CarAdvice Podcast- The car industry with Tom Elliott

By thomasrdotorg | June 01st, 2009

FIND DEALS

Recently CarAdvice had the opportunity to sit down and chat with Tom Elliott who is both a financial commentator with radio 3AW and ABC TV as well as Managing Director of hedge fund MM&E Capital.

During the course of this wide ranging half hour podcast you’ll hear a number of issues raised including: the global financial crisis and the knock on effect this has had on the car industry, the current state of play in the global, US and Australian markets, the situation for Holden and Ford (it’s not as you perhaps imagine) and hear Tom’s views on whether we should even have an Australian car manufacturing industry.

capodcast

To hear the podcast, you can hit the buttons below or cut and paste this address: http://www.caradvice.com.au/?feed=podcast into your podcast software.

[podcast]http://www.caradvice.com.au/wp-content/podcast/007-podcast-carindustry.mp3[/podcast]

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jp

Aye Tassie is part of Australia!
Frontman

got to the seventeenth minute mark and turned off due to this guys total lack of understanding of the industry. Whilst he is allowed to express his opinion, his opinion is so obviosly drawn from only one side of the equation.
Sure only 190,000 (roughly) vehicles were Aust built last year and 140,000 were bought buy fleets and governments. How many of the others were bought under fleet or government banners (and include the Novated Lease vehciles)?
As for Australian public NOT wanting larger cars, if that was true why is it that all the NEW models have actually physically gone up a size?? 6, Accord, Mondeo etc are all BF Falcon VZ Commodore size, whilst the new 3 is the previous 6. SO whilst, by brand name, it looks like Australians are buying smaller, it is not the case they are simply buying vehilces that now fit.
The commentators attitude is clearly displayed by his comment about the build quality of the Australian cars, the are, in real life, no better or worse than the current offering from overseas (as can be seen by the constant rambling and references quoted on this site) and to say the vehicles from the earlier years were not as good, a HQ Kingswood compared to a Skyline Prince, or a TOyota Corona? An Australian designed XA Fairmont to a Rambler Matadore? A VB Commodore to Fiat 131? These are why people looking from the outside don’t understand.
I mean, really, if I were a cynical B’tard I could pass comment about the effect the hedge fund managers have had on the global finance situation and and how hedge funds have helped organisationslike the US banking industry toi get to the healthy level they are at now! Yet this guy is regarded as an opinion to be listened to?
(Rant over, send in the flame throwers )
Bavarian Missile (.)(.)

Yep about the fifteenth minute it all became his opinion !

Change what side of the road we drive on ???
Wheelnut

Couldn’t agree Frontman..

This guy is a financial advisor and its peole like him and the advice they gave to people and other cmpanies as to what to do with their finances ans where to invest etc which caused the crisis/problems we are experiencing at the moment..

Infact [ towards the end of the interview] the interviewer came back at this moron and said “but let’s look at this in reality – this isn’t really a manufacturing crisis/problem given that a number of car companies are still building big cars..” this is really a financial crisis/problem.

At which point Tom Elliott started to backpedal faser than a politician

This guy is as much an Automotive expert as Matthew Clive Wilson
Wheelnut

Oops my previous comment Should read “Couldn’t agree more Frontman..”
http://www.thomasr.rog/blog thomasrdotorg

Bavarian:
In Tom Elliott’s defence *I* asked whether we should have changed the side of the road we drive on post war (WW2). I asked this question as I believe it may have had a marked effect on our export possibilities. IMHO Ford and Holden would have a more ambitious export program if we made left hand drive cars. Just a passing thought.

Frontman:
Of the million cars sold in Australia last year, it turns out just 50,000 were bought by private buyers buying Australian made cars. That changes my view of the importance of local manufacturing. Are not the public voting with their wallets?

(Oh and MM&E capital had one of the smallest drops in their returns last year compared to all other Australian hedge funds, so Tom & co are most certainly experts on the financial side of things)

Cheers- keep the comments coming, I have more interviews with people whom I’m sure you’ll all be just as opinionated about.
Tom (Reynolds!)
Tomas79

Good Podcast, although no suprises there. Thanks CA!
Wheelnut

Tomasrdotorg says “IMHO Ford and Holden would have a more ambitious export program if we made left hand drive cars. Just a passing thought.”

Just because we drive Right Hand drive cars in Autralia doen’t mean that we can’t build LHD Cars does it?
I mean they drive LHD cars in Europe but they also build RHD cars for export markets including Australia.

Sure if we also drove LHD cars here in Oz it would reduce the cost fo the cars a little bit but if the car is designed to be built in both LHD and RHD – such as the VE.. and the assembly line is is flexible enough to do both – like the Holden assembly line is then there is no real problem is there?

Even if we did change from RHD to LHD do you really think that it would somehow make more people want to buy an Australian Made car?
I doubt it because as a number of comments on this site show there are a number of people out there who beleive that [anything that's] Australian Made is inferior to anythng made overseas..
http://www.thomasr.rog/blog thomasrdotorg

If we made left hand drive cars it would mean every car we make is a potential export vehicle for Europe and the USA. At present we only have Japan, UK and the middle east ready to take our “normal” production line. If it’s so easy to do a left hand version, then I wonder why Ford never allowed for it when designing the new Falcon…?
Based on the comments I get from USA based journos and fans, I think Ford would have taken some new Falcons over there if it was as easy as asking for them rather than re engineering and retooling.
Anyway, it was just an idea I came up with at the time, not really the core issue here.
Cheers
Tom
DesignEngr

Thomas, the falcon was engineered for LHD, but I believe for the V6 incarnation (was going to be post 2010) and not the I6. Most of the work IS done.
Frontman

Tom (Reynolds!)
Okay 50,000 sold to private buyers, please tell me how many of the others went to fleet and government. Also, the Australain built were the best single sellers on the market by a country mile.
The simple fact thathtere are over 260 different badges (not counting trim levels) to be chosen from a market that has a true level of 800,000 vehicles per annum (noting that the 1 mil mark has been passed twice, and only in years preceding a financila melt down or at the precipice of a boom time) then you can see why there is such disbelief by people in the industry when it comes to these comments. If it had been that Commodore, Falcon & the Camry/Aurion clones had been surpassed by 3 Corolla and 6, or even if Commodore had been passed by Camry then there might be a modicum of truth, just like the Americans wanted smaller more fuel efficient vehicle yet F truck was still the number one seller. But until there are real signs that this is happening then these people will blow in and out with the breeze.
Wheelnut

Every car we make is a potential export vehicle – Thing is as all 3 car manufacturers in Australia are foreign owned whether or not the Locally made Commodore Falcon and Aurion are exported depends on decisions made by management in Detroit and Tokyo not in Melbourne or Adelaide.

I mena Holden and Ford are about to start building smaller cars here; Holden with the Cruze [or Insignia] and Ford with the Focus.. However; the majority of them will most likely be exported in order to supplement or meet demand for the car overseas..
Because like the Commodore and the Falcon the Insignia and Focus can also be built in LHD and RHD
Brett

Not meaning to be provocative; but the interviewer is just terrible. The purpose of the exercise was to hear Elliot’s views (agree with them or not). Why ask a question and then talk over the top of the answer? Some basic training in how to conduct an interview mightn’t go astray.
crouchy

Wow… people REALLY dont like this podcast!!!!!!!
Frontman

Brett that technique works well for Kochie, and the guy who does the 7:30 report so why not on this site (lol)
Brett

Kochie: what a joke!

The 7.30 Report: start out with a pre-conceived position and attack anyone who doesn’t agree with it.

Hardly a recommendation.
Wheelnut

As Shaun McAlleif said last week on My generation:
“Celebrities – David Koch is he a celebrity..? You know years ago you needed talent or skill to be a celebrity; it wasn’t enough to just be annoying”

IMO Andrew Denton has one of the best interview techniques
topdog

Aarrrrrrr thats the prob we drive on the wrong side of the road
Fastback

More discussion needs to be had on the ADRs. Building cars specific to our market has pretty much restricted our ability to build and export globally and imposes extra costs on all imported vehicles (as said > 80% of the market). I reckon we’d be better off adopting the EuroNCAP standards and building our cars to that, we’d get the benefit of a globally recognised standard and this should reduce the final cost. Once again the customer gets screwed.

As for the left/right hand drive thing, well if the Japanese and Europeans can build cars for both then why can’t we?
Lukaas

Lol

Did he really say Australia should change the side they drive on?

He may be a financial “expert” but other logical things he lacks. Accountants should stay off matters where Designers, Engineers, Planners excel on.

First off, exporting to USA will not be as easy and lucrative as it sounds. USA already has dozens of plants capable of building the same “tier” car. Importing cars from Australia will just bring more competition for cars over there. And believe me, they are already having problems with the amounts of models competing with each other ironically from the same manufacturer…

Regulations is another thing.

Engineering wise, designing the car with LHD from concept then “converting” it to RHD is not ideal. But you can design a car with LHD and RHD capabilities assuming done at start. So its possible engineering wise.
Commericially… AUSTRALIA wise yes we should export to RHD countries.. but for manufacturers/government for those overseas countries they rather not have more imported vehicles especially to the USA where they can build the same cars and save all the hassles.
Tom Elliott

Dear All
Thank you for your comments regarding the podcast.
I realise many of you disagree with my views, but can I just clarify a few points:
1. This interview was done over a week ago, at whcih time I said GM was going into bankruptcy. This has now happened. GM Holden has only avoided this path because of federal govt subsidies. Therefore it is not a profitable standalone operation;
2. re the financial crisis, and you might say I’m talking my book here, it was not caused by hedge funds, but by the poor lending decisions of many banks (of which a great number have now had to be bailed out by the American and European govts). Remember a thing called the ‘sub prime crisis’? nothing to do with hedge funds; all to do with lending people too much money to buy homes they couldn’t really afford;
3. the car industry’s problems, esp in the US, predated the financial crisis by some years. essentially, Americans stopped buying US-branded cars (ie GM, Ford and Chrysler) increasingly in favour of Japanese and European brands. exactly the same thing has happened here in Australia, and there is no arguing with customer preferences in a competitive world;
4. re driving on the other side of the road, this was Tom Reynolds’s (the interviewer) suggestion, not mine. All I did was point out (a) that there are 2 places in recent history where such a change was made (Newfoundland and Sweden), and (b) that the world would be a simpler place for cars if we all drove on the same side (I prefer the right, although I have experience with both);
5. Without federal govt subsidies of the local car industry, a base model commodore (assuming it was even made) would cost over $50,000 per unit. How many people would purchase one at this price point? fewer than is currently the case, that’s for sure;
6. Finally, to survive and be profitable, the car industry has to become more global in outlook and less fragmented. That is why near the end of the interview I said ‘world’ cars like the camry and the cruze are the future to local manufacturing – not because they are amazing cars in themselves, but because their development costs can be spread over hundreds of thousands (if not millions) of units rather than just tens of thousands as is the case for locally designed cars like the commodore and falcon.

Thank you for listening.

Regards
Tom
Bavarian Missile (.)(.)

On the demise of Holden Reuss said a couple of hours ago…

“The Australian arm of the beleaguered company has posted no job losses despite the downturn, Mr Reuss said, with pay cuts taken “across the whole organisation”.

“We have worked over the last 18 months and taken all the necessary steps in the global financial crisis to make sure Holden here in Australia is cash-flow positive, is viable and has a great revenue stream set up here for our new products that we’re beginning to introduce,”

“We are part of the new GM parent company but more importantly we have a future here in Holden that we feel very, very good about.”

He said the company had structured operations in “a very responsible way” sparking a line production with demand, following the industry’s decline by up to 20 per cent in Australia.

Mr Reuss said he had worked closely with federal and state governments, unions and headquarter staff to take important decisions, including the development of alternative fuel technology, and a new small car design due for manufacture in Adelaide from 2010.

He said the company did not expect any job losses in the immediate future.

“We’re very well positioned here for any upswing in the economy and in fact, I think you’ll see this last month we’ve had start to have a little bit of rebound on local demand,” he said.

“We’re in a good place.”
Brett

And yesterday Obama’s own Democratic colleagues in Ohio said:

‘“It is unacceptable to ask U.S. workers to subsidize the exportation of their own jobs,” said Representative Dennis Kucinich, Democrat of Ohio, whose district includes Cleveland. “The taxpayers’ investment should be used to protect American plants so that American workers can build the next generation of automobiles.”

And today Obama said that it was not the intention for US taxpayers money to be used to sustain jobs outside the US. That statement was widely reported this morning (including in the Fairfax press; who have now removed it).
Brett

Sorry; it is still there:

“US taxpayers’ dollars should stay within the US and it is not intended for taxpayers’ dollars to go offshore”.
billyjoebob

Are you guys listening to the same podcast I’m listening to?

TomR was the one who asked about RHD cars, not TomE. I think that there’s something there – regardless of what the re-tooling costs might be, they’re an additional cost that contributes to the financial arguments about exporting Australian cars to o/s markets.

But, seriously, if we only sold 50,000 cars to private buyers, then why do we even have a car industry here? If it’s just to support manufacturing jobs, why don’t we build global cars that we can export, rather than local cars we can’t?
Brett

You have to love Michael Moore’s take on GM’s current woes:

“It is a sad irony that the company which invented ‘planned obsolescence’ – the decision to build cars that would fall apart after a few years so that the customer would then have to buy a new one — has now made itself obsolete.”

And:

“”Beginning in the 1980s, when GM was posting record profits, it moved countless jobs to Mexico and elsewhere, thus destroying the lives of tens of thousands of hard-working Americans,” he wrote.

“The glaring stupidity of this policy was that, when they eliminated the income of so many middle-class families, who did they think was going to be able to afford to buy their cars?”
Radar13

Toms (E and R). Thanks for a great podcast.
We’ve heard today the views of Mr Reuss (thank you Bavarian Missile) that all is well and there have been no job loses. Surely cutting two teams back to share the one shift at Holden in Adelaide is effectively the loss of half those jobs.
General Motors (now Government Motors) of the US will look at disposing of its overseas assets that may be of value and do not directly relate to providing jobs for american workers. Holden Australia fits nicely into this niche. The podcast suggests that the Australian Government may have to buy it, but as others have suggested on many sites, beware the Chinese or Indian buying the companies and moving the manufacturing offshore (cheaper) and retaining the design and development in country. Imaging the future ads for the new Commodore of Falcon praising it as “Designed in Australia”.
As for the future Falcon being a Taurus, I’d hedge my bets on the Mondeo. It’s already right hand drive. Not sure if the Taurus is made RHD at this stage.
Wheelnut

Radar13 – Whilst Holden have cut back to a single shift the workers will still get paid half their normal rate for the days that they were meant to be rostered on .. which means that they are still on Holdens Payroll which means that they still have a job.

Sure there mightn’t be enough work around at the moment to have 2 or 3 shifts. Yet Holden are retaining their workers for when the market and production picks up again to save them the cost in looking for and training new workers

Because don’t forget next year Holden will start building their new small car so some of the workers that would normally work on the main assembly line can start work on the second production line – which they have just started to install

The workers agreed to the plan because as they say a job at 1/2 the usual rate is better than no job
DesignEngr

Not job cuts, but “here have 6 months leave if you want”.
Sounds like a “try before you buy” scheme for finding a new job. Ultimately there will bw more job losses, unfortunately.
http://www.autostry.com autostry

It seems like a lot of people here don’t agree to the podcast.