing levels and
understanding directors duties and other insolvency issues, are not
only relevant to the automotive sector. Sectors including aluminium
smelting, power generation, media and retail are all undergoing
rapid change as technology and new ways of doing business sweep
across Australia. More than 2,700 businesses went into
administration in 2012-13, which was the second worst year on
record for business failure.
Federation of Automotive Parts Manufacturers President Jim
Griffin said the industry's big players had a "moral"
to help smaller suppliers who might have invested heavily in plant
or equipment that will soon lose its value. "It's up to
individual companies to negotiate with their customers, but I would
hope they would do the right thing."
Many tools used by suppliers are owned by the car-maker itself,
and those will be collected and moved elsewhere in the world as the
car-maker leaves Australia. Limited volumes of parts making would
continue in Australia for ten years as car companies met their
obligations to provide spare parts, Mr Griffin said.
"That's quite a complex issue and it is going to need to
be addressed by the three car makers."
At Dolphin Products in Melbourne's north, owner Mario
Turcarelli is pleased his plastic moulding company has three years
to plan. "Forty per cent of our business is Holden so we will
be impacted," he says. "We are working hard on our sales
and marketing diversification plan, we have a couple of years to
diversify into medical and food packaging and homegoods."
Turcarelli was an employee of the company just a few years ago.
He bought the company when its foreign owners decided to shut it
down, and set about making it profitable again. He has managed that
through careful rationalisation of property—the warehouse and
factory are now co-located—as well as building new markets.
But the end of the contracts with Holden will blow a hole in the
profitability Turcarelli has restored. "We will see a tapering
down as they stop buying that product... There's nothing in
those contracts, we don't get compensated in any way."
Similar planning scenarios are playing out all over the country
as suppliers manage the end of relationships they may have had for
decades. Not everyone is as hopeful as Mr Turcarelli. The
Federation of Automotive Parts Manufacturers says thousands of jobs
have been put at risk as the anchor businesses in the sector
committed to pulling out.
Companies that are not going to survive must also plan for their
future, including what they will do with leases and staff. For
example, many rounds of redundancies may be required at Toyota,
Ford and Holden as they shrink their output. Rules around
redundancies will differ between the big three car makers and the
smaller suppliers, depending on entitlements written into
With good planning, some companies impacted by the end of the
Australian car manufacturing era will stay afloat. Those that are
sinking have a number of options, including being wound up. Solvent
businesses that are wound up must cancel their ABN and GST
registration with the ATO, and retain all business records for five
years. Companies must ensure they do not trade while insolvent. If
creditors are left in the lurch, the business can be liquidated and
assets will be sold. ASIC provides for "serious
penalties" for directors who permit businesses to trade while
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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