Defence opportunities last-ditch for some Australian manufacturers

The Federal Government’s recent announcements regarding future submarine, frigate and other naval vessel builds in Australia represent some rare opportunities for a struggling Australian manufacturing sector coming to terms with the demise of the local automotive industry over the next 18 months.

Around 120 Australian companies face uncertain futures as the three car makers finish production, so while the defence opportunities offer real upside, they will also require significant work if the Australian supply chain is to secure this business.

Australian manufacturing will have to diversify itself, something that has proven difficult for individual suppliers through the decades of automotive production.

While some companies have been active in trying to identify new market opportunities, there will still be substantial dislocation to these businesses when we stop making cars. These new defence markets will generally not sustain the same employment numbers that have been required for automotive production, and often new investment in innovation and capital equipment will be required to capture new opportunities.

Companies also need to be much more active in pursuing new defence opportunities.

While supply chain revenues from the potential submarine and frigate builds is some time off, now is the time to push to participate in global supply chains. Just like the days of automotive manufacture, local suppliers will be competing with a range of international businesses, many of whom are already established suppliers to the proposed global companies vying for this business.

In this context, it is critical that local manufacturers focus on telling their stories now, and understand the expectation of the ultimate global customer when it comes to the performance standards required to become a successful supplier.

Waiting for the activity to start in Australia will be too late to make this pitch.

Manufacturing

Significant preparation will be required to win this work, including investment in training of staff, and identification of new skills and capabilities that might be required. This will certainly put to the test claims from our automotive industry that it has built world class manufacturing skills for the nation.

The payoff for winning this work will be substantial. Contracts will be very long-term, and activity will be based around highly complex, high value-add activities where Australia should be competing.

The Federal Government’s approach in awarding the contract is also important. While the days of mandated local content are rightly long gone, it is important that the structure of the arrangements provide the opportunity for Australian businesses to be considered on a level playing field.

With assembly work located in Australia, there will be some proximity and time to market advantages that will play to our strengths, but these will need to be augmented by individuals, businesses (and networks) making the strongest possible cases as genuinely world-class manufacturing operators.

These are real market-based tests of just how adaptable our manufacturing base really is. The fate of tens of thousands of local manufacturing jobs rests on how well we respond.

 

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