THE survival of Mitsubishi in Australia will depend on whether the company and its Japanese parent can satisfy shareholder expectations of a return to profitability in the short term. It will take a monumental effort to achieve this. Continued uncertainty surrounding a long-term commitment to local operations is likely to hurt Magna sales. Reversing this will require a brilliant marketing strategy and an exciting new look for the Magna. Mitsubishi will also need to capture a higher share of fleet vehicle sales and perhaps enter into collaborative arrangements with other car manufacturers to make full use of the Tonsley Park assembly plant.

The closure of Mitsubishi’s Lonsdale plant and downsizing at Tonsley Park will shed about 1000 of the company’s 3320 jobs for SA employees over the next 18 months. Mitsubishi is also planning to reduce production to 30,000 cars, down from 33,600 in 2003. While the impact of these decisions is not likely to be felt for some time, there will be considerable flow-on effects throughout the state economy.

These are not as great as they might have been, as the Lonsdale engine plant does not have the extensive linkages with local component suppliers that the Tonsley Park plant has. However, early estimates suggest an additional 1300 jobs are under threat, primarily in property and business services, trade and motor vehicle parts and related manufacturing. Mitsubishi operations in Adelaide purchased more than $1 billion worth of goods and services in Australia in 2001. Around $420 million of these purchases were in SA.

All of this will have a significant impact on the SA economy and labour market. And other states will be affected by the announcements, particularly Victoria which supplies a range of key components to the Lonsdale plant.

The job losses at Mitsubishi and Port Stanvac oil refinery signal the pressures facing Australia’s manufacturing industry and the need for a more interventionist national industry policy framework.

While a strong Australian dollar has made it difficult for exporters, the lure of moving offshore is becoming irresistible for some manufacturers. As the benefits to manufacturers of tariff protection evaporate and massive new markets for consumer goods open up in such countries as China and India, a manufacturing exodus threatens Australia. In the absence of a national industry policy designed to cultivate and sustain manufacturing industry, SA is vulnerable. It will not be able to out-spend the eastern states in bidding wars over the location of footloose firms.

Responding to Mitsubishi’s May 21 announcement, the Federal government announced it would provide a major assistance package worth $50m. The package provides around $10m for employment and training support services to workers who lose their jobs, and $40m for investment attraction. The Rann Government provided a further $5m for employee support and industry diversification in southern Adelaide. The $40m investment sum might buy Australian manufacturing some time but it will not solve the fundamental structural problems facing the industry.

If the free trade policies of the last decade are followed through to their logical conclusion, a large number of Australian-based manufacturers will consolidate some or all of their operations in low-wage countries with few environmental or social protections. This is not inevitable but it does loom as the greatest threat to retaining a viable manufacturing industry in Australia.

In the context of a Federal election, we can hope that the Mitsubishi crisis might focus the minds of politicians on policies which will ensure that the manufacturing industry has a future in Australia. And, crucially, economic strategies must now be drafted to foster the development of new industries capable of sustaining employment and economic growth, especially in the context of threats and challenges that the manufacturing industry now faces.

And so the search for new business investment in SA begins. The State Government is on a quest to persuade US and European contractors bidding for the $6.5 billion Australian Navy shipbuilding project, to identify SA as their preferred location. It has the support of Liberal Senators Robert Hill and Nick Minchin, who are talking up SA’s prospects. However, Victorian Premier Steve Bracks has called on the Federal Government to not give preferential treatment to SA in the awarding of the ship building contracts.

Winning a share of the naval ship building contract would generate hundreds of new jobs in SA but they probably won’t be available in time for the 1000 people who lose their jobs at Mitsubishi over the next 18 months.

A short-term strategy would be to substantially increase public investment in physical infrastructure, such as establishing a light rail system for metropolitan Adelaide and expanding the State’s public housing stock.

As well as generating suitable jobs for many Mitsubishi employees, this sort of investment will have important social and environmental benefits for South Australia.