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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.

The union hand on the wheel that doomed Ford

Wednesday, June 19, 2013

There's more to the Ford closure story than at first appears.

In fact, there's a monster truck crashing over the bonnets of the car manufacturing industry in Australia.  Unfortunately, no one seems capable of stopping its destructive progress. Sitting in the driver's seat are Australia's manufacturing unions shouting loud about 'workers' rights'.  These unions share a big part of the blame for the industry's progressive decline and job losses.

Certainly the high Australian dollar, intense international competition and failure to make cars that people want to buy are dominant reasons for the industry's problems. None of these can be addressed if managers of car plants can't effectively manage.  That's what's happened in Australia.

Since 2003 the Institute of Public Affairs has studied industrial relations agreements and how they impact on the capacity of managers to manage.  Ford, for example, has gone backward – in a big way.

IPA's assessment of Ford's enterprise agreement gave it a better score than Holden.  This was even though Ford had plenty of management restrictions under their agreement: casuals are not allowed; changes to production require union approval; changes to shift arrangements involve bureaucratic union processes, and; union delegates can take 12 months' leave for union training.

These management restrictions have nothing to do with 'workers' rights' in the common sense understanding of the term. Ford workers are paid very well. The restrictions instead are about unions exercising control of the way Ford is able to manage its business. Unions exercise power without accountability.

Ford's 2009 enterprise agreement went further to incorporate additional management restrictions on a similar scale to Holden. New 'consultative' committees were added. The committees 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.

The Gillard government's theoretical 'flexibility' provisions are useless. The Ford agreement only allows flexibility on two of the agreement's 375 clauses.

The unions fought hard for this Ford agreement. They organised two 24-hour strikes during negotiations.

Anyone who's had anything to do with running even the smallest of businesses would look at the Ford agreement and wonder how a business could operate. Probably, the Ford bosses at global headquarters in Detroit wondered the same thing.

Maybe, for many years, the Australian taxpayer funding of car manufacturing was some compensation for these agreements – $7 billion dollars taxpayer assistance to the industry from 2001-15 is a lot of money.

Ultimately, though, taxpayer subsidises of bad industrial agreements was not enough.

To survive it's about good cars being manufactured at internationally competitive levels. Obviously for Ford, Australia has failed. Unions can, of course, share the blame but also local Ford executives who agreed to managerially destructive agreements, and the Gillard government.

Gillard's Fair Work Act effectively forces businesses into union negotiations over clauses that are managerially damaging. The Fair Work Authority routinely backs unions in this process. It's about unions wanting and obtaining management control.

It's now time to wave goodbye to Ford. But hold on. Holden's industrial agreements are as bad as or worse than Ford's. It's probably happening now. Holden's bosses, also in Detroit, are comparing notes with Ford executives.  Keeping Holden going in Australia looks like a bad deal.
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