Australia Takes Notes from GM's Fall

Comments by Ivan Deveson, Chairman of the Committee for the Economic Development of Australia and a veteran of more than 30 years with GM.

"I want to outline a few of those factors as lessons for Australia, where our manufacturing sector is under siege, having fallen from 30 per cent of gross domestic product to about 12 per cent in recent years.

An excess of vertical integration, where GM made many of the components it used, made the company blind to advances in competitive pricing and technology. Outsourcing was resisted for too long, with make-versus-buy comparisons constantly clouded by investments in bricks and mortar.

The traditional management/labour bargaining rounds of the 1950s through to the 1980s resulted in excessively high wages and benefits that rendered GM plants in the US uncompetitive with imports and with vehicles manufactured in "greenfield" US plants.

So-called hard-earned conditions of employment can be a burden in the ever-changing global economy, particularly if they threaten business viability.

Success breeds complacency — and some arrogance. When I visited Japan in the mid-1970s and saw the just-in-time and quick-die-change processes, I struggled to convince many of my Detroit colleagues that an economic tsunami was coming. Beating budget and being better than last year are irrelevant if you do not meet or beat world's best practice."

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