When Peter Rowland was setting up mobile X-ray start-up Micro-X, he cold-called Holden’s human resources manager in Adelaide: “You might just hang up on me but I want to steal your best and brightest,” he told the surprised executive. “So we can do this the easy way or the hard way.”
The audacious call paid off. “The whole Holden management got behind us really strongly and actually set up interviews and made recommendations about candidates because they saw it as a huge motivational tool for their staff who were staring at a pretty bleak future,” Rowland tells BOSS.
Micro-X is designing one of the world’s lightest mobile X-ray machines for use in remote locations, with a team that includes seven former Holden car manufacturing workers.
High-tech manufacturing is one possible escape route for former workers at the big three car makers as they shut up shop, and other manufacturers forced to the wall by Australia’s high costs. But opportunities like those offered by Micro-X are rare. Most Australian manufacturing firms aren’t moving up the value chain and embracing the advanced manufacturing attributes required to compete in global markets.
Bleak picture
In a blow to the Turnbull government’s $1.1 billion innovation agenda, a report from the Advanced Manufacturing Growth Centre paints a bleak picture. Most manufacturing firms fail to exhibit vital attributes such as research and development collaboration, introduction of new products and processes, use of science, technology, engineering and maths (STEM) skills, and exporting or increasing use of IT, the AMGC’s Sector Competitiveness Plan says.
“I think there is a knowledge gap in our wider manufacturing base on how to become more competitive, namely through advancing manufacturing techniques rather than cost competitiveness,” AMGC chief Jens Goennemann says.
There are huge knowledge gaps: robotics and automated production; materials and composites; digital design; 3D manufacturing; sensors and data analysis; bio-manufacturing; nano-manufacturing, micro and precision manufacturing; and virtual reality systems. Australian firms do much less R&D; than those in America, Japan and Germany, management is weak and labour productivity is only 60-65 per cent of international benchmarks.
Enormous upside
The report holds out a prize for Australian manufacturers that move up the value chain: a 25-35 per cent increase in value for the $100 billion sector during the next decade. Deloitte finds similar advantages. “The upside is enormous,” Goennemann says. “There is a lot of work to do, no doubt, but I think the willingness to compete is certainly there.”
Australian firms have one big advantage: the skilled workers needed to drive up the value chain are 38-40 per cent cheaper than US counterparts, at least in medical devices and aerospace. That should make it cheaper to design and build better products, do more R&D; and collaborate with research agencies to gain a technical edge, pinpoint untapped markets, integrate into global value chains and boost scale and management.
If the AMGC can drag Australia’s manufacturing laggards into the 21st century, more of them may be able to offer jobs to refugees from legacy manufacturers.
Some firms are getting it. ResMed spends more than $100 million a year on R&D; and has 40 per cent of the global sleep aids market. Textron Systems Australia and Cablex make drones and short-run aircraft cables for global markets. Working with Deakin University near Geelong, Quickstep has created new ways of curing carbon fibre resins for automotive, aerospace and defence. Carbon Revolution makes the world’s first volume production carbon fibre wheels and has won niche contracts from Ford Motor Company.
Skilled engineers
Carbon Revolution employs about 20 former Ford workers and at least another 10 from Toyota, Qantas maintenance and Chassis Brake International at Deakin’s Waurn Ponds campus. As it grows, it will employ more, says chief executive Jake Dingle. “They are very valuable to us.”
Codan, which makes metal detectors, radio communications equipment and tracking devices for the mining, defence and consumer markets, wants to employ former Holden workers in Adelaide. “We have moved into Mawson Lakes [Adelaide] which is right in the catchment area,” chief executive Donald McGurk says. “There are a lot of very skilled people in Holden’s workforce and not just in manufacturing but right through the supply chain.”
Codan is eyeing Holden’s skilled engineers, and sales and marketing workers, although it has reduced its total Adelaide workforce from about 400 in the 1990s to about 300 today.
The shrinking workforce is a result of the company concentrating on higher-value, lower-volume products that face government regulation in Australia. At the same time it has added about 150-250 indirect employees at contract manufacturer Plexus’ Malaysia plant, where it has transferred low-value, high-volume production that needs low costs.
That underlines a big challenge. Too few school students are doing the higher maths necessary to study STEM disciplines at university and fill high-skilled roles in advanced manufacturing, and the proportion is declining, Engineers Australia says.
Not everyone needs a degree, though. What matters most are relevant skills, especially in new fields such as cybersecurity, data science, artificial intelligence and cognitive business, IMB Corp chief executive Ginni Rometty told US President Donald Trump in a letter.
Even so, despite Trump’s promise to create millions of manufacturing jobs in America, most low-skilled manufacturing jobs aren’t coming back.
Perfect storm
At Micro-X Rowland says they have a very simple recruitment process: former Holden and now Micro-X production manager Adam Williams phones up the best workers at Holden as the business expands.
“It’s been a huge roller-coaster ride,” Williams says. “You’ve always been hearing it was going to shut down but you never think anyone would actually make the decision.
“You put your heart and soul into the automotive industry but then you realise it’s about me and I need to protect myself and my family. To have an opportunity like this come up, I’d like to take hundreds more people from the automotive industry, they are the best at what they do.”
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