JOHN MENADUE. Cars, submarines –costs and jobs and a likely disaster.

Oct 11, 2016


Last week we saw the end of car manufacturing in Australia by Ford. It was a sad day for many people. Toyota and General Motors will be gone next year.

Joe Hockey goaded our car manufacturers to leave Australia. He obviously thought Australia would be better off without them. Instead this government which claim’s business and economic expertise has agreed to submarines being built in Australia at horrendous cost, at great risk and with few benefits.

The closing of the three car manufacturers and the much hyped submarine building in South Australia, is an example of flawed industrial policy and outrageous protection.

Comparing the motor vehicle industry and the proposed new naval shipbuilding in SA, Jon Stanford in his blogs ‘JON STANFORD. Business welfare under the Coalition: two case studies (1)’ and ‘JON STANFORD. Business welfare under the Coalition: two case studies (2)’, said

‘Car manufacturing, the imminent loss of which may cost an estimated 200,000 jobs, has an effective rate of assistance (ERA) of less than 8%. The proposed submarine acquisition will require an ERA in excess of 300%. In return, according to the Defence Minister, the project will create “1,100 jobs in the shipbuilding process, potentially 750 jobs in the supply chain”. As a payoff for such a high ERA this is a very damp squib … The Australian Submarine Corporation in Adelaide has been consolidating three air warfare destroyers (AWDs) for the last ten years. They have been plagued with cost and delivery overruns. Finance Minister Mathias Cormann has noted that “these ships are costing $3 billion a ship when equivalent ships from other parts of the world would have cost us $1 billion a ship”. Not only is the cost of the ships unacceptable, but they are already years late in delivery, leading to significant additional costs for the RAN.’

 In terms of jobs and minimizing protection, it would have been much better to retain the car industry and buy submarines off the shelf at a much lower cost. In any event, why do we need to buy large conventional submarines to operate against China in the South China Sea? Conventional submarines in the South China Sea will be no match for Chinese nuclear submarines. Furthermore there is no suggestion that the US would welcome our large conventional submarines in the South China Sea.

If a Labor Government had made anything like this submarine decision, the corporate media and business economists in The Australian and the Australian Financial Review would have been calling for a Royal Commission.

This submarine saga has a long way to run. It will probably require a Royal Commission to sort it out.

We had a Royal Commission on pink batts. But the cost and problems of that program were a drop in the ocean compared with the horrendous $50b cost of the future submarine project. And that $50 b is only starters when we consider the whole of life costs that we face,.

We need to grasp the nettle quickly by extending the Competitive Evaluation Process and resuscitating the Japanese and German proposals See what Hugh White says on competitive tendering. .’.acquisition strategy for the submarines almost guaranties a disaster, whoever builds them ’ See link. JON STANFORD. Business welfare under the Coalition: two case studies (2)

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