Australia Reporting On Detroit Auto Show and Car Manufacturing Issues, Interesting

Detroit is poised to unveil more muscle cars at its international car show


WITH its derelict buildings and gutted high-rise facades, Detroit may be a grim backdrop for the North American automotive industry.

But as the motor capital of the world gears up for the first international car show of the year, the big US brands have their feet on the gas pedal.

Buoyed by the best sales in six years - after 15.6 million new vehicle deliveries in 2013 - Detroit is back in the fast lane in more ways than one, even if it still trails China as the world's biggest car market (a title it snatched from the US in 2010).

Over the coming days Detroit is poised to unveil more muscle cars, a high-powered version of the Corvette and an all-new Ford F-150; the nation's top-selling vehicle for 32 years and the most popular "pick-up" for 37 years in a row.

If it sounds like North America is yet to join the real world by unveiling such automotive excess, think again.

The new Ford F-150 is said to have a lightweight aluminium body, the first such change in the 111-year history of the Ford Motor Company, which is tipped to deliver massive fuel economy savings.

And the new high-powered Corvette sports-car from Chevrolet is said to have a new generation super-efficient V8 engine, even if it's still supercharged.

Nevertheless, when the doors to Cobo Hall open Monday local time for the 2014 Detroit motor show (about 1am AEST Tuesday) the industry will be putting on a brave face.

The city known as Motown is a shadow of its former self, with only two factories remaining, down from more than two dozen of two decades ago.

The population of Detroit is down by more than half, from 1.8 million in 1950 to just over 700,000 today. Unemployment is close to 20 per cent and, last year, Detroit was the largest municipality in US history to go bankrupt.

The murder rate is currently 10 times higher than New York City and 70 per cent of murders remain unsolved.

Most car factories have shifted to other US states, which have offered incentives for greenfield sites established by foreign brands. The Big Three - General Motors, Ford and Chrysler - regard them as the enemy from within.

Of the 39 car factories in North America, just two are in Detroit and only seven are in its home state of Michigan.

Having agreed to more flexible contracts with its workers, with support from the states they're based in, the foreign brands have developed an upper hand by setting up elsewhere across the US.

Last year, the Big Three brands built about 7 million vehicles on home soil; foreign brands built more than 5 million vehicles, leaving only about 3 million vehicles imported.

Which is why there won't necessarily be Armageddon when Ford, Holden and (probably) Toyota close their Australian factories.

Last year, Australian vehicle production fell to its lowest levels since 1958; it now represents such a small part of the market, the adjustment to the new world order has, largely, already happened.

The populations of South Australia and Victoria are still growing, and unemployment is below 6 per cent, not as high as 20 per cent like it is in Detroit. Even if every Ford, Holden and Toyota worker did not find another job, the unemployment rate would rise by about 0.9 per cent.

But a study by the University of Adelaide last year found that more than two-thirds of Australia's displaced automotive manufacturing workers will find new employment quickly.

Often overlooked is the fact that, since 2004, Holden alone has let go more than 5000 factory workers; currently there are only 5300 employees on the workshop floors at Ford, Holden and Toyota combined. And Australia appears to have survived the impact so far.

Many auto workers have ended up in other related industries, such as aircraft component manufacturing. US giant Boeing employs 1500 workers near Melbourne to make hi-tech wing components for the new 787 Dreamliner, for example, so highly regarded is our expertise.

Meanwhile, the closure of Holden's factory looks set to open up new opportunities for imported models now that, as insiders put it, "we don't have to put a ring fence around the locally-made models". That means, hopefully, Australians will have an even bigger selection of new cars from which to choose.

So while there will be much sadness about the passing of Australia's automotive manufacturing capability, and the livelihoods it will affect, the reality is it will, ultimately, provide an opportunity to reinvent ourselves. It's the unwelcome jolt we had to have.

Manufacturers in other countries continue to receive substantial taxpayer support - but they have much bigger car markets to sell into. Australia happens to be stuck in a corner of the world surrounded by countries with cheaper labour. No amount of government money could compete with that. Game over.

http://www.news.com.au/finance/busin...-1226800915644