Can Australian auto parts suppliers survive now Holden, Ford and Toyota are gone?

The recent decisions by Ford, Holden and Toyota to cease manufacturing in Australia have raised serious concerns for the thousands of Australian businesses who work in the automotive supply chain. Manufacturers are asking themselves, how will I respond? How will I transform?

Some suppliers service other markets, so their businesses may continue, albeit with a smaller customer base. However many suppliers are vulnerable and highly dependent on the volume from the auto industry for their survival.

These business owners must choose whether to wind up, or to diversify their business so that they can fill the hole.

At CSIRO we are investigating the concept of diversification for the small and medium businesses in Australia’s automotive supply chain. CSIRO has the largest manufacturing innovation program in Australia, partnering with manufacturers to help solve technical challenges, improve products and processes and develop new technologies.

Our close relationship with industry has allowed us to build a broad picture of the challenges Australian manufacturers are facing. It also gives us the opportunity to play a pivotal role in helping manufacturers innovate, diversify and transition to new markets.

The biggest misconception about diversification is that there is only one way to do it. In fact, diversification can take many forms – diversifying into different supply chains and global markets, or even diversifying products, processes and business models.

Mitigating risks

Manufacturers that branch out into other industries mitigate the risks that come with limiting themselves to one supply chain.

One company that has continually done this well is Marand Precision Engineering. A key supplier to Australia’s auto sector, Marand is now branching out into aerospace, defence, rail and mining, with automotive business now representing less than 10% of its turnover.

The key question this firm asked itself was: do the components we manufacture always have to go into a car? The simple answer was no. Marand’s specialisation isn’t in automotive supply; rather it is precision engineering – skills that can be applied elsewhere to different markets.

Diversification doesn’t have to be mean moving into new industries. Melbourne-based firm MtM was founded as Melbourne Tooling Co half way through last century, growing to manufacture and design components for Ford, Holden, Toyota, Nissan and Mitsubishi. It even exported parts to Cadillac in North America.

Since 2013, MtM has been selling entire cars – online. The company recently launched the Tomcar, a tough off-roader that is all about customisation – focusing on niche market segments like agriculture, tourism and mining – which can be paid for via the cyber-currency Bitcoin.

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