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Postcard from the Bleeding Heart of Auto Manufacturing

Manufacturing

IT is all very easy to sit back and criticise Australia's 150 automotive supplier companies for failing to diversify out of the sector. 

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But that glib view looks cruel visiting Precision Components in Adelaide Thursday. 

The company turns over $25 million pressing, welding and assembling the largest steel parts used by Australia's three automotive manufacturers. 

With a dozen giant presses and 20 robots the company makes the very largest parts used in cars such as bonnets, boots and dashboard assemblies, products that incur a big transport cost when imported. 

To do this Precision, owned by the Fitch family, has taken a big bet on automation and its lean nature has allowed it to meet industry demands to cut costs by four per cent a year, year after year. 

There has even been $5 million invested in a robotic and laser cutting cell to hot-stamp high strength steel parts – the first time the technology has been used in Australia. 

And a similar amount has been invested in a facility in China to assemble parts for automotive gear boxes for local cars. 

It is no slouch of a company and unions here are certainly not an issue. There are no union members, wages are on the low end and skills and commitment are not in short supply. 

The issue is with rug suddenly pulled from under it, can it diversify totally out of automotive before 2017, a radical change that might normally take a business five years to achieve? 

A four-member team led by engineer Paul McKenna has certainly tried. 

Talks with agricultural machinery company, a pre-fabricated building company, a defence supplier and numerous start-up businesses are underway. 

But start-ups are never easy, the company has little experience in marketing except to three customers, buildings are very large and just don't fit into the factory and defence offers volumes of only a few hundred a year. 

Fitch could invest in any of these routes….but these are totally new businesses and ways of working….any capital investment would be carefully weighed against alternatives outside Precision such as leaving the cash in the bank. 

The sad truth is Precision is perfectly set up to supply thousands of parts an hour and allow for rapid tooling changes to large-scale pressed metal parts in high volumes. It is not well suited to anything else that is obvious, or that can be imagined even by the most optimistic. 

If a future can be found, Paul and his team will find it. 

But there are 33 similar tier 1 companies in Adelaide with only three or four thought to have any real prospect of diversification as each faces similar issues such as Precision. 

2017 looks like the end of the line for dozens of great supplier businesses and, perhaps, 

Peter Roberts is the founder of the Australian Manufacturing Forum.

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