No easy answers on GMH subsidy

There’s an old saying that you can tell the future by the shadows thrown by current events. The leading edge of a shadow is falling over Elizabeth and the local GMH plant in South Australia.

Holden employs about 2,500 at the Elizabeth plant and it’s estimated that those salaries support 10,000 people out of a total population of 83,000 residents in and around the City of Playford. According to the automotive ‘multiplier effect’ every Holden worker creates four to six jobs in South Australia along the supply and retail chain.

This is a story about the future of the automotive industry in South Australia and specifically Elizabeth. The knock-on effects of GMH leaving South Australia would have catastrophic knock-on effects for the local economy and especially for older workers.

Elizabeth is a short drive 20 minutes north of Adelaide’s CBD, where over the last 20 years, 10,000 people have lost their jobs and one third of working aged population are on Centrelink benefits. Youth unemployment is currently around 30 per cent.

Yet it was not always so. In the 1950s, Elizabeth began in optimism under Premier Tom Playford as a satellite city to house semi skilled U.K. migrants, many of who worked at GMH. Some of their sons and daughters still work there. They lived in government supported Housing Trust homes - the type I played in as a kid.

By 1960, Elizabeth was the second largest town in South Australia. The kids went to local schools, the government planted trees, and even built English-styled pubs. But from the early 1970s, the dream began to go sour. The economy turned down and unemployment rose.

Key Automotive Statistics 2011

Local Vehicle Manufacturers’ Profit Performance (Innovation, Industry, Science & Research)

The Commonwealth Government and the S.A. and Victorian Governments recently bought GMH’s goodwill over the next ten years with a $275 million injection to produce two new car lines until 2022. This gave the industry and Elizabeth especially, vital breathing space.

If GMH is planning to stay in Australia, over the next four or five years we’ll see more workers at the Elizabeth plant trained in high-end engineering and design skills in complex materials, lightweight metals, heat treatment of steel and complex electronics. The next generation of cars will use different materials and drive systems from what we use now. A failure to upgrade technology at the plant is a clear signal that GMH will pull out.

The $275 million ‘wages subsidy’ was a carrot to save jobs at GMH’s Elizabeth and Melbourne plants. The Commonwealth and state governments know it and GMH know it too. Premier Jay Weatherill flagged that the S.A. government was considering topping up monies to GMH but that was before BHP withdrew its support from the Olympic mine expansion, effectively knocking out the budget windfall of 10,000 jobs and $5 billion of potential revenue over ten years.

GM Holden managing director Mike Devereux said, “If you removed the co-investment, we (GMH) would be figuring out the most humane way to close this plant.”