In April 2004, Australia’s Prime Minister John Howard – flanked by South Australian Premier Mike Rann and Mr Tom Phillips, the serving CEO of Mitsubishi Motors Australia Limited (MMAL) – announced that the Lonsdale plant of MMAL would be closed with a loss of 700 jobs, with a further 400 voluntary redundancies from MMAL’s Tonsley Park assembly plant. The factory had been in operation since the mid 1960s and performed a number of roles, including a foundry where engine blocks were cast, as well as hosting the assembly of some components, such as brake knuckles. The Tonsley Park plant has remained a site for vehicle assembly, but functions such as inventory and upholstery manufacture have been further outsourced.

The loss of just over 1,100 jobs in the southern part of metropolitan Adelaide was recognised as a major setback to the regional economy. The Federal Government responded by announcing a $45 million assistance package for the region – called the Structural Adjustment Fund (SAF) – as well as enhanced employment assistance for retrenched workers. This assistance was to be delivered via the Jobs Network, Australia’s network of federally-funded labour market providers. In addition, the South Australian Government committed $10 million of assistance to displaced workers, mainly in the form of enhanced access to services. The loss of employment from MMAL in 2004 can be seen to be part of the longer term restructuring of the automobile industry, and manufacturing more generally, in Australia (House of Representatives Inquiry into the Automotive Component Manufacturing Sector, 2006). In the mid-1970s manufacturing employment accounted for 25% of the workforce but by 2001 it had declined to 12% of the labour force, even though the value of production had increased (Forster 2003). Where once car-making plants could be found in all state capitals except Perth, by the year 2000 motor vehicle production had consolidated into a limited number of sites with Toyota and Ford assembling vehicles in Melbourne, Mitsubishi and General Motors Holden building cars in Adelaide, and General Motors Holden building engines in Melbourne.

The southern region of Adelaide – defined as the jurisdictions of the City of Onkaparinga and the City of Marion – was perceived to be at risk economically as a consequence of the MMAL job losses. Its potential vulnerability reflected a number of structural factors, including the fact that the region has a relatively unskilled and under-qualified workforce (City of Marion and City of Onkapringa 2006); regional incomes are lower than the national average (ABS 2001); and a significant proportion of the workforce is employed outside the region. The further loss of local employment had the potential to undermine the viability of the region’s small businesses. More specifically, the workforce being made redundant was mature and tended to be concentrated in neighbourhoods close to the MMAL factories. There was, therefore, a real prospect that those who left Mitsubishi would not find paid employment and that the consequences of employment loss would be concentrated in a relatively small area. In addition, the region as a whole has lagged behind the expansion of manufacturing – and especially advanced manufacturing – in other parts of the metropolitan area, as the majority of new manufacturing enterprises have established in northern Adelaide. Businesses within the southern region of Adelaide tend to be small-scale and relatively mature (Kearins 2002). The Mobil (Exxon) oil refinery at Lonsdale had closed two years previously with significant loss of employment; and the wine industry in the southern part of the City of Onkaparinga (Southern Vales/McLaren Vale) faltered in 2004 and 2005 as the national supply of grapes for wine production exceeded demand. Finally, it is worth noting that the southern region of Adelaide is relatively poorly served in terms of access to infrastructure, with transport, power and telecommunications of a poorer standard than its competitor regions.

The announcement of job losses from MMAL was accompanied by the establishment of a new institutional structure to deal with the consequences of the plant closure and employment loss. A new body was established – the South Australian Government Advisory Group – to provide the government with industry-relevant advice under the chairmanship of a former President of General Motors Japan. Four sub-committees were also established:

From its inception, considerable importance was attached to the work of SSIDWG as it was the only sub-committee to involve representatives of the region and it had a mandate to shape a new future for the region. SSIDWG commenced meeting fortnightly in May 2004 and began to address an ambitious program of work including: planning for a Southern Summit to raise the profile of the challenges confronting the Southern Region; preparation of a regional economic development strategy that embraced the two council areas (The Blueprint for the Future); research into the availability of land for further industrial development; contact with businesses and other organisations interested in investing in southern Adelaide or in applying for money from the Structural Adjustment Fund (SAF); and planning for an Innovation Centre in the south.

SSIDWG’s role needs to be viewed within the context of the broader processes of government, as well as the overall response to the closure of the Lonsdale plant. It is important to emphasise that the $45 million of funds made available through the SAF was by far the most significant response to economic restructuring. Limited, or no, resources were committed by the State and Australian governments to other initiatives such as SSIDWG. This stands in stark contrast to policy responses in other regions – such as Birmingham, UK – where governments have invested substantial resources in the institutions managing the processes of change at the regional level. The MG Rover Task Force, set up when MG Rover announced that it has entered administration, had £175 million allocated to deal with the impact of the MG Rover closure and to assist further modernisation and diversification of suppliers (MG Rover Task Force, July 2005).

The SAF was the most significant response by central governments to the loss of employment at MMAL, and we must recognise that it does not fit easily within contemporary paradigms of regional development (see, for example, OECD 2001; Rainnie 2004) because the program consisted of grants – effectively capital subsidies – to firms willing to invest in South Australia. The SAF supported firms that were able to make a ‘business case’ that the injection of additional capital would allow for the expansion of business and would result in a significant number of new jobs. Firms had to match the grant awarded to them and complete a substantial application which was assessed by the advisory group. Two issues are critical here: first, SAF monies were not targeted exclusively to the southern region of Adelaide; and, as Table 8.1 shows, more grants were awarded to firms outside the region as within southern Adelaide. In other words, the SAF was intended to assist firms within the South Australia region, rather than focus on southern Adelaide. This meant that approximately half the funding went to the booming northern Adelaide region.

In part this decision was justified on the basis that workers from the south would commute to the new opportunities in the north, but as other research (Beer et al 2006) has shown, many retrenched workers were reluctant to undertake such time-consuming journeys to work, with a number choosing to leave the formal labour force rather than seek work in the north. Second, grants of this nature are a relatively blunt policy instrument and one which has fallen out of favour in most developed economies (Haughton et al 2003). Commonly, subsidy programs of this nature do not achieve the employment outcomes forecast – and committed to – by businesses (Beer, Maude and Pritchard 2003) and the diverse firms able to take up these opportunities effectively precludes the targeting of those industries considered to have the best long term prospects. In this instance, as shown in Table 8.1, the single largest grant was awarded to a chicken processing plant (Ingham Processing) in northern Adelaide.

Critically then, government responses to the loss of employment at MMAL included a high profile grant program from the Australian Government that was not targeted to the affected region, and which the evidence suggests is likely to be ineffective in the long term. The South Australian Government response was restricted and did not include ongoing measures to assist the adjustment of regional businesses. Local governments – the junior tier of government within Australian federalism (Troy and Stilwell 2000) – were left with responsibility for developing and implementing a more strategic approach to advancing the wellbeing of the southern region. SSIDWG emerged as an important avenue for local government to articulate its vision for the future of the region, as it adopted the roll of a ‘clearinghouse’ whereby ideas and issues were raised and tested against the opinions and attitudes of central government agencies. SSIDWG was the catalyst for a number of regional development strategies that attempted to present a new ‘vision’ for southern Adelaide and these are discussed in more detail in the section below.

The Australian Government chose to implement a Structural Adjustment fund that operated at the scale of all of South Australia. Effectively this decision saw the region affected by the redundancies as the entire state, and privileged that scale of intervention over a more tightly targeted intervention in the southern region. Critically then, the SAFSA allocated more monies to enterprises outside the southern region than within it. This outcome reflected both a neo-liberal ideology in which governments place priority on assisting private industry to expand in the wake of economic shocks, and an emphasis on market processes that operate on a wide geographic scale. It is quite possible that SAFSA funding would not have been fully allocated within the two year time period if had been restricted to the southern region. Instead, central governments would have been forced to think – more imaginatively – about other forms of assistance and support for the region. Such approaches could have included the provision of infrastructure that would have enhanced the competitive position of the region; comprehensive labour market training and education; and small business development programs. The approach adopted by the Australian Government assumed that workers displaced from MMAL would be willing and able to find employment in other regions, including northern metropolitan Adelaide. Other research (Beer et al 2006) challenges this assumption.

The strategic priorities of both the Australian Government and the Government of South Australia must be reviewed in order to understand the scale at which governments chose to act. For the Federal Government, the southern region of Adelaide is not a strategic priority as the nation’s medium to long-term growth prospects are tied to mining and the expansion of knowledge-intensive industries along the eastern seaboard. The South Australian Government, also, had priorities that lay elsewhere. During the period of redundancies at MMAL the South Australian Government was bidding for, and won, a substantial expansion in its defence industries and was at the same time promoting the growth of mining in the northern part of the state. Indeed, the State government’s priorities in the expansion of manufacturing capacity lay in northern Adelaide, in and around Edinburgh Park, where there was significant state government investment in road, rail and land development.