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Issue # 1400      25 February 2009

Vehicle industry

A question of survival

On Monday February 16, 400 workers were stood down for a week in Albury, on the Victorian border, as their employer went into receivership. On the Friday they learnt that it would be for another week at least, and that many of them would not be coming back to work. They are now fighting for their jobs and $25 million of termination and redundancy entitlements that the administrator says the company does not have.

Feelings are also running strong throughout the community as Drivetrain Systems International (DSI), a manufacturer of gearboxes for motor vehicles, is a major regional employer with a long history in the town. After being stood down, the workers established a 24-hour picket. Their union, the Australian Manufacturing Workers Union (AMWU), has called on the federal government to help them.

As recently as the end of last year, when rumours were flying about the company’s future, the company assured them that their entitlements were secure. Now they have joined the many thousands of people around the world in the vehicle industry and their communities whose future livelihoods are in doubt.

The workers at DSI are determined to fight for their jobs and rights. The strength of feeling and importance to the local community is reflected in the local tabloid, the Border Mail which gave four to five pages of coverage including the front page under the headline “Dark Day”. This is on top of prominent reportage throughout the week following first stand-downs.

DSI, which had concentrated on the export market, came undone when its major customer, the Korean car maker Ssang Yong went into receivership in January. At its peak around 20 years ago, the business had 1,200 employees.

Successive changes in ownership at DSI have seen the number reduced to its present 400. Its workforce is highly skilled, with a very low rate of turnover. Some workers have been there as long as 35 years, and it is not uncommon for several members of the same family to be employed there. Any further cuts to its operations or its closure will be a huge blow to Albury as well as those directly affected. Job prospects for those sacked are extremely bleak, particularly its older workforce, in the current economic situation.

The closure of the company would also be a serious loss to the skills base of manufacturing in Australia. It does everything from design, engineering, to manufacturing the final product, light-weight aluminium gearboxes.

The administrators are attempting to re-establish DSI on a profitable footing so that it could be sold as an ongoing business, with a workforce slashed by half or even more. The administrator has indicated that sacked workers will have to apply for the federal government’s GEER scheme for any entitlements.

The legal entitlements of DSI workers include accrued annual leave, accrued untaken sick leave, all long service leave, outstanding wages and redundancy payment of three weeks pay for every year of service.

Under GEERS, there are strict limits on payments which fall far short of present entitlements. The most serious of these is the cap of 16 weeks wages for redundancy and no provision for accrued sick leave entitlements.

A worker with 30 years at the company stands to lose $90,000 to $100,000 of entitlements if denied their rights and left to the sink in the GEERS “safety net”. Those forced into retirement and looking to superannuation face another blow and serious loss following the massive hammering these funds have received during the financial crisis.

Global crisis

“It is a local industry caught up in broader global circumstances. Very weak domestic sales are leading to real problems with the standing down of workers in auto plants or non-production plants,” national assistant secretary of the Vehicle Division of the AMWU David Smith told The Guardian.

In Australia, the vehicle industry directly employs somewhere in the region of 12,000-15,000 people with another 30,000-50,000 in the manufacture of component parts. All of them are in trouble as overseas and domestic demand continues to contract.

Some component manufacturers have put their workforce on a four-day week in response to falling sales. Toyota has scheduled in 22 non-production days over the next couple of months. During that time workers will receive additional training. The impact of those non-productive days will be felt by component suppliers. Holden and Ford are also expected to cut hours as they further cut production.

In the USA, where the auto industry is the backbone of what remains of its manufacturing sector, the three major auto companies are battling for survival. Domestic sales were a steady 16 to 17 million on the vehicle market. Now, the industry is debating whether they will sell 10 to 12 million this year.

Holden has plans to speed up the closure of its 4-cylinder plant at Port Melbourne, as its parent General Motors in the US is fighting off possible bankruptcy. It has already been thrown a lifeline of US$13.4 billion (AU$20.9 billion) in emergency loans and is back begging for more. It plans to sack another 47,000 workers around the world, some in Australia.

Its US competitor Chrysler is also pleading for additional government assistance and has announced further job losses – 3,000 more for now. Ford does not look to be in any better shape.

There is more that the government could do to support component manufacturers. For example, make assistance to the car makers conditional on greater local content. Toyota, for example, is importing gearboxes. DSI is highly competitive; it must be to have been able to sell on the Korean market.

Protect workers’ entitlements

The GEERS scheme, set up by the former Howard government, would be a joke if it were not so serious. DSI is not the first company where workers’ entitlements have gone up in smoke and there are thousands more similar tragedies in the pipeline.

Unions have fought for greater protection for redundancy and retirement savings. Some gains have been made in particular industries, such as to protect long service leave and make it transferable.

Universal protection is required, and urgently. It is time the government set up a national scheme where employers who were not part of an industry scheme were obliged to make regular payments to ensure that workers’ entitlements are secure.

Mr Smith said that the government’s $6.4 billion package is very good for the industry in that it provides a lot of incentives to develop new technologies. “If the economy starts to grow it will provide the incentives … Today the question is of survival, to get to that point.”    

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