In sad remembrance of Australia's auto industry

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A car repair shop in South Australia circa 1925 (Image via Wikimedia Commons)

The history of the rise of the auto industry has rarely been addressed in public debate, writes Evan Jones.

ON 20 OCTOBER 2017, the last automobile fully manufactured in Australia rolled off General Motors-Holden's (GMH) assembly line in Elizabeth, South Australia.

True to recent form, that car was a "rev-head’s" delight — a 6.2-litre V-8 SS-V Redline. And not cheap. Not exactly your EH family sedan, but a sign of GMH’s home-grown engineering wizardry.

Much media coverage has homed in on the cultural significance of the home-grown auto, especially the Holden.

There has also been perennial attention drawn to the seeming impossibility of sustaining a viable auto industry in Australia with its small population.

For most, as the adage goes, it was a nice party, folks, but the party’s over. It’s time to face reality.

Almost wholly missing from the public debate is the historical context of the development of the auto industry in Australia. And what is completely missing is the political culture of what industries get a guernsey in the preferred character of Australian economic development.

For a shortish exposure to the entire subject for the uninitiated, look no further than Gideon Haigh’s masterly 2013 book, End of the Road? The readily digestible text belies the author’s in-depth research into this complex history and insightful interpretation of the whole.

Manufacturing in Australia — the early days

Local manufacturing began early with white settlement in catering to local food and construction needs. The take-off occurred during the 1850s Gold Rush with Melbourne at its centre.

During the late 19th Century, Victoria had erected tariff barriers to protect its nascent industry. Federation of the colonies saw the establishment of a compromise tariff at the national level, mostly for revenue purposes, as the states retained the sole right to levy income taxes until the Federal government appropriated the privilege during World War II.

Soon into the 20th Century, a tariff regime was established for protective purposes to support domestic manufacturing. Various protective measures to assist national economic development have been applied historically, without exception. The newly created Australia was merely following national “best practice” at the time.

Formally, this protectionist regime was directed primarily towards Britain, which accounted for 60 per cent of Australia’s imports (mostly manufactures) at the turn of the 20th Century. Policies were subsequently developed that forged a “mutual advantage” between Australia and Britain. British goods obtained a lower tariff than did goods from elsewhere.

By the 1920s, British manufacturers were establishing subsidiaries in Australia behind the tariff barrier to cater to the local market. Carpet and food manufacturers, and Imperial Chemical Industries are some examples. This was accompanied by government-supported immigration of a “surplus” British population. The “mutual advantage” process, though, went over the top with the counter-productive entrenchment of British Imperial Preference in the Ottawa Agreement of 1932.

A key early force for support for tariff protection was the growth of Australia’s population. By the early 20th Century, Australia was highly urbanised. People needed jobs. At the same time, local manufacturers – epitomised by H.V. McKay, the Sunshine Harvester inventor in outer Melbourne – faced incursions by overseas giants into the Australian market.

Some strategic pro-protectionists, like the astute industrialist John Storey, claimed that without a domestic industry, Australian users would be subject to the dictate of foreign suppliers: destroy any local competition and then charge what the market can bear.

Another driving force for local manufacturing (autos included) was the threat and reality of World War I. The Federal Government was contemplating the creation of domestic steel capacity. Broken Hill mining interests foreclosed that option with the establishment of a steel plant in Newcastle in 1915. Moreover, international freight capacity had to be at the service of the war effort. In 1917, Prime Minister Hughes banned the entry of auto bodies, allowing chassis in.

A “ratchet effect” set in after the end of World War I. A sentiment for greater home-grown manufacturing was established. Towards that end, the Tariff Board was established in 1921, in operation after March 1922. This institution was unique globally, in place formally to grant tariff protection for domestic manufacturing only on a “rational” basis.

Primitive experimental cars were being produced in Australia around the turn of the century. Imports grew quickly in the new Century, and Henry Ford’s Model T, after 1910, readily dominated the imported market.

General Motors-Holden

South Australia’s involvement is serendipitous. Adelaide had an auto fanatic called Sydney Cheney, who became an early importer. Cheney induced the carriage-building Holden family, father James and son Ted, into the auto body business. Thus, the early and momentous relationship with General Motors began – and was formalized – in 1931.

Successive governments increased tariffs on a range of manufactured products, a key vehicle in lifting Australia out of the Great Depression earlier than elsewhere around the world. The auto industry, with tariffs on auto bodies and parts, contributed to Australia’s growing economic improvement.

General Motors installed the Englishman Laurence Hartnett – much travelled and experienced – as head of General Motors Australia in 1934. Hartnett successfully mediated between GM’s arrogant and reactionary Head, Alfred Sloan (who thought Australia a "goddamned socialist set-up"), and the assertive Ted Holden.

In 1936, Hartnett initiated and oversaw the then huge GMH plant at Fisherman’s Bend. Hartnett, with other key industrialists, like Broken Hill Proprietary's (BHPEssington Lewis, spearheaded a smoother transition to industrial production for the war machine.

In 1938, the Tariff Board, after an exhaustive study, concluded that the manufacture of a complete automobile in Australia would be unwise.

However, Haigh notes (p66) that, by 1936,

... a new consideration arose: security. War jeopardised Australia’s links with the rest of the world, and in particular continuity of supplies in munitions, armaments, aircraft and vehicles … industrialisation suddenly took on patriotic hues.

The auto industry’s detractors never mention the influence of the war on the thinking of Australians about a car industry, but it was profound, both in terms of building an industrial base in the event of Australia being cut off from the rest of the world, and later underwriting promises of full employment with the onset of peace.

World War II and Post-War reconstruction

In 1943, the Tariff Board changed its tune.

According to Haigh:

'The manufacture of a complete motor vehicle in Australia as a postwar measure is desirable.'

The massive boost to industrial capacity generated by war created an unprecedented “ratchet effect”. It was seen as a foundation to underpin more sustainable economic development. This mentality was embodied in key players like John Jensen (Secretary of the Department of Munitions and subsequently of Supply and Development), Harold Breen (Jensen’s deputy who became Director of the new Division of Industrial Development within Post-War Reconstruction), and John Dedman (Minister of War Organisation of Industry and subsequently Minister of Post-War Reconstruction).

Hartnett himself worked under Jensen in Munitions from 1940 as Director of Ordnance Production. Jensen was put in charge of the Secondary Industries Commission, established in 1943, the central bureaucratic vehicle to effect the change to post-war conditions.

The scale of the analytical effort is reflected in the mountain of bureaucratic material generated during the 1940s. This material is admirably catalogued by Graeme Powell and Stuart Macintyre in a landmark project labelled Land of Opportunity: Australia’s Post-war reconstruction, sponsored by the National Archives of Australia.

Whole automobile manufacture was to be an integral part of the package.

Former Labor PM Ben Chifley, then Minister for Post-War Reconstruction, wrote to Hartnett in July 1944 (Hartnett’s 1964 Big Wheels and Little Wheels, p242):

I am interested to hear that during your visit to U.S.A. you propose to discuss the possibility of producing complete motor vehicles in Australia.

The Government is anxious that Australian needs of such vehicles should be made to the greatest extent possible by Australian production, particularly if this can be associated with a reduction of selling prices to the public. The technical development of Australian industry during the war provides, I believe, an opportunity for a rapid development of the motor industry in Australia and its development can contribute significantly to the employment of Australian workmen who, during the war, have acquired skill and experience in this class of production.

Herbert Evatt, Ben Chifley and Clement Attlee (Image via Wikimedia Commons)

Here is Dedman, in Parliament, 21 March 1945 (E. Ronald Walker’s 1947 The Australian Economy in War and Reconstruction, p407):

Even in peacetime the importation of sufficient vehicles is by no means assured. Our export income, from the proceeds of which we must pay for imports, is subject to sudden and largely unpredictable fluctuations. We have no guarantee that the overseas demand for our staple exports will be sustained permanently at levels to which we have been accustomed in the past. With so much in the way of raw materials which in any event have to be imported, it is only prudent that we should endeavour to become beholden only to our own resources and enterprise for the production of this essential item of our transport system.

Stuart Macintyre, in his 2015 Australia’s Boldest Experiment (p224), highlights the “multiplier effect” embodied in the auto production, of which its proponents were convinced:

'The munitions effort had increased manufacturing capacity, especially in the metal trades, and a car industry would stimulate a wide range of ancillary production in steel and allows, glass, rubber and paint. It would boost employment, support a larger population, signal that the country was fully industrialised.'

The Government sought offers from auto manufacturers for manufacture in Australia. The U.S. and Canadian giants came around (partly under threat of a publicly-owned company by default), but British companies showed no interest. The Government set up an Inter-Departmental Committee in May 1945 to oversee the project. Ultimately, the policy-makers determined that the GM offer was the most acceptable. Thus, in late 1948, GMH – with huge government support – produced the first car entirely manufactured in Australia.

At the time, policy-makers were unaware of the scale of the migration that would be accepted, first of displaced persons (DPs) and then of economic migrants — mostly from Southern Europe.

DPs were forcibly indentured into two years of conscripted work, not least in the mammoth Snowy Mountains hydro-irrigation scheme. Many male economic migrants went into the auto factories, while their female counterparts went into textiles, clothing and footwear.

The Broadmeadows factory was established by Ford in 1959 precisely because of its proximity to the residences of many recent arrivals. Thus, in 1960, the Ford Falcon was produced (based on the Mustang, but soon modified to accommodate the local rugged conditions) — a belated rival to the Holden.

Life on the assembly line was more bread than circuses, as evidenced by some serious industrial disputes. But regular jobs meant regular wages — classically representative of the so-called age of Fordism.

Ironically, the majority of Broadmeadows’ workers at the time of its closure in December 2016 were from later generations of non-English speaking backgrounds.

The automobile became an integral part of the post-war boom that lasted for 30 years — built on family formation, housing construction and homeownership, suburban development and consumerism. The problems of financing an auto purchase (along with other “consumer durables”) even led to innovation in financial instruments and institutions.

This story of the auto industry to the early post-World War II period concludes with two curious developments.

J.T.O Loorham and the Beetle

Among the considerable number of personnel in Occupied Germany after 1945 was J.T.O Loorham. He had been in charge of Stores and Transport in Munitions, with the largest fleet of vehicles in Australia. On his travels, Loorham discovered the Volkswagen (VW) Beetle and he became addicted to them (this story came from an unpublished 1962 Harold Breen memoir).

Independently, some Australian army units had witnessed the VW in operation in North Africa and were impressed with its hardiness. The VW plant at Wolfsburg (in the British Occupation Zone) was then barely operational. At the time, Allied personnel – including Soviet personnel in their zone – were scouring over devastated Germany, looking for possible stuff to haul off as reparations.

Loorham accumulated thousands of drawings and sheets, satisfied that he had sufficient technical data to establish a plant in Australia. A people’s car for Australians, courtesy of Nazi Germany’s engineering wizardry! (Auto historians claim that Ferdinand Porsche stole this idea from the Czech Tatra T97.) Loorham and Breen imported two cut-down models and showed them to prospective manufacturers, but there was no interest. The one that got away!

Of course, VW, in conjunction with Australian companies, set up production facilities in Australia, and VW autos were produced locally from 1954 to 1976.

Laurence Hartnett: from kingpin to dustbin

Laurence Hartnett was a vital “cog in the machine” that engineered the establishment of an auto industry in Australia. His story is told in his Big Wheels and Little Wheels and in Joe Rich’s 1986 Hartnett: Portrait of a Technocratic Brigand.

Hartnett was marginalised at precisely the time of takeoff of the domestic auto industry, acquiring the status of an eccentric has-been.

Ironically, Hartnett had been sacked as local managing director by GM in December 1946, with the always chauvinistic head office tiring of his insistent pressure for complete auto manufacturing in Australia. This was immediately after Australian teams of engineers and technicians had spent two years in Detroit working on the future Holden.

Hartnett turned his energies to the design and manufacture of a smallish car appropriate for urban Australia. The story is that he had Chifley’s support in the enterprise. He argued for the modification of a French Grégoire design, to be called the Hartnett.

The car was long in development and production of a handful of cars at a Frankston plant lasted for a mere five months in 1952. The crunch came when the company failed to obtain long-ordered steel supplies from the partly government-owned Comeng. The Labor Opposition blamed this on the Menzies Government consciously blocking the car’s development.

Opinions surrounding Hartnett’s car are strongly divided. Some see it, with its 600cc engine, as a joke. Others see its advanced features as ahead of its time. As late as 2010, the media reported that car enthusiast, Rod Fulton, still had a reconstructed Hartnett on the road.

With VW in Australia, and British and Continental small car imports, Hartnett was doomed anyway. Renault was assembling its mini 750 locally during the 1950s. By default, Hartnett helped Renault set up local manufacture in West Heidelberg in 1959. This plant operated until 1981.

Hartnett gained a new lease on life, initiating the importation of Datsun and Nissan autos after 1959. Ultimately, he also fell out with Nissan head office over the prospects and character of local manufacture.

Hartnett died in 1986. Since then, his name has hit the press as much due to the real estate fortunes of his upmarket house at Mt Eliza as to his pivotal role in the development of the auto industry in Australia. A regrettable fact, indeed.

Dr Evan Jones is a retired political economist.

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