11 May 2006 
 
South Australia’s troubled automotive industry should diversify into the defence industry if it wishes to secure its long-term financial security according to Paul Merrow, defence industry specialist and principal consultant at mhm.  
 
Mr Merrow told a group of local business people at the Institute of Chartered Accountants Business Forum today that failure of the South Australian automotive industry to quickly embrace this opportunity could prove fatal to many companies that have been too reliant upon the automotive sector for too long.  
 
He said the defence industry requires an influx of high performing suppliers to improve its delivery performance and cost overruns.  
 
“There is a lot of pressure for the local defence industry to look overseas for solutions, yet the solution is right under their nose here in South Australia”.  
 
“Our highest performing supplier sector is currently being pulverised by Chinese and other Asian competition and I can see new developments which are about to be launched in Asia which will continue to decimate the local automotive market.  
 
“The automotive supplier sector could secure their future by targeting the defence industry. There is no doubt that the defence industry is seeking an injection of people and skills that could support Dr Stephen Gumley and the DMO to deliver more programs on-time and on budget.  
 
“Like many industries, the defence industry is facing a skills shortage. Yet here, in South Australia, there is a high performing, highly skilled workforce which could provide the solution,” he said.  
 
Currently, manufacturers in the domestic automotive industry are struggling against China’s cheap labour and high-tech. However Mr Merrow believes competition in the defence supply sector from China and other Asian countries would be unlikely due to security of supply chain reasons.  
 
He said that automotive suppliers that quickly recognise the need to diversify, change and embrace the opportunities that the defence industry provides will undoubtedly succeed.  
 
South Australia is becoming known as the defence state as a result of the Air Warfare Destroyer (AWD) and this industry has a strong future ahead of it. For example, the relocation of an army battalion to South Australia will provide more economic and employment benefits than the $6 billion air warfare destroyer contract. The decision could be worth up to $100 million a year to state’s economy.  
 
Mr Merrow called on the local automotive industry to move fast before overseas solutions were engaged by the defence industry.