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The chief guardian of the Victa and Sunbeam brands today is Ian Campbell, managing director of GUD Holdings. The tall, trim Campbell has a modest office in Melbourne's western suburbs above a plant that once made Ryco oil filters for automobiles. But last month, after reducing his workforce from 600 six years ago to just 50, Campbell closed the factory. Ryco-brand products will now be made overseas. "The total cost of labor for a process worker is $A49,000 a year. In China, it's $A2,500 a year. Add the cost of shipping and other things, and we can employ 15 people in China for the cost of one Australian worker." Factoring in longer work hours and leave, the Chinese worker will also toil for 100 days a year longer than his Australian counterpart. Then there's the cost of components. Some companies can now land inputs from China at the price they used to pay for the raw materials. A few years ago, GUD closed the remaining Sunbeam plant in Sydney. Sunbeam products - kettles, toasters, food processors, irons - are now designed in Australia and made in China. Sunbeam's 60 Chinese suppliers are licensed to make a product for Australia, but are permitted to sell the same items into other markets if they pay Sunbeam a royalty.
"How important is it to have made in australia stamped on a product?" says Campbell, an energetic figure amid the dourness of secondary industry. "A dyed-in-the-wool manufacturer will take that idea to their grave. But if you have a good product at the right price, supported by warranty and after-sales service, that argument doesn't hold water." However, China does present a significant new challenge for Campbell when it comes to Victa, which also benefits from cheaper component costs for its lawnmowers. The company has traditionally held about 50% of local sales. But in the past year, a new brand called Talon, made in China, has entered Australia and has already taken an estimated 20% of the market. "The Chinese are trying to eat my lunch," says Campbell. The drought and city water restrictions are already hurting Victa, but Campbell has an ace up his sleeve. In coming months, Victa plans to introduce a base-model lawnmower made in China to its specifications. "It's not important where the model is made," says Campbell, "as long as it maintains the quality and values of the brand."
As a group, Australian manufacturers are not frightened by China's great leap, but they are wary. According to Heather Ridout, the chief executive of Australian Industry Group, a combination of the two Cs - currency appreciation and China - has caused a slackening of factory exports. In a 2004 survey of members, the manufacturers' lobbyist found that 60% of respondents are restructuring their businesses in response to the pressures being generated by China. Union leaders fear more job losses, saying the country will simply become a quarry and that pay and conditions will be cut in a "race to the bottom" with low-wage countries. Many firms that once thought themselves immune to import pressure are feeling China's productive muscle. "We have a two-China approach - the China we sell to, and the China we buy from," says Richard Leupen, managing director of the United Group, whose Newcastle-based Goninan company makes rail cars: soaring demand in the resources sector prompted Goninan to start importing fully made rail wagons from China to meet orders. According to Leupen, although the freight cost would be huge, there's no reason why a Chinese competitor could not bring in whole passenger trains.