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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

IR deals hog-tie Holden

Friday, September 20, 2013

It was only the middle of last year that Ford announced it was closing. Now Holden is making the same threat, not directly but through what it seems is its chief lobbyist, the South Australian Labor government. This time, Holden is saying it wants another $275 million from government or it closes.

Yes, a local car manufacturing industry is important. Yes, let's help if it has a viable, profitable future. But there comes a point where propping up a bad business has to stop.

Holden has a special case to answer. For years it, like Ford, has been signing up to self-destructive union industrial relations agreements. The agreements have been happening for a decade or more. The issue has not been pay rates. Instead, agreements progressively have stripped away the capacity of managers to manage their business.

Typical car manufacturing agreements have prevented the use of robotics or outsourcing without union approval. Casuals are not allowed. Any contractors have to come from a union-approved list. Changes to production require union approval.

Changes to shift arrangements involve bureaucratic union processes. Union delegates are allowed 12 months' leave for union training.

These management restrictions have nothing to do with workers' rights. Car manufacturing workers are paid well. Instead, the agreements shift critical areas of control of the business from management to unions. The unions exercise this power without accountability.

Holden's agreements usually have been the worst of the three car manufacturers. They have "consultative" committees that are required to create processes to maintain established labour levels, assess requests for part-time employment, manage supplementary labour for weekend work and much more.

What this sort of thing entrenches in any business is poor productivity and endemic inefficiency. The margins and competition in any industry, let alone car manufacturing, are too tight to allow such a situation.

Toyota knew it had a problem. Early last year, it pushed through significant changes to its industrial relations arrangements. It was heavily criticised for doing so. Ford, however, gave up.

Holden says it has quite recently addressed its industrial relations issues. It says it has negotiated with the workforce and unions to fix the problems. But has it? The Australian car-manufacturing sector has been on a $7 billion taxpayer assistance package lasting from 2001 to 2015. Now Holden wants $275m more.

Remember where this money comes from. It's taken from the pockets of every Australian who pays income tax. The taxes that every small shopkeeper, tradie and IT contractor pays subsidise Holden. Small businesspeople don't receive or ask for similar government handouts. Holden does. It's big business welfare.

Holden needs to prove it's worth the money. For too long the car sector has done these bad union deals, then used the union connections to lobby governments for subsidies. It has entrenched bad management practices, then expected taxpayers to pay for the bad practices.

If Holden believes it's worth more taxpayer handouts it needs to demonstrate that, at minimum, it has firm management control of its business. It shouldn't bleat about Julia Gillard's unfair industrial relations laws and use this as an excuse. Holden signs agreements and Holden should control its business.

Taxpayer money can't be fed to Holden forever. It's about time Holden grew up as a business and stopped believing that Australian taxpayers owe it a living.

[First published in The Australian, September 2013]


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