A bad day for jobs yesterday that will test the resilience of the country’s labour market that has so far shown unusual strength in 2013, with more than 95,000 jobs created in the first four months of the year.
But the market will now face the impact of 5,000 or more jobs to be lost over the next five months, on top of the usual comings and goings of an economy experiencing softening demand.
Telstra’s (TLS) restructuring threatens to put hundreds if not thousands out of work over the next few months, Ford’s closure of its two Victorian manufacturing operations will cost 1200 jobs at a minimum in about three years (and more to come from the components industry), and a major cleaning company failed with the immediate loss of more than two thousand casual and full time positions, although many of those will be reversed once new employers pick up contracts.
Telstra’s reorganisation started the day’s news flow yesterday with the company telling unions and others that the proposed (but unknown) changes would affect around half its 30,000 employees across the country, with details to come shortly.
The news hit the company’s shares which lost 3.7% to $4.95. They are still up around 13% for the year thanks to the attractive 28c a share full year dividend.
TLS Weekly – Shares dipped on a mixture of fears
But Telstra’s share sell-off seems to have been more to do with the loss of confidence among local investors generally yesterday about the health of the Chinese economy, than linked to its mooted employment changes.
Other telcos were weak with M2 Telecommunications down 11%, Iinet off 9% (11% at one stage) and TPG losing more than 5% in value.
Major national cleaning company Swan Services has gone out of business, putting 2500 cleaners across Australia out of work for the time being until they can be reemployed by companies taking over the various contracts held by Swan.
Fairfax websites reported "Swan Services was placed into voluntary administration by its directors yesterday afternoon," said Anthony Elkerton, a voluntary administrator and a partner of accounting firm Pitcher Partners. "The company has ceased to trade…a quick review made it clear that we, as administrators, were unable to continue operations." The same message was posted on the Swan company website.
The Ford news attracted much of the attention – 1200 jobs will go with the closure of the car making plants at Geelong and Broadmeadows (in northern Melbourne). But Ford says it will still employ 1500 people in its Australian business and will retain the 200 dealerships across the country.
Mitsubishi closed in Adelaide several years ago and General Motors and Toyota have both cut more than 1500 jobs in the past year to 18 months, but remain in operation.
Job losses are expected to happen among car component makers because those companies will lose contracts or economies of scale with the closure of the Ford plants.
Ford will still import cars made in Germany and the US to sell in Australia.
Some unionists and analysts claimed it is bad news for Australia, but others point out that Ford has failed to move with the changing taste of Australian car buyers away from the big six cylinder cars such as the Falcon and the Territory, towards smaller, more upmarket four cylinder models and small SUVs. It chose to import these vehicles, as do Holden and Toyota, rather than make them here, which would have been too costly.
The company blamed the strength of the Australian dollar, but the reluctance to invest in new, smaller products played a big part because sales of the Falcon (its six cylinder base line model) have fallen sharply in the past three years, along with those for the Holden Commodore. The dollar’s strength has played a smaller part than the company claims.
Ford lost around $A140 million in 2012, which took losses for the five years to last year to nearly $A600 million. The US giant though has deeper problems in Europe where car sales have been crunched by the widespread recession and slowdown.
Ford lost $US462 million in Europe in the first three months of the year and is "expecting" to lose $US2 billion this year.
Cutting a small loss-making operation in Australia seems much easier than doing the same to uneconomic car plants in some parts of Europe.
Commonwealth Bank economist Diana Mousina said in a research note this week (issued before the Ford decision) that manufacturing in this country has been contracting for decades and currently accounts for around 7.3% of the economy – down from 14% in the late 1970s (before the dollar was floated).
The AMP’s chief economist Dr Shane Oliver said it was more than 21% in 1961, when industry protection through tariffs and quotas was at its highest levels.
Ms Mousina wrote in a research note that "the reduction in tariff barriers and protection generally in the late 1980s and early 1990s exposed Australian manufacturers to overseas competition and started the decline in the industry, Difficult trading conditions were exacerbated from around 2001 when the [Australian dollar] started its structural appreciation.And more recently, weak customer demand and global competition have negatively affected the performance of manufacturing firms."
