To build or not to build?
Warwick Lorenz, Managing Director of Australian Pump Industries takes an insightful look into the past, present and future of Australia’s power equipment manufacturing industry
Many Australian importers, some of whom used to be manufacturers, are now seriously re-evaluating going back into building equipment in Australia. The honeymoon with cheap third world products at irresistibly low prices seems to be drawing to a close.
Some of us are old enough to remember leading manufacturers of equipment coming to Australia in the ‘50s, ‘60s and ‘70s with a plan to build that equipment in Australia. Some of us will remember that we already had a home-grown manufacturing industry, building everything from engine drive generator sets to lawn mowers (Dunlite, Victa etc). Protected by whopping tariff barriers were manufacturers, some as high as 55%. On the other hand, the population was only half of what it is now and the government had a clear vision to build employment and that meant manufacturing.
The big changes came with the floating of the Australian dollar and its appreciation (and sometimes depreciation) coinciding with the lowering of tariff barriers, one step at a time that brought them down to what is largely around 5% duty now but duty-free depending on the free trade agreements with exporting nations.
That was a reality check. We even made engines. As the tariffs came down and imports became substantially more attractive (relaxed import regulations) Australian manufacturers found themselves up against mass producers from the United States, Europe and, of course, Asia. Japan led the way with their booming manufacturing industries, led by companies like Honda, Yamaha, Kawasaki and Fuji Heavy Industries’ Robin Engine division.
The Japanese product particularly impressed us OEMs because of its competitive price, smart appearance and “start first pull every time”. Engines that were manufactured in Australia, Wisconsin and Villiers as I recall, didn’t last too long once the Japanese quality products starting coming into Australia. Mass produced, high quality and reasonably priced, it was inevitable.
Those Japanese companies were determined to succeed in the international market with their big target always being that gigantic sponge, the USA! Here, in Australia, we just watched it all and as a manufacturer of pumps in those days, it wasn’t long before we realised the game had changed. Our cast iron pumps couldn’t compete with die cast aluminium and Al Marlow’s unique polyester self priming pumps were a radical change. Is it any wonder that manufacturers turned to partial and sometimes complete imports?
CHINA’S CANTON FAIR
Australian power equipment manufacturers sourced their Briggs and Stratton and Honda engines, Peerless transaxles for ride-on mowers and many other products from overseas. I remember my boss telling me how he smelt the end of apprenticeships and the death and destruction of Australian manufacturers. Worst, he predicted a huge vacuum of practical technical knowledge when bright young folk decided they wanted to be in IT or hospitality instead of going into an engineering related trade.
So, what’s the Canton Fair got to do with it? Australian manufacturers started going to Canton to take a look at what was on offer. Chinese entrepreneurs offered products sometimes made under license to Japanese companies, others not under license but looking awfully similar.
A friend of mine started importing Chinese engine drive generators, only to find the deal he had made for exclusive representation was not exclusive at all. He also had experiences of a routine of one good shipment, one bad shipment.
Today, we see major European and US brands coming out of third world countries, China particularly, all because of lower cost, not necessarily because the product is better or more suitable for the application. Most often, it’s about the price.
WHAT AUSTRALIANS REALLY WANT
We perceive a growing unrest and distrust of cheap third world products. We may have loved the price but we often find that the folk who made them have no real idea of where they will end up or what they actually have to do. Take a look at the big box stores and see how they can take power equipment dealers’ business by offering low prices based on their big volumes. That story is still evolving. Even DIYers, and particularly those on small farms can get very bored with second class product!
THE AGE OF THE PROFESSIONAL
We’ve all noticed the way professionals involved in lawn care, property maintenance, plumbing and loads more industries are no longer considered just hired labour. Considered to be both brains and labour. By that I mean they are, what we call, products of the ‘Age of the Executive Tradesman’. The executive tradesman is someone who does his own books (or their partner does), they do their own tax return, they understand looking good, presenting their equipment and vehicle in a professional way and properly maintaining their gear. They are the consummate professionals and their most vital commodity is time!
If they can get a cleaning job done in a half of the time by using the right machine for the job instead of a cheap third world product with a fraction of the performance, they’ll dump the product and buy the right machine. This presupposes that their local power equipment dealer is smart enough to stock the right product in the first place.
So many times we’ve seen professional dealers stocking high speed pressure cleaners with good quality Honda engines or similar and thinking that because the product is 4,000 psi, it’s a top quality professional machine. It doesn’t work like that.
Real professionals use Class A, slow speed gearbox drive high pressure blaster units that have pumps that will run at half the speed and last three or four times as long as the high speed job. These professional executive tradesmen need advice and direction on the right product for the job and they depend on OPE dealers to deliver that.
WHAT’S THIS GOT TO DO WITH MANUFACTURING?
The perception is growing amongst the professional OEM companies that the market is not just for cheap third world products, or cheap Australian products designed to compete. We are seeing the strong advance of companies like Honda and Stihl who make their specialty products, engines and chainsaws in a way that sets real standards for everybody. Cheap chainsaws from a third world country will cost Stihl sales but they certainly won’t be having sleepless nights over those products. Professional customers will still buy a Stihl or Husky or any other alternative that represents a top quality first world product.
Will they make them in Australia? That’s a question of volume and a decision they have to make but we know that in other areas, Australian manufacturers are designing and delivering world quality.
Focused on Australian designs, Australian Pump Industries is the best overseas components to come up with machines targeted to be the best in the world. That sounds pretentious but the Scud machines that we build in Australia are now in service in many other countries including Japan. Our Aussie Jetters, designed as a world first with the first protypes built 20 years ago, are now not just making Australian plumbers happy and profitable but also extending those benefits into a wide range of other applications. Smart power equipment dealers sell Jetters, are familiar with the Class A and B rules regarding operator certification, trained in their safe operation and understand that the markets include local government, schools, TAFE colleges, universities and hospitals. Even New South Wales Correctional Facilities operate Aussie Cobra drain cleaners.
The story of the evolution of the Aussie Scud is another story. We are so proud of the Scud and our Jetter range that we know there’s hope for Australian manufacturers, provided we are prepared to be better than imports. That’s the challenge for all of us in the OEM business. If you are going to be in manufacturing, you can’t just decide you will try and cut costs to beat importers. That’s not going to work because their volumes are always going to be bigger than yours.
On the other hand, we can be better. At Australian Pump we have the luxury of not being concerned about a bunch of shareholders from a big multinational corporation. Our function is the user of the product. From interviewing and dealing with OPE shops across Australia, we know that’s the down-to-earth approach taken by 90% of all successful operators.
WHERE TO NOW?
Yes, there is a future for Australian manufacturing but only if we choose to be better, more innovative, and more adventurous. We have to be prepared to take the risk of building better products to help grow Australian jobs. Aussie Pumps prove every day that Australia isn’t just an exporter of beef, wheat and iron ore. We ship our products to the world and believe many other innovative Aussie companies can do the same.
For any further information, contact Warwick Lorenz at firstname.lastname@example.org or visit aussiepumps.com.au.