Monday, December 09, 2013

QANTAS and Holden: do we assist?

Two important issues in Australia at the present time are the survival of QANTAS, the local carrier, and Holden as a car manufacturer. Both are iconic because of the place they occupied in the history of twentieth century Australia. Their problems have generated discussion focused on costs and workforce flexibility, feeding into current Australian political and economic debate on these issues. I take a somewhat different view.

Back in August 2011, I wrote of Qantas's problems in Visitor 120,000, structural change and QANTAS. A key point then was the progressive erosion of my own loyalty to QANTAS as a consequence of decisions the airline had made. Some of those decisions date back to the nineties, many came under the rule of Geoff Dixon, head of QANTAS from March 2001, others were made under current CEO Alan Joyce. Central to them was a regime that placed cost before customer. Cost is important, but if you lose your customers as a consequence then you have nothing.

I see QANTAS as an example of the problems associated with current management styles. Holden was always different, for here we have a branch office problem.

Even at its peak, General Motors Holden was always a small part of a global business empire, as were the other parts of the Australian automotive industry. Local operations were always going to be affected by global decisions. The Button car plan as well as subsequent plans centered on actions intended to influence decisions made within a global business structure.

That's fine, but the problem is that the success of those actions depended on influencing business decisions made elsewhere that were always going to be unstable. It's a bit like building a house on shifting sand where all you can do is shore up the foundations. The house survives for the moment, but only until the next shift.

Arguably, Australia got quite a good economic return from the early car plans. They facilitated lower tariff barriers, so we got cheaper cars. They encouraged growth of automotive exports, including components, to the point that these exports were Australia's biggest manufacturing export. However, the base was always unstable since it focused on the local rather than the broader industry dynamics.

In all these things, there comes an end point where additional resources simply try to ring fence what remains. On the evidence I have seen, we seem to be at that point with Holden. Perhaps time to let go, even if it means the end of the Australian automotive industry?

QANTAS is a little different. Maybe there is a case here for action, although I do object to providing funds to compensate for what I see as bad management decisions. Still, the case is arguable.  


On QANTAS, a piece in Macrobusiness  summarises an article by the former chief economist at Qantas, Tony Webber, on some of the causes of the airline's woes. On Holden, there has been a variety of opinions that I won't attempt to summarise. This is one example.

Meantime, the Government's calls for Holden to "come clean" on its intentions (this letter is an example) is just dumb policy and politics. You don't play like that in Government, no matter what you might do in opposition.          


Anonymous said...

Lots of emotive comments about "icons"; a dearth of facts; fear, uncertainty, doubt - always a solid foundation for wise decisions. Sounds like just another day at the office for proponents of economic rationalism.


Jim Belshaw said...

And their opponents, too, kvd!

Evan said...

I'd like to see some ideas on how to retrain current workers. You can do an awful lot of training for $100M a year I would think. And setting up manufacturing in industries with a future too I would think.

Anonymous said...

Holden has made a commitment to keep making cars in Australia for at least another 10 years in return for $275 million in taxpayer subsidies, but has promised nothing about jobs.

Without the commitment of $215 million from the federal government, $50 million from South Australia and $10 million from Victoria, Holden says it would have stopped making cars in Australia after 2016.

Holden's "Kodak moment" as reported March 2012 -


Jim Belshaw said...

Evan,the difficulty is that skills without jobs is problematic.

Jim Belshaw said...

Good lord, kvd. Always good to find stories from the past!

Scott Hastings said...

People whose jobs are not viable go onto the dole, that is, $11k a year. It's not clear to me why these particular non viable positions needed to be maintained at a cost of $50k a year. This injustice has cost us a hospital or three new schools each year over ten years. Good riddance to it!