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Industries Assistance Commission report - electric motors, generators and rotary converters



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INDUSTRIES ASSISTANCE COMMISSION REPORT

ELECTRIC MOTORS, GENERATORS AND ROTARY CONVERTERS

The Minister for Industry and Commerce, Senator

Robert Cotton, and the Minister for Business and Consumer

c

Affairs, Mr John Howard, announced today that the Government

had decided the following duties will apply to electric

motors, generators and rotary converters:

. 30% for two years certain direct current (d.c)

or universal motors;

certain rotary converters

to 400kW; certain

alternating current (a.c.)

generators to 500kVA;

d.c. or universal gener­

ators to 50kW; and certain

a.c. motors to 410kW

) )

) )

- other goods

. 30% to minimum rates,

depending on power rating, )- a.c. motors above 410kW

for two years

. minimum rates

The Ministers said that the Government had accepted

the recommendations of the Industries Assistance Commission

that the short-term rate of assistance should be set at 30% .

However, the Government had decided that the

industry situation should be further reviewed before any

action was taken to adopt the Commission's presently

recommended industry long-term rate of 20%.

Accordingly, the industry would be referred to the

2 .

Industries Assistance Commission in two years, and the

presently introduced rate of 30% would remain in force until

the Government had announced its decision on that review.

Copies of the Commission's report are available from

the Australian Government Publishing Service retail book shop

in each of the capital cities.

CANBERRA A.C.T.

18 February 1977

Department of business and consumer affairs

V,-

CANBEPRA. A.C.T. 2600 TELEPHONE: Reply to The Secretary'

Quote ,

The Secretary, .

Industries Assistance Commission, Kings Avenue, BARTON A.C.T. 2600

IAC REPORT - ELECTRIC MOTORS, GENERATORS

AND ROTARY CONVERTERS '

As part of its consideration on the Commission’s report, the Standing Committee on Industries Assistance would appreciate the Commission’s advice on the following matters:

1. Profitability and Funds. Employed

The information provided on page 17 of the report gives no data or comment on profitability in the last two years (since 30 June 1974).

(a) can the Commission up date the information in Table 4?

(b) if not, would the Commission provide some comment on trends in profitability over the last two years?

2. Relationship between Fractional and Integral HP AC Motors

Because of the close association of the production of fractional and integral HP AC motors by the major manufacturers, what would be the effect on fractional HP AC motor production, should integral HP AC motor production decline significantly upon implementation of the recommendations contained in this

report?

3. Viability of Special Integral HP AC Motor Production

What would be the effect on the ability of manufacturers to produce special AC motors, should production of standard AC motors be not viable under the recommended rates?

4. Impact of Tariff Increases on User Industries .

On page 24 of the report the example is given of the effect of a 10% increase in the nominal tariff on motors on the effective tariff on the production of vacuum cleaners. What would be the effect on other user industries of such an

increase in the tariffs on a range of goods covered by this . report, including integral HP AC motors in each of the three - power categories used by the Commission? . .

. . . / 2

5. Essentiality of Production

What were the criteria used and the factors considered for each category of goods under reference in arriving at the Commission * s conclusion contained in the statement on page 29 of its report that "It was not demonstrated that electrical rotating machine production is essential to Australian industry"?

6. Effective Rates of Protection

The Commission states that a 20%. nominal tariff would provide an effective rate of protection of about 25%. How does this vary between the various categories of goods covered by the report?

7. Fractional Motors ·

The report indicates that further employment losses in the fractional HP AC motor sector are not expected. The '

Department of Industry and Commerce understands that two appliance makers have recently switched in part to using imported fractional motors. Is the Commission reasonably confident that other appliance makers will not also switch to imports of

such motors?

(L. J. Willett) Assistant Secretary Protection Policy A Branch

2 November 1976

Industries Assistance Commission

All correspondence to be addressed to: The Secretary, Industries Assistance Commission, P.O. Box 80, Canberra. A.C.T. 2600. Telephone: 73 0415 In reply please quote:

Kings Avenue, Canberra, A.C.T.

17 November 1976

Mr L.J. Willettt, Assistant Secretary, Protection Policy Branch, Department of Business and

Consumer Affairs, CANBERRA A.C.T.

IAC Report - Electric Motors, Generators and Rotary Converters

I refer to your letter received 3 November 1976, seeking advice on certain aspects of the Commission's report on Electric Motors, Generators and Rotary Converters. The matters raised are dealt with in the attachment to this letter.

j) - V r <- _ >

A.E.S. Davey (Secretary)

Enc.

ATTACHMENT TO LETTER OF 17 NOVEMBER 1976

Question 1

Most goods under reference are produced for in-house use or as part of a

product mix which includes other goods besides those under reference (see

report p. 21).

Attribution of profit performance to the goods under reference is not only

fairly time-consuming and onerous to witnesses but also involves a number

of arbitrary, allocations of such things as factory overheads, administration,

etc.

The original evidence was updated once- and the Commission was reluctant to

ask the manufacturers to go through the updating exercise a second time.

The Commission understands from major producers that the industry's

profitability in 1974-75 was above the level of the previous year. All of

the twelve firms canvassed, however, reported a fall in profitability

in 1975-76, coincident with the general contraction in the economy.

As pointed out in the report (p. 17) the profitability of firms in the

Industry varies considerably and it was not possible to establish the

profitability of particular goods.

Question 2

It is considered that the association between integral and fractional hp

motors is not close and that the effect on fractional hp motor production

of a decline in integral hp motor production would be minimal. Because of

the definitions used for this inquiry there is an overlap between integral

and fractional motors at the margin. This overlap is relatively small.

Integral motor production is mainly confined to four firms: Simpson Pope,

Crompton Parkinson, ASEA and GEC, though the range of some fractional motor

manufacturers does spill, in a minor way, into the lower end of the integral

hp area. *

2.

Simpson Pope produces fractional and integral hp motors at its plant in Adelaide.

However, the operations are conducted in separate buildings and are, in the

main, separate activities.

Crompton Parkinson's operations are quite separate - fractional motors being

produced at Campbelltown and integrals at Five Dock, with little if any,

interdependence.

GEC manufactures motors only in the integral range. ASEA manufacture almost

entirely in the integral range, though their range does extend down to the

larger fractionals.

Question 3

Question 3 must be looked at separately for fractional and integral motors.

About 90 per cent of the production of fractional motors are specials

(report, p. 23) and, both these and the 10 per cent of fractional motor

production represented by standards are expected to remain viable at the

recommended rate (report, p. 32). Fractional motors account for about three

quarters of motor production (p. 1).

As to integral ac motors, it is in this area that the contraction predicted

by the Commission has been occurring (report, p. 33). The production of

special ac integral motors is expected to continue but at a reduced level

at the recommended rates (report, pp. 32, 33, 35).

Question 4

The Commission does not have sufficient detailed data to provide the

breakdown requested. The example given on page 24 was included to

highlight the fact that these goods are all inputs to other industries and

that an increase in protection in this industry reduces the available

effective protection of user industries. During the inquiry, for example,

Comeng (a user) requested additional protection on user goods (locomotives)

if assistance is raised on motors. ,

3.

Question 5

The question of essentiality was considered in relation to the electrical

rotating machine industry as a whole.

The basic consideration was: can it be shown that user and supply industries

would go out of existence or be seriously prejudiced if there were no

electrical rotating machinery manufacturers in this country?

The comment on essentiality was included more for the sake of completeness of

coverage of the arguments raised than for decisive relevance, since the

industry is expected to continue and to expand as the economy recovers.

Question 6

The Commission's analysis showed that the factor inputs of the various products

covered by the electrical rotating machinery industry are largely the same.

User data were not available for every product category. In the light

of similarities in proportional inputs it is the Commission's opinion that the

industry-based effective rates shown in the report adequately reflect the rates

for individual activities under reference.

Question 7

The switching of fractional motor users to imports was raised by several

witnesses (see transcript to hearing of 6 and 7 November 1976, pp. 1768-9,

1784-6, 1790-1, 1813-4, 1854, 1858-9 and supplement pp. 8-9; and hearings

of 24 and 25 March 1976, pp 100, 133-4, 137-8, 142-3, 154-5, 215). Alleged

cases, which were numerous, were checked out.

Most complaints were unfounded, arising from business lost to local

competitors. Some switching to (and from) imports was noted but the

quantities were minor overall and mainly arose from decisions to engage in

dual sourcing, during and after the commodity shortage.

Attention is invited to the continuing very high market shares of local fractional

motor producers (report, p. 25), to the price relativities (report, p. 20)

and to the recommended rate.

The evidence indicates that, while users will continue to switch back and forth from local production to imports to a minor degree, local fractional motor

production will retain its market.