The manufacturing sector has lost 125,000 jobs in the last four years. Car component and manufacturing industries are over represented in that number.
The recent standoff between a Dandenong component manufacturer and unions highlights the problems the automotive industry is facing. The dispute was settled over the weekend with the company agreeing to raise its redundancy cap to 52 weeks.
This is not high in an industry beleaguered with high redundancy caps, often redundancy caps are in the 80-week plus zone. This is money that must be provisioned and can't be spent in capital improvement, restructuring and transformational changes critical for the continuity of the industries.
As commodities soften and China comes off the boil, the excessive cost and inflexibility of Australian working conditions has led businesses in China to start to invest in risky political opportunities in Africa for resources because the underlying workers' conditions in Australia are not sustainable. A number of Australian mining projects have been parked.
It is worth reflecting on the Qantas FWA decision to remind us that all is not lost for the courageous (but perhaps that is limited to those who can afford courage):
- FWA maintained that business is entitled to manage its own business without interference from workers or their union.
- It permitted flexible arrangements with contractors and refused to permit an alignment between workers’ conditions and contractors.
- It acknowledged that contractors are familiar and legitimate methods of engagement in a broad range of jobs and cannot be limited, made inefficient or too expensive through industrial bargaining.
There is much more in the decision but the central thrust is that unions have no entitlement to interfere in management prerogative. But who can afford the Qantas-style confrontation? The answer is probably not even Qantas when you look at the financial losses sustained, return on share value and share price.
The Qantas win cures only part of the problem. The real problem remains that wages are too high, conditions lack flexibility and the costs around maintaining workforces and restructuring are too high. We have seen several car component businesses go to the wall in the last year. All have been victims of the high dollar, the push by car manufacturers for lower costs and the unacceptable working conditions in the sector.
It is worth remembering that manufacturing creates around five or six jobs for every direct job. The problems associated with the inability to restructure and transform in the automotive sector will have a massive impact on Australia and particularly Victoria, NSW and South Australia.
As mining comes off the boil the absence of a strong and resilient manufacturing industry will be very damaging to our economy. Will the AMWU and other related unions in manufacturing learn these lessons? Unfortunately, I think not.
Andrew Douglas is a principal at M+K Lawyers and is a specialist in workplace relations law.