ENGINEERS AND THE SHAPE OF AUSTRALIA’S INDUSTRIAL FUTURE

Thank you for inviting me to be with you tonight as you honour colleagues who have made distinguished contributions to your profession and the wider industry.

I acknowledge the President of the Society of Automotive Engineers, Mr Adrian Feeney; the Executive Director, Ms Natalie Roberts; and members of the Society’s board.

The industry in which you work is in transition to a future that holds great challenges and exciting possibilities.

The changes that lie ahead are reflected in the change of name for the awards that will be presented tonight.

They are now the Mobility Engineering Excellence Awards, in recognition of the fact that the industry must adapt to survive the announced shutdown of the motor vehicle producers by the end of 2017.

As the name of these awards acknowledges, we must work towards a future in which the industry has the potential to embrace every type of transport mobility.

Not only passenger cars and light commercial vehicles, but also the automotive aftermarket, rail, buses, aerospace, freight and heavy trucks.

We already have significant capabilities in this regard.

To cite just one example, this week I visited the Volvo Cab and Vehicle Assembly Plant in Wacol, Queensland.

This factory producing heavy trucks employs 360 people, including 50 engineers.

It is a showcase of Australia’s talent in mobility engineering.

Product testing is a major activity at the site – every Volvo truck, anywhere in the world, would have one or more components that has been tested in Australia.

Every truck produced at the factory is customised.

Even if a simple item such as a bull bar is added, many other components have to be adjusted, too, to create a balanced vehicle.

And as you know, none of that can happen without the precision and skills that engineers bring to the operation.

I have said many times that there will be an automotive industry beyond 2017 and that it will include manufacturing in many forms.

I am confident that we will be able to attract new investment.

I base this confidence on discussions I have already had with a number of proponents.

What form this new investment takes will depend on many things, not least the policy decisions made by governments.

It will also require this country to continue to ensure we have skilled people.

Whatever direction we go in, we will depend on engineers.

Australia has a great tradition of excellence in industrial engineering and design.

The car makers continue to value that tradition.

Holden and Ford will retain design and testing centres in Australia after they cease manufacturing.

Post 2017, Ford Australia will be the largest employer in the domestic automotive Industry, with 1500 staff, including more than 1000 engineers and designers, and 500 contractors.

The Australian design centre will be one of Ford’s four global “centres of excellence”.

While General Motors has not announced a projected staff number, but their technical and design centre in Australia will include a proving ground and require engineering teams big enough to work on powertrain and vehicle dynamics systems.

I remain confident that GM will continue to employ many hundreds of engineers and designers.

But we cannot leave the future of mobility engineering and manufacturing to the car makers alone.

What is crucial now is that governments act to preserve the industrial capabilities of the automotive supply chain.

I visit firms as often as I can, and I am very aware of what will be lost if the supply chain firms go out of business.

Recently, for instance, I visited Harrop, in Preston, and Unidrive, in Clayton

Harrop employs a team of nine engineers, who provide design and R&D services that allow the firm to produce specialist products for niche markets.

For example, they customise brakes for Toyota Landcruisers, refitting vehicles for mining operations in remote Australia where brakes wear out every week.

Unidrive, which employs 10 engineers, produces carbon fibre for drivetrain componentry.

It is a successful exporter to nations that are themselves major automotive manufacturers: 50 per cent of its product is supplied direct to the US under existing contracts.

Whether we maintain these sorts of capabilities in supply-chain firms will depend largely on government policies, especially those determining access to the Automotive Transformation Scheme.

Today I was at RMIT and an examination of the new developments in materials science, 3D laser cutting and printing, give me every confidence that our engineering excellence will facilitate this country going up the value chain in advanced manufacturing.

RMIT has 127 students undertaking automotive engineering degrees. These are among our brightest students – they have an entry ATAR of 91.75.

There has been no evidence of a drop in demand for automotive engineering places.

This is a key element in my argument for optimism.

We have the talent and the capability, and that is why I know automotive investment can be attracted to this country.

The automotive industry, as your members know well, has always been Australia’s great repository of knowledge and skills in advanced manufacturing.

The industry is a powerhouse of innovation: of engineering talent, and research and development activity.

If we preserve these capabilities there will be a basis for attracting new investment.

No one pretends that the task will be easy.

The economic consequences of the shutdown by the motor vehicle producers will be severe.

Nonetheless, I firmly reject the predictions of doomsayers who speak about the death of the industry.

There is an international precedent for a revival of automotive manufacturing in similar circumstances to those which now confront Australia.

In the UK at the end of the 1980s, many people expected Britain’s auto industry to die.

But the industry didn’t die. In fact, it is now flourishing.

Because new investment was found, and British auto firms focused on areas in which they had a competitive advantage, such as engine production.

Both sides of British politics now support co-investment in the industry, because they understand the boost to advanced manufacturing capabilities that an automotive industry provides.

There is no reason why a similar revival cannot happen here, too.

It is a matter of whether there is the political will to do it.

Other countries understand very well what is required.

I have just returned from the Germany, where I had an opportunity to see how the German innovation system operates, and how engineering and technological capabilities have the central place within it.

In Germany, the innovation system integrates all sectors of the economy.

That is in contrast to, say, the US, where there is great emphasis on ICT start-ups and the provision of venture capital, but where old industries are too often allowed to die out.

Germany, however, aims to renew them through a broad view of innovation.

Mecerdes-Benz and BMW, for example, are being improved through the embedding of advanced communication technologies and other software.

A typical modern car already has more than 250 microprocessors.

In the future this will be much more extensive with the use of telematics.

Innovation is an incremental process, not a series of lightbulb moments for researchers working in isolation.

Innovation is about much more than just designing new coffee apps for smart phones.

It is about the steady transformation of an economy, firm by firm and industry by industry.

That is what Germany’s “High-Tech Strategy” – the official name of their innovation system – is intended to do.

What is happening at Mercedes-Benz and BMW demonstrates how effectively it works.

At the core of this strategy is what the Germans call “Industrie 4.0”, which in English-speaking countries is more commonly referred to the Internet of Things.

Or, if you prefer to take a longer historical perspective, the Fourth Industrial Revolution.

One of the reasons I say that this time of transition in Australia’s mobility industries holds both great challenges and exciting possibilities is that it coincides with this Fourth Industrial Revolution.

A revolution in advanced manufacturing that has expertise in technology and engineering – the expertise of your members – at its front and centre.

I’m sure you’ve heard the stages in this history set out before.

The first industrial revolution, in the mid-18th century, began with the harnessing of steam power.

The second, late in the 19th century, was the result of electrification.

The third, late in the 20th, was about the spread of information technology and the internet.

And the fourth, now in its beginnings, is about the increasing ability of machines to communicate with each other through the Internet of Things, and to use the so-called Internet of Services, or cloud computing.

We are seeing the birth of the Smart Factory, which will transform industrial production even more than the assembly line did a century ago.

Assembly line production was devised to make standardised products with parts in common, for a mass market.

But in the smart factories of the fourth industrial revolution, it will be easier, and eventually cheaper, to produce customised products for niche markets.

That should be an opportunity for Australia’s advanced manufacturers, especially in the mobility industries.

Australia’s unique road conditions and climate patterns mean that vehicles built to one-size-fits-all global model aren’t always suited our needs.

They need to be customised in the way that Volvo customises its trucks, and that requires engineering expertise.

Just as the UK car industry was revived by refocusing on products in which British firms could gain a competitive advantage, so Australia could seek to do the same.

We should exploit our strengths – not only in the existing automotive supply chain but other mobility industries as well.

If diversification beyond passenger cars is to happen, it will mean getting the policy settings right.

The Senate inquiry into the future of the automotive industry, which will release its final report in the first week of December, has already made some proposals on how to proceed.

The inquiry’s interim report recommended that the main form of public co-investment in the industry, the Automotive Transformation Scheme (ATS), should be redefined as a broader, advanced manufacturing, engineering and design program.

The Government has fortunately withdrawn its plan to cut $900 million from the ATS.

If it also adopts the recommendations of the Senate inquiry, it has a chance to preserve the industrial capabilities Australia must not lose.

I intend to do everything possible to persuade the Government to do so.

I shall continue to encourage new investors to take up the engineering and design expertise that Australia has to offer – not only in the production of passenger cars, but in the other mobility industries, too.

These are the industries in which the knowledge and skills of your members will be the key to the future.

Thank you.

ENDS


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