C2006/2833, Transcript of Proceedings [2006] AIRCTrans 944 (10 August 2006)

TRANSCRIPT OF PROCEEDINGS

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Workplace Relations Act 1996 15442-1

COMMISSIONER BLAIR

C2006/2833

ZF LEMFORDER AUSTRALIA PTY LTD
AND
NATIONAL UNION OF WORKERS AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
s.496(1) - Appl’n for order against industrial action (federal system).
(C2006/2833)

MELBOURNE

1.44PM, WEDNESDAY, 19 JULY 2006

PN1

MR J D'ABACO: I seek leave to appear on behalf of ZF Lemforder Australia Pty Ltd.

PN2

MR T LYONS: I appear for the respondent, National Union of Workers, with me is MR A THOW.

PN3

MR B TERZIC: I appear on behalf of the organisation known as the AMWU.

PN4

MR M BROWN: I represent Huon Corporation under administration in this matter. Appearing with me today is one of the administrators, MR T SIMS of Sims Partners.

PN5

THE COMMISSIONER: Does anybody have any objections to Mr D'Abaco seeking leave?

PN6

MR LYONS: Not in the circumstances, Commissioner.

PN7

THE COMMISSIONER: Thank you, leave is granted Mr D'Abaco. The Commission has received the application under section 496(1) for an order against alleged industrial action occurring. The order only refers to the Bendigo site, it doesn't refer to the Frankston or the Dandenong site.

PN8

MR D'ABACO: That's correct sir. The order is only sought in respect of the Bendigo part Huon Corporation Pty Ltd.

PN9

THE COMMISSIONER: Right. Are the parties of the view that there might be some progress made on this matter if we were to adjourn into conference?

PN10

MR D'ABACO: That may well be useful Commissioner, we certainly wouldn't oppose that course of action. I would wish, however, to place a few matters on the record so that you are apprised of the factual background to the application. I understand also that the administrator wishes to place certain matters on the record and no doubt my friend, Mr Lyons and Mr Terzic will wish to do so as well.

PN11

THE COMMISSIONER: Fine, well the Commission is a customer focussed organisation.

PN12

MR D'ABACO: Well in that grain sir, on behalf of client, we wish to express our gratitude to the Commission for bringing the application on for hearing so promptly. Can I give you firstly sir, a very brief factual background of the application and the reason for its institution. ZF Lemforder Australia Pty Ltd, who I will refer to from here on in as ZF, is a company which assembles and supplies car components to the motor vehicle industry. It's a new entrant into the market, it only commenced operations in Australia on Thursday 13 July 2006. Based or located at its plant in Edinburgh Parks, South Australia are approximately 130 employees.

PN13

Of those employees, approximately 65 employees are in the production area and they're directly employed by ZF. There are another 15 employees of various contractors who are also in the production area and then there are an additional approximately 40 to 50 employees - direct employees of ZF in the areas of managements, technical and administration. ZF's sole customer in Australia is General Motors Holden Ltd and what ZF does is assemble and supply to Holden rear axle and front end suspension components for the new Holden Commodore, which has just been released. In providing these components, and this is really the crux of the matter and why we're here before you today sir, ZF purchases parts from various manufacturers in Australia and overseas, principally Australia, and one of the those manufacturers is Huon Corporation Pty Ltd.

PN14

As the Commission will no doubt be aware from having read the papers of recent times, Huon Corporation Pty Ltd has three parts and the products which are required by my client are manufactured here in Victoria at the Bendigo plant. As the Commission may also be aware from general reading, last Friday on 14 July, there was a strike - immediate strike action across all of Huon Corporations plants including Bendigo plant and I'm instructed a picket has also been erected outside the premises of Bendigo, preventing ingress and egress to goods and materials. As ZF had already purchased the necessary parts that it requires from Huon Corporation prior to its commencement of operations on 13 July, to today ZF has been able to manufacture or assemble, I'm sorry, and supply to Holden the components which it has contracted to provide.

PN15

However, because of the strike it hasn't been able to purchase from the Bendigo plant of Huon Corporation any additional parts. I'm instructed that during the course of this afternoon, the parts which ZF does have will run out, it's production will cease and as a consequence, effective the end of today's afternoon shift - ZF operates two shifts per day sir, a morning shift and an afternoon shift, but effective the end of the shift today approximately 80 employees in the production area will unfortunately have to be stood down simply because as a result of the absence of product from the Bendigo plant of Huon Corporation ZF is unable to continue its production. I'm further instructed sir, that on the basis of evidence which, if we get that far of a Mr Yergan Bracht, the plant manager at ZF, once it ceases supplying the relevant rear and front end suspension components to Holden, within two to three hours of that occurring Holden will also have to cease production of those lines which utilise these particular components, i.e. the new Holden Commodore.

PN16

The difficulty sir, is that these components as the Commission would be well aware - well appreciate, are unique. My client unfortunately cannot simply go out into the market place and purchase the products elsewhere. Whilst as I have indicated approximately 80 employees will be stood down at the end of today or at the end of the afternoon shift today, if the industrial action continues at the Bendigo plant, within a matter of 24 to 48 hours the situation will be that ZF will also need to stand down the other 40 to 50 employees who are engaged within its operations. So I'm instructed sir, that in addition to the potential standard of 130 workers and the obvious financial impact that will have upon them and their families, my client will lose approximately $625 000 in revenue per day for each that it cannot resume production. It's on that basis, sir, that as a party affected by the industrial action, the application for orders in the terms attached to the application is made.
THE COMMISSIONER: Thank you Mr D'Abaco. Mr Brown, do you wish to say anything at this point?

PN17

MR BROWN: At this point Commissioner, I think I'd ask Mr Sims to go on the record.

PN18

THE COMMISSIONER: Thank you. Mr Sims.

PN19

MR SIMS: Commissioner, perhaps it's appropriate - sorry, following the appointment of the administrators late on 30 June, we sought to do several things to ensure that Huon's operations could continue. The first thing we did was speak to the company's financiers, GE Capital, to ensure that there was continued funding available for the administrators to carry the business. The other key things we undertook in the first week were to negotiate with our major and principle suppliers to ensure that we had continued supply of critical goods and we also met with who we regarded to be the six major customers of this business and specially the Empire Rubber business. Those six major customers did not include ZF because they weren't considered to be a major customer by virtue of their level of turnover.

PN20

After our first week, we identified that the business of Empire was losing approximately $600 000 a month. That was well in excess of what the management accounts showed. It put the administrators in a position where they needed to develop very quickly a rescue plan to ensure that that business could continue in operation and also to ensure that as many as 360 employees could continue to be employed. We were also fairly keen to try and prepare that business for sale as soon as possible to determine whether or not the business could be sold as a going concern. As far as a rescue package goes, we identified there were three essential things that had to occur.

PN21

The first two things we needed were from our customers. We needed forward orders to be committed for the next three months so that we knew that we had an underlying business and our financiers also need the commitment of those forward orders to provide us with funding. We needed price increases of approximately 35 percent across the board. However, we were prepared to look at a rebate system with all of our major customers to ensure that that price increase was rebated through the proceeds arising from the sale of the business. So in effect, we were asking our principle customers to provide us with a short term loan. We also identified that there were approximately 108 staff who needed to be made redundant. The business of Empire Rubber had a turnover of approximately $5.5m a month, 12 months ago and today its turnover is approximately $4m a month.

PN22

Whilst that turnover has decreased materially, neither the current owner nor the previous owners had undertaken any work at all to restructure the operational overheads. The challenge we faced was that to make 108 people redundant, we didn't have any money to pay their entitlements when they left. Those entitlements, Commissioner, are in the range of $5m. In terms of customers, we - I went out personally and met all the customers in the few first days of my appointment. After discovering the quantum of the losses of Empire, we wrote to them on 11 July setting out the financial position of Empire and setting out our proposal that they provided some firm orders, that they provided some price increases and also consideration of the redundancy fund.

PN23

We then convened a meeting of all the major customers together on Thursday,
14 July - my apologies, Thursday, 13 July and at that meeting, Ford, PBR and Apex attended. We provided them with a complete briefing of our investigations and we also confirmed our commitment to continuing the business, subject to their ongoing support. Over the course of the following weekend, which was last weekend, you may be aware from press reports that the administrators have also discovered that approximately $13m of property has effectively been removed from Huon Corporation. When settlement took place with Nylex in December of last year, a number of entities were incorporated by Huon's sole director, Mr John Schulz. Three specific entities were set up and acquired properties which Huon effectively funded. We've now issued proceedings in the Supreme Court of Victoria which are due to be heard this Friday.

PN24

THE COMMISSIONER: I read that this morning.

PN25

MR SIMS: So Commissioner, the importance of that point is that we now have those - well, we think we'll have those assets available to pledge as security to raise further funds. As at today, the administrators have both a short term and a long term funding problem. Our short term funding problem is that we have approximately $400 000 in cash. Due to the current industrial dispute, the secured creditor has suspended the financing facilities that are available to the administrator. So that $400 000 wouldn't even provide sufficient funding to pay next week's wages. The other issue is the medium to long term funding, even if we have some money today to meet next week's wages if the Commission was minded to make the orders which are being sought, we then face the further problem that we haven't as yet been able to obtain any resolution from the major customers in terms of the price increase that we would need to minimise the losses, notwithstanding our offer to provide some form of rebate. Commissioner, I guess that properly summarises the position from our point of view in terms of where we are today.

PN26

THE COMMISSIONER: Thanks Mr Sims. Yes, Mr Lyons.

PN27

MR LYONS: Thank you Commissioner. I intend to be reasonably brief.
Mr Sims, I think, has appraised the Commission of the broad circumstances but from the point of view of the NUW, the situation we find ourselves in is, from the position of our members, a tragic one Commissioner, in that there are presently those some 110 people who in the event they are terminated will be paid not only not all of their entitlements but none of their entitlements and a question about the ongoing viability of the remainder of the business. As has been put to you, the situation of the business on the ground at this moment is, there are insufficient funds to pay the wages of the employees even if there was - even if everyone presented for work, Commissioner. So that is the situation we are in.

PN28

We've all been following closely sir, of course the issue of the property transactions and what appear to us to be circumstances where assets that ought to have been available to meet the entitlements of the employees have vanished, which is part of the reason we are in the circumstances that we are in. We are content to go into conference sir, but we wanted to place on the record our intentions should the matter proceed to further hearing. It would be our intention sir, to make an application for the matter to be indefinitely adjourned pursuant to section 111(1)(i). We say that the Commission has power to do so and ought do so on two grounds. The first relates to the matters that Mr Sims just put to you, sir. That is that there is no money to pay the workers.

PN29

Now it cannot be sir, that it is industrial action if the boss can't pay. If the boss can't pay sir, there's been a fundamental break down in the wages work bargain and we cannot be required, if you like, to be forced at the point of an order to work for no wages. That would appear to us sir, to be a working definition as slavery as much as anything else. So it's an exercise in futility for the order - the making of the order would be an exercise in futility as the employees would not be accepted back to work. Now, whether that's a stand down or a lock out is a moot point and would turn on the contents of the enterprise agreement and conceivably the award as well sir. That's the first ground.

PN30

The second is, and I make this - I foreshadow this application not lightly sir and it's not a matter that we've raised before. It would be our intention to allege that the application should be adjourned indefinitely on the grounds that it is made for a collateral and improper purpose. It has come to our attention through information provided to the union through various sources, that officers of the Office of Workplace Services, that is the Commonwealth government, have been contacting various points in the supply chain if you like and attempting to exert pressure on people in that supply chain to make an application of the form that is before you. Now, in those circumstances, and at the appropriate time we can take you to the cases, the Commission would have power to indefinitely adjourn the proceedings on grounds they were made for an improper or collateral purpose.

PN31

Now, we're in a process of attempting to firm up the facts around that allegation. You'll be aware we've known about this application for only a very short period and are conducting further enquiries, if you like. But just to give you the flavour sir, we are aware through access to publicly available materials that the applicant was the recipient of very substantial, although at this point we're not in the position to quantify this, assistance - financial assistance from the Commonwealth to set up a facility at Edinburgh Park. Now, the information that has come to us sir, is the effect that leverage is being applied. We intend to further investigate that and advise the Commission and advise the other parties at an appropriate time. We would seek agitate those matters.

PN32

THE COMMISSIONER: Thanks Mr Lyons.

PN33

MR D'ABACO: Commissioner, as I indicated, we have no opposition whatsoever to moving into conference very quickly. But I can please address those one or two matters which fell from my learned friend.

PN34

THE COMMISSIONER: Yes.

PN35

MR D'ABACO: Firstly in relation to this final point that he made in relation to the suggestion that this application has been brought for some form of collateral or ulterior purpose or as a result of pressure having been exerted by particular parties, and in particular the federal government. Can I indicate in relation to that sir, that I have absolutely no instructions or suggestion from my client that any such pressure has been applied and in the event - been brought by the Commonwealth. In the event that there was any pressure or suggestion that I was aware of, I wouldn't be standing before you this afternoon making this application.

PN36

In relation to the penultimate point which was raised by my friend in relation to the alleged futility or otherwise of the order, you will recall sir, it was put to you by Mr Sims that there are three, as it were, conditions which need to be satisfied if the Huon Corporation business is to be rescued and put on some form of footing so that it can proceed into the future and perhaps be sold. One of those conditions which Mr Sims outlined to you, was that there was a willingness on the part of the employees to return to work because that would provide the financiers, GE Capital, some indication that this business actually does have a future and that it's worth the while of GE to provide finance.

PN37

Now if, Commissioner, the situation was to transpire that the orders were issued, the employees return to work and they were then stood down by Huon Corporation or the administrators for whatever reasons, there would no longer be the industrial action of which my client is complaining. The workers would be back at work and, in my submission, perhaps there would be some hope of the business being salvaged. At the moment, in the circumstances where no one is working and this company is not earning any income, doesn’t make it any easier for the administrators, in my respectful submission, to try to convince customers or financiers that this business has a future. They're the only matters I wish to put to you sir. It may be appropriate in those circumstances then to move into conference.

PN38

THE COMMISSIONER: Mr Terzic, did you wish to - - -

PN39

MR TERZIC: Everyone else has had a turn, I might have one as well. Firstly I would just seek to place on the record that various assertions and allegations have been made by the applicant. We don't concede or admit to any of those. Secondly, we adopt the submissions made by Mr Lyons of the NUW and seek to have the Commission move accordingly, if the Commission pleases.

PN40

THE COMMISSIONER: Thank you. All right, the Commission will go into conference.

<NO FURTHER PROCEEDINGS RECORDED