Leaks And Spills As Big Wheels Meet Over Mitsubishi
Sydney Morning Herald
Thursday August 2, 2001
Senior Australian officials were locked in urgent talks with the Japanese carmaker Mitsubishi last night to determine the financial price necessary to keep alive its struggling Adelaide manufacturing plants.
The talks, involving the new Australian Ambassador to Japan, Mr John McCarthy, are the precursor to a crucial meeting between Mitsubishi management and the Prime Minister, Mr Howard, in Tokyo tomorrow.
Mr Howard is desperate to keep Mitsubishi as one of Australia's four car producers.
The Government can ill-afford the loss of Adelaide seats that would inevitably follow a shutdown, given the importance of the two plants to the fragile South Australian economy.
But Mitsubishi, carrying record losses and under immense pressure to rationalise its international operations, appears intent on extracting big concessions from Australia in exchange for a guarantee on Adelaide's future.
This is on top of the estimated $200 million the company would receive by recommitting to Australia under Canberra's revised car industry assistance scheme. The South Australia Government has also offered a $20 million lure to Tokyo.
A big financial investment is needed to upgrade the Adelaide production lines to enable it to come up with a replacement for its aging mainstay, the Magna.
The Tokyo-based parent, now firmly in the hands of its new ``partners" DaimlerChrysler, is reluctant to commit the funds, given the Australian subsidiary's precarious financial position and the small size of the local car market.
The high stakes have produced some brinkmanship tactics, with what appears to be strategic leaks to Japanese news agencies yesterday, 48 hours before Mr Howard's arrival, suggesting that a business plan had already been formulated to shut down the manufacturing operation, reducing the Australian subsidiary to a sales outfit.
Quoting unnamed industry sources, the reports said Mitsubishi's chief operating officer, Mr Rolf Eckrodt, would present the plan to Mr Howard at tomorrow's meeting. The company was forced to deny the reports yesterday, but it was heavily qualified, leaving Adelaide's future beyond the next few years uncertain.
``[Mitsubishi] remains committed to the Australian market and we have no plans at this stage to change our operations," the company said.
``We are pleased at the significant process [Mitsubishi Australia] has made in implementing its restructuring and we continue to investigate opportunities for future improvement."
The Prime Minister said yesterday the Government understood Mitsubishi in Australia had ``no knowledge" of the material behind Japanese reports that the company was about to close down its Australian operations.
``These reports do appear from time to time," Mr Howard said.
``I happen to have the opportunity amongst other things of speaking to the Mitsubishi people in Tokyo [this week].
``. . . If the opportunity presents itself, I will naturally be pushing the case for Mitsubishi to maintain its operations in Australia."
DRIVING A HARD BARGAIN
* Mitsubishi employs 3,500 people, down from a peak of more than 5,000, at its two Adelaide plants. After shedding 1000 positions since 1999, it recently put on 300 staff.
* With both Federal and State Liberal governments due to go to the polls, the political stakes have never been higher. The flow-on effect of lost jobs and revenue worth hundreds of millions of dollars would be felt by associated businesses.
* Incentives include $200 million notional assistance under the car industry scheme. So far, the Federal Government has baulked at a rescue package. The South Australian Government has offered $20 million, conditional on Mitsubishi deciding to stay.
* Most of its losses have been blamed on exchange rates for parts imported from Tokyo, but sales of the Magna have been a historical problem.
The Federal Government is most at risk in Hindmarsh and Makin. Hindmarsh, in Adelaide's western suburbs, was held by Chris Gallus in 1998 by 3.5 per cent in the face of a 6.8 per cent swing. Trish Draper just held onto Makin in the north-eastern suburbs and would lose the seat with a swing of less than 1 per cent. Mitsubishi's plants fall in the Labor seat of Kingston, held by David Cox with a margin of 1.5 per cent.
© 2001 Sydney Morning Herald