A recent survey highlights an ongoing restructuring of the auto components industry as it responds to the impacts of globalisation in the world’s automotive industry and other factors including the high dollar, rising costs and climate change related issues.
The Australian Industry Group-Deloitte National CEO survey indicates that these pressures have led to auto parts makers increasing efforts to search for overseas markets and greater integration in the global supply chain, particularly through closer liaison with customers and suppliers. There has also been a greater focus on operational improvement, particularly through a strong focus on lean manufacturing and the creation of new products and services. In addition, and mirroring developments in overseas competitors, firms in the sector are focussing on organisational innovation.
The survey, Driving on Innovation and Competitiveness, also shows that skill shortages are continuing to bite and is constraining innovation, with no less than 81.5% of respondents indicating that a shortage of skilled labour is affecting them to some extent. Our survey also reports the growing importance of environmental issues with increased interest in green products and in environmentally sustainable processes.
The survey involved the CEOs of 150 companies (98 producing automotive components and 52 who had exited component production and were now making other goods) employing 12,500 people and representing sales revenue of around $4.9 billion.
Ai Group Chief Executive Heather Ridout said the survey provides an important snapshot of the pressures on the industry ahead of the Federal Government’s Bracks Review of the sector due to be presented to the Government this week.
“The study shows an industry responding to intensifying global pressures. The impact of the higher dollar in particular has resulted in a loss of competitiveness, higher import penetration, weaker export returns and lower margins.
“Restructuring in the sector is understandably intense, with a remarkable 52 of the Tier two firms surveyed indicating that they no longer supplied to the auto parts industry.
“In addition to this more drastic restructuring, businesses remaining in the sector are very active in exploring a range of new directions. These include expanding offshore activity through outsourcing or through new investments abroad. For example, one in five CEOs expect sales growth in the US and Asia-Pacific over the next three years and around 11% expect growth in China. Around 50% of automotive components manufacturers have switched (to varying extents) to lower cost suppliers in China over the past three years.
“In terms of the policy settings being considered by the Bracks Review, an important message from the survey was that any policy solution must be consistent with the rapid globalisation of the industry. Government support should be built around strengthening capabilities and competitiveness, and attracting investment into Australia from the three multinational car companies,” Mrs Ridout said.
Deloitte’s Australian leader of Manufacturing and Automotive Industry Groups, Tom Imbesi, said the report showed companies were committed to achieving international benchmarks.
“Global competitiveness and key initiatives such as the Automotive Co-operative Research Centre were seen in the report as helping companies to develop a stronger focus on innovation.
“The local industry also needs to develop a greater focus on building markets overseas given that local vehicle production is expected to be flat in the near term.
“The most significant external change that will assist the local industry is a significant increase in local production numbers. In this regard recent announcements regarding the production of the Ford Focus and the Hybrid Camry are very encouraging and highlight that Australia can successfully compete for new vehicle builds,” Mr Imbesi said.