CAR gearboxes designed by DSI engineers in Albury and Melbourne are being churned out by the thousands in China.
That’s the fact behind the threat looming over the factory in Kaitlers Road, Lavington, that has made millions of gearboxes since 1971.
Four years ago, The Border Mail discovered Geely Automotive, the new owners, intended to build a factory in China to produce 200,000 DSI-designed car transmissions a year.
And so it came to pass — but it’s now three Chinese factories are able to produce several hundred thousand units a year.
This newspaper made the point in 2009 that Chinese labour costs would, of course, be vastly cheaper than in Australia.
The Kaitlers Road factory, under all its owners, has always been caught by the shifting sands of the motor industry.
Only a few years ago, the workers’ big fear was Ford Australia would one day stop buying 110,000 gearboxes a year from them— Ford finally stopped buying in 2011.
SsangYong, which began buying Lavington gearboxes to import to South Korea in 1997, became the main customer.
The Koreans were upset when Drivetrain Systems International went broke in 2009 and halted production for some months.
But two years later, SsangYong itself went belly-up and stopped orders for months — it is now controlled by India’s Mahindra company, which was a Lavington customer for Scorpio gearboxes for a while.
Sadly, Holden had been a big hope in 2004 under the factory’s former owners, ION, but it never clinched a deal.
ION Group failed in 2004, and the next operator, Drivetrain Systems International, folded in 2009, even after taxpayer support.
Industry expert Mike Turner controlled management of the factory under the failed companies and now heads Geely subsidiary DSI Holdings, having assisted Geely to set up its new factories.
In 2009, when Geely paid over $55 million for the business, it was clearly after DSI’s intellectual property, though at the time more emphasis was placed by the media on its “saving” 130 jobs.
The Australian engineers had designed high-torque, seven-speed and eight-speed automatic transmissions, hybrid transmissions (for petrol-electric cars), dual clutch transmissions and continuously variable transmissions.
Geely said it would use the Lavington product for its own car-making business in China as well as the needs of other car manufacturers, including those in China.
That is, indeed, happening, but the gearboxes are being produced in the Chinese “DSI” plants.
It didn’t take long for the Australian Manufacturing Workers Union to sound warnings.
In March 2012, NSW official Sean Morgan said he was worried Lavington could close within two or three years.
“I am concerned about what will happen when Geely’s sister plants in China are fully operational and the quality (of the product) is comparable to that of Lavington,” Mr Morgan said.
“Why would you try to sell expensive products made in Australia when you can get them cheaper in China?”
Mr Morgan said on Friday the factory could close in October 2014 — though the AWMU’s enterprise bargaining agreements with Geely run to 2015.
Geely’s DSI factories in China are in Hunan, Shandong and Chongqing.
It’s an industry giant, having bought Volvo in 2010, it now employs 18,500 staff.
Last year Geely sold 483,483 cars and sports utility vehicles, and 2013’s target is 560,000, most with automatic transmissions.
Revenue last year was a whopping $26.6 billion, the revenue from gearbox production being $236 million.
If it does close Lavington, unlike the previous owners, it will easily be able to make the required pay-outs to workers.