Australia's Alleged Conservatives Surrender to Unions; GM Australia vs. GM US; Currency Madness Everywhere

Here is a link from a couple of weeks ago from my "Down Under" friend "Brisbane Bear" regarding Australia politicians surrendering to unions for absolutely no reason, and for no possible benefit.

For US readers not following Australian politics, Conservatives won a landslide victory in the September election with Labor Party percentage vote the lowest in 100 years.

Conservatives could have and should have demanded change. Instead Minister Ian Macfarlane decided to create a panel to advise on unions, and one of the three appointees was a huge Labor Party advocate.

Surrender to the Weak

In response, News.Com.Au commented "Surrender to the weak and willful will cost us all".

INDUSTRY Minister Ian Macfarlane made an incomprehensible decision this week. After talks with Coca-Cola Amatil, a taxpayer-funded three-person panel was created to advise on a request from SPC Ardmona for assistance. The panel's charter includes "workplace practices, productivity" and "product range".

Labor Party heavy and former ACTU secretary Greg Combet is one of the appointees - he is going to advise on enterprise bargains with the unions.

After the announcement of the SPC panel, between fielding calls from the bewildered and outraged, I scrabbled for an explanation for Macfarlane's reckless move. I have been writing on these issues since 2007 and have never found reason to criticise the Coalition, but this action is naive, irresponsible and indicates the government is captured by the big business-big union nexus.

Australia is at a crossroads. For 20 years, regardless of the legislation, about half of our companies have been incrementally enterprise bargaining themselves into bankruptcy, while the other half have not.

Increasingly, many of those that have bargained are on the verge of ruin. A growing number will be seeking government subsidies during the next few years.

It is not always easy to say no to unions, and occasionally you must negotiate, but no company can be forced to make an enterprise agreement. Any business can simply pay its workers the modern award wage.

About 20 per cent of Australian workers are paid only the award wage, while roughly 30 per cent are paid a rate above the award, with the award remaining as the legal minimum.

Many companies have never bargained with their workers, while others stop bargaining after seeing its adverse effects.

Roughly 50 per cent of Australian workers are employed by companies that have chosen to enterprise bargain. Enterprise bargaining agreements are binding contracts that sit over and above the award, like gold-plated awards. Agreements include extra productivity restrictions, often doubling, tripling or even quadrupling the total employment cost of a workforce. These agreements have the force of law. The employer cannot change them without an employee vote.

Enterprise bargaining is the main reason that Holden, Toyota, Simplot and SPC Ardmona are in strife. These companies seek government subsidies because they need money for the inflated wages and conditions they have agreed to pay but cannot afford.

During this election term the list of companies needing help will grow. No one in their wildest dreams would have envisaged a Coalition government would create a crack team of taxpayer-funded faux toecutters to run the ruler over and advise on the internal workings of distressed companies.

Let me just cut to the chase here. Companies that are financially distressed because of unaffordable enterprise bargaining agreements should be instructed to lodge a form with the Fair Work Commission to have their agreement dissolved, at their own cost. All of their workers and unions should sign the form and be returned to the award wage before any of them even consider putting their hand out for money.

For a government to have a policy other than this is to reward sections of the business community for doing the wrong thing, for being foolish, irresponsible and weak. A government should never send the signal to business that taking the easy way out - giving in to the unions and paying workers wages it cannot afford - will result in financial assistance.

Conservative in Name Only

I asked Brisbane Bear a few questions including "Why would Macfarlane toss such a negotiation offer to unions in the first place?"

He responded ...

Hello Mish

Macfarlane is a Country politician. They are the worst type of socialists. He is conservative in name only.

These food companies that have their hands out are based in the farm belts or food growing regions. Huge US companies like Simplot own many Australian food brands. If they close down these small towns are decimated.

We have award wages in this country. They are the basis wages and working conditions which are the bare minimum. We have a system whereby companies can do an enterprise bargaining agreement (EBA) at individual companies.

Companies in strong union dominated industries have written very lucrative EBA's in recent years during the mining boom and have subsequently pushed wages and benefits thru the roof.

These companies can't possibly afford these wages and now they are losing money hand over fist.
The idea these car makers or any other manufacturer can pay whatever the unions demanded and now think they can simply get taxpayers money to help subsidize these wages is ridiculous.

I have argued for about 3 or 4 years that wages are too high and working conditions too generous.
I sign off most letters to the papers by saying "they can't afford these wages and neither can we".

"We" being the rest of us in the real world trying to run a business with these high wages and generous working conditions and no free money from the taxpayer to offset them.

Businesses in trouble don't need to go broke or close down. They just have to go back to paying award wages. That would mean pay cuts of 50% or more in most cases.

Looking for madness? Baggage handlers for QANTAS earn up to $85k per annum.

When these protected companies and industries cave in to unions, these new wages and working conditions become the benchmark and these wages flow onto every other sector. It is not sustainable and the repercussions are being felt right now.

GM has decided to shut down their Holden plant in Australia. 50,000 jobs are directly and indirectly on the line. BP announced 300 jobs going in Australia saying our costs are way too high.

There will be hell to pay as these jobs disappear in the 100,000's. Our property bubble has been blown off the back of these outsize wages.

Hope that helps make it a clearer picture.

Regards
Brisbane Bear

GM Closes Australia Plants, Toyota to Follow

On December 11, Yahoo!Finance reported General Motors to close Australian plants by 2017

Auto giant General Motors said Wednesday it will close its Holden plants in Australia by 2017, prompting Toyota to review its operations as unions warned the car industry was finished.

Holden's decision to move to a national sales company, costing 2,900 jobs, comes after Ford said in May it would stop making vehicles at its unprofitable Australian factories in 2016, with the loss of 1,200 jobs.

With Mitsubishi closing its Adelaide plant five years ago, only Toyota Australia -- which employs more than 4,000 workers -- will be left making cars in the country.

Even that appeared uncertain, with the Japanese auto firm immediately announcing a review of its own position in Australia.

"This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia," Toyota Australia said in a statement about Holden's closure.

The Australian Manufacturing Workers Union said it expected Toyota to follow Holden's lead.

"It's now highly likely that Toyota will leave Australia. In fact it's almost certain," AMWU national vehicles division secretary Dave Smith told reporters.

"It's a very bleak day indeed."

GM chief Dan Akerson said the decision to shutter Holden's Australian operations reflected a "perfect storm of negative influences the automotive industry faces in the country."

"This includes the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world," he said.

Reflections on GM Australia and GM U.S.

How did GM U.S recover?

In bankruptcy GM shed a mountain of debt. Equally important, if not more important, unions agreed to work rule and pay changes. The same thing needs to happen in Australia, across the board: in manufacturing, in restaurants, and in retail stores of all kinds.

Instead of pushing that agenda industry minister Macfarlane wants to ask unions what needs to be done.

I can tell you the answer in advance: the unions will seek still more handouts in return for trivial rule changes and little if any pay structure changes.

Currency Wars

The Reserve Bank of Australia is in on the act as well.



As with Japan striving to sink the yen, Australia's central bank wants to sink the Australian dollar. Of course the ECB wants a lower euro, and the Fed wants a lower US dollar.

Madness is everywhere.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com