It was two weeks to Christmas. Just another Wednesday. Day shift had been running since six in the morning and now that the clock had ticked on past midday, those working the assembly line at Elizabeth’s Holden factory were looking forward to going home. But behind the main administration building there was movement. A shop steward soon noticed figures on the grass setting up a stage, so he called up to the union seniors’ office to ask what was going on.
‘I don’t know anything about it,’ Darryl Waterman told him when he answered the phone, but the Australian Manufacturing Workers’ Union (AMWU) senior promised to take a look. He hung up and went down to investigate the administration building with Leanne[1], the other AMWU senior.
There they found Bob Glass. Now retired, back then Glass was Holden’s Director of Vehicle Assembly Operations and the factory’s second in command. Glass refused to answer any questions, saying that they’d both find out with the rest of the workforce.
Leanne said she needed a cigarette. She went outside with Darryl and they talked over what Glass had said. Both had a pretty good idea about what it meant.
‘The union had been telling the company that if you do get to a point where you are going to pull the pin, make sure the workforce is the first to know because in the past, decisions have been made and people hear about it on the media before we’re told in the factory,’ said Waterman, months later.
Rumour spreads like fire in large factories, so the pair decided to keep quiet and went back to their office where they called AMWU organiser John Gee. They told Gee what was going on and what Glass had said before suggesting he get over to the factory. As it turned out, Gee was already on his way. He had heard whispers about what was going on.
The pair met Gee at the gate. He had arrived at the main administration building just as word was getting round that the company was shutting down the line and pulling everyone out onto the grass. Gee shook hands with both seniors and looked each in the eye. ‘I think the decision we’ve all been trying to avoid is upon us,’ they remember him saying.
It was the middle of summer, 2013 and the clock was pushing 2pm. By now, there was nothing else for the three union reps to do except join the rest of the workforce outside. Together, everyone listened to Holden CEO Mike Devereux announce that the company was going to close the factory in 2017. Then Richard Phillips took the microphone. Phillips was the Executive Director of Manufacturing and the boss of the Elizabeth factory. Tall and square-jawed with an athletic build, Phillips spoke at length about the state of the business and praised the workers for their loyalty and service.
On the grass, the mood among the crowd was sombre. They had known this might be coming for some time, but now it was really here. Merry Christmas, Elizabeth.
The reaction was matter-of-fact. It had happened. It sucked. But it wasn’t up to them anyway. Mostly, people just wanted to go home and were relieved they weren’t one of those who’d be coming in for the afternoon shift in an hour.
After the Holden workforce was told, the company put out a notice to all Tier 1 and Tier 2 suppliers. From Elizabeth, or the City of Playford to use its official title, the news rippled outwards. Next to hear were the suppliers down the road at the Edinburgh Park’s Industrial Estate just outside neighbouring Salisbury – an old colonial town built along the trade route that eventually became Main North Road.
Then the news thundered south, radiating out along the plains past Mawson Lakes and Gepps Cross, down towards Adelaide. The car industry once dominated out that way too; from Holden’s Woodville factory in Adelaide’s west that operated in the 40s, to Mitsubishi’s Lonsdale factory right down near Reynella. Having a car factory in your neighbourhood was once a sign of progress. Then the 80s rolled around and the big factories started to close, one by one.
A century-old South Australian company, CARR Components had seen it all. By this time, the firm was getting by making parts for Holden’s Commodore and Cruze models from its factory at Netley in Adelaide’s west.
Adam Reynolds, CARR Components’ Engineering Coordinator, who had spent more than half his life in the automotive industry, was standing in the main office when the news broke.
Everyone in the place was stunned. No one wanted to believe it. Holden was ‘bigger than the Roman Empire’, as one former Holden worker put it. It wasn’t going anywhere.
Now it was, and the news ricocheted through the rest of the building.
Out the factory floor a fifty-year-old woman got talking to Reynolds. She wore a look of complete hopelessness. She had spent most of her working life at CARR Components. Factory work was all she knew.
‘Well… what do I do now?’
‘I don’t know,’ Reynolds told her.
What else do you say to someone whose entire future has just been brought into question?
Darryl Waterman knew they were screwed as soon as he saw the Chinese factories.
Waterman was part of a group of senior factory figures, including union reps and area managers, who went on an expenses-paid company fact-finding trip in April 2013. Over a two week factory shutdown, the group visited the Vauxhall Plant in Britain and toured Chinese car plants run in partnership with General Motors (GM) in Shanghai and Shenyang.
There was nothing unusual about this trip. The company organised them once every few years as new people rose to senior roles. They helped put the Elizabeth factory in its global context and the time was mostly spent plane-hopping, dealing with jetlag, or touring factories.
Waterman went thinking they were supposed to be looking at production processes to see what could be brought back to Elizabeth. First stop was the British plant. And it was impressive. Following the 2008 Global Financial Crisis, the collapse of the UK’s financial services sector had made the government look twice at its manufacturing base. Manufacturing, and car making in particular, was suddenly seen as an area where the government could invest in order to buttress the economy against future recessions.
But it was the massive Chinese factories that surprised everyone. Most went in expecting sweatshops and low quality vehicles. What they found were massive factories, full of momentum, with happy workers capable of pushing out hundreds of thousands of cars a year. Last year, the Chinese car industry produced a little over 18 million vehicles. Australia made a grand total of 210,538. Where the Japanese once out-competed the Americans by learning how to build cars better through lean manufacturing, the Chinese now do it through sheer scale.
‘That’s when we sort of thought, shit, we’re in a bit of trouble,’ says Waterman. When asked what was missing from the Elizabeth operation he says, ‘Lots of things.’
Mostly, it was the high Australian dollar that did it. So long as the Australian dollar was sitting around US$0.80, carmakers were earning good money and any problems with cost of production or accessing export markets were manageable. Then, the dollar started creeping up towards parity and stayed there. This made imports cheap while Australian cars became more expensive to make and more expensive to export.
Parity for manufacturing is what drought is to agriculture. For a farmer, no rain means no crops and huge debt. For factory owners, a high dollar means high production costs and little return. In both cases, things will eventually change. Fresh rain will come again and the dollar will fall. The question is how long they can hold out, as the longer it takes the more likely farmers and factory owners are to go broke. Left unchecked, this is how dust bowls and rust belts happen.
‘And you know, that’s why we’re not going to continue after 2017, because there was just too much that we were up against,’ says Waterman. ‘But one of the things that we were trying to do was change the Enterprise Bargaining Agreement (EBA) to something that would allow the company to get some more money out of the business, to try and reduce their costs and get more productivity. The company was struggling running the way it was with the Australian dollar, the drop of tariffs, the cost of labour and the cost of production, full stop.’
While still in Shanghai, the delegation met with two GM reps at the company’s Asia headquarters. One of these was GM’s Executive Vice President, James DeLuca. Over take-out pizza and cans of Coke, the two GM company men promised to do what they could to help Elizabeth, but at the end of the day, they said, they needed three things: 1) a variation that would change the EBA; 2) further government support and; 3) GM Board approval to keep the Elizabeth factory open and give them the next two models.
This was the first the unions had heard about changes to the EBA. Vauxhall in the UK had just negotiated a change to keep the factory open and now the company wanted the same thing to happen in Elizabeth. The company offered to help with the EBA, but this was union territory. If it was going to happen at all, it needed to come from them.
Once home, the first thing the company had to find out was whether a variation was legal. It was, so the real problem came during negotiations when the company wanted to cap the amount awarded to retrenched workers under the Voluntary Separation Package (VSP). This meant lower payouts if the company suddenly wanted to downsize the operation by 400 people.
This did not go over well with the workforce. VSP agreements had traditionally been uncapped and tied to how long a person worked for the company. The change would have punished a worker for their loyalty, as anyone who had worked the shop floor for twenty years and held out to the very bitter end may have recieved less than if they had bailed right when things started getting difficult.
So the union reps were sent back and the cap was removed. In the end, the unions made deep concessions that amounted to a few million dollars in savings. The variation would mean a three year pay freeze, less break time and would allow the company to call people in for overtime when they needed it despite a national standard that prohibited just that. The unions didn’t like it, but they were convinced it needed to happen.
In the end, it didn’t mean much. The sacrifice was a nice sentiment, but a false hope. Ever since the US government had to bail out GM in 2009, the company has been getting brutal about closing old operations to prove to investors that everything is under control. And while Vauxhall may have been spared the knife, the Opel plant in Bochum, Germany wasn’t. In April 2014 the GM-subsidiary announced that the Bochum factory would close at the end of the year. This was after more than 3000 workers said no to a company offer to keep production running until 2016 in return for a freeze on pay rises.
The reality for Elizabeth was that the factory’s fate was never going to be decided by labour conditions, but by a handful of very important people in Canberra and Detroit. While no company official will ever say so on record, or even in private, and especially not to a reporter, the new government from the 2013 election brought a new point of view with it. Any industry support promised by the previous government was not coming, and so GM’s decision fell on the side of closing the plant.
About two months after Holden made its future known, Toyota followed. Extra security was present when Toyota told the 4200 odd employees at its factory in the Melbourne suburb of Altona that they too would close by 2017.
Industry observers were not surprised. The two companies shared the same supply base and Holden’s decision effectively sealed Toyota’s fate. One without the other increased the risk of a supply chain collapse. While both companies could have limped on without Ford, Holden and Toyota needed each other to survive.
[1] Leanne asked for her surname name not to be used in this story.
This is an extract from a long-form essay written as part of the KYD Copyright Agency Investigative Journalism Mentorship. The full article will be published on our website in late January.
Image credit: Michael Coghlan
