Metricon, Australia’s largest homebuilder, reached an agreement on Friday for an emergency doubling of its working capital credit facility, in a bid to stave off bankruptcy amid growing crisis in the sector of the building of the country.
Metricon’s possible collapse threatens the jobs of around 2,500 directly employed workers, mostly in eastern Australia, where it currently has around 4,000 homes under construction. The many subcontractors engaged by the company, as well as suppliers of building materials, household appliances and furnishings, also face an uncertain future. According to the Housing Industry Association, Metricon completed 6,052 homes last year and 4,354 in 2020.
Prior to securing the additional Commonwealth Bank of Australia loan, Metricon met with the governments of New South Wales (NSW), Victoria and the Federal Government to discuss the possibility of a bailout, estimated at 0 million or more. In an attempt to bolster consumer and lender confidence in the failing company, Metricon shareholders also pumped $30 million in cash into the company.
Even as the company scrambled to secure additional funding, interim CEO Peter Langfelder, appointed after the sudden death earlier this month of Metricon founder and CEO Mario Biasin, denied that the company had solvency issues and insisted the business remained viable.
Despite Langfelder’s claims, the company allegedly pushed its vendors to secure deposits for home construction projects in an effort to increase cash flow. These deposits represent 5% of the total cost of a build, so on an $800,000 house project, for example, the initial payment would be $40,000. However, given the widely publicized speculation of potential insolvency, it is highly likely that customers will delay or withhold deposits, which would jeopardize Metricon’s attempt to overcome any liquidity issues.
The reality is that these eleventh-hour financial maneuvers will do nothing to solve the underlying crisis facing the entire construction industry.
Russ Stephens, co-founder of the Association of Professional Builders (APB), estimated earlier this year that around 50% of Australian construction companies were currently insolvent, based on the association’s monitoring of 2,680 Australian residential home builders over a long period last year.
An APB report said that in October 2021, it was clear that the rising price of building materials, supply chain delays and COVID-related labor shortages were having a impact on the profitability of every construction company in Australia.
A number of the company’s major suppliers and contractors launched an advertising campaign intended to assure the public that reports of Metricon’s impending collapse had no basis. This includes Dulux, Fisher & Paykel, Fujitsu, Beacon Lighting Commercial and Civic Shower Screens and Wardrobes, which would no doubt be badly affected by the bankruptcy of another major homebuilder.
In a bid to head off homebuyers’ reluctance to risk putting down large deposits, Civic Screens chief executive Stefan Styles told the media, “We don’t think the business is in trouble.” Even so, Styles warned, “The problem is customers will get nervous and it will become a self-fulfilling prophecy.”
Homebuyers have every reason to be skeptical of such assurances. As speculation grew last week over Metricon’s possible demise, Pivotal Homes, one of Queensland’s biggest homebuilders, went into liquidation. Another Queensland firm, Solido Builders, a small business specializing in luxury homes, revealed over the weekend that it had appointed directors, adding to the series of home-building company collapses and large commercial construction companies over the past six months.
In April, Perth-based Home Innovation Builders went into liquidation the same day another Western Australian company, New Sensation Homes, was placed in the hands of administrators. In March, Queensland-based Condev Construction, which specializes in multi-unit residential construction, business and commercial premises, industrial units and warehouses, went into liquidation.
Also in March, major construction company Probuild was placed into administration with $5 billion worth of unfinished projects in three Australian states on its books.
Other homebuilders that have gone bankrupt in the past six months include two Tasmania-based companies, Hotondo Homes in February and Inside Out Construction in November.
Many of the failures left behind a mountain of unfinished projects and homebuyers lost millions of dollars.
The pandemic has exacerbated existing problems in global supply chains, delaying shipments and raising the price of essential materials across all industrial sectors. Steel, concrete and plasterboard have suffered multiple price increases in 2021, increasing the cost of building a new home in Australia by 15-50%.
Fixed price contracts typically signed by Australian construction companies do not contain cost escalation clauses. As a result, these increases could not be passed on to customers, even assuming homebuyers could afford the price hike, under conditions of stagnant or falling wages across the working class.
The ‘let it rip’ COVID policies adopted since late last year by all Australian governments, Liberal-National and Labour, have caused repeated waves of mass infections, illness and death. In construction, as in many industries, this has led to continued labor shortages.
Since the beginning of the pandemic, the desire to maintain production, whatever the cost to health and human life, has been led by the unions. The Syndicat de la construction, de la forêt, de la mer, les mines et de l’énergie (CFMMEU), alongside the big builders, has constantly demanded that the sector be exempted from containment measures and other public health measures, forcing workers to stay on the job amid a raging pandemic.
It is a logical extension of the role that unions have played for decades, enforcing the destruction of working conditions and the massive increase in casual, hire-and-hire and fictitious contractual agreements in the industry. construction. The unions justified this assault by reproducing the false managerial line that it was necessary to ensure competitiveness and preserve jobs in the future.
Today, as construction companies fail in rapid succession, destroying the livelihoods of workers, contractors and suppliers, the CFMMEU is virtually silent except to warn that there will be “probably more pain in industry”. The aim is to stifle workers’ opposition to the crisis by leading them to the conclusion that they can do nothing but accept the inevitable further destruction of jobs.
Construction workers must take stock of the bitter experiences they have gone through. This will demonstrate that they cannot leave matters in the hands of the unions, which are tied by a thousand threads to corporations and the capitalist state and serve as the industrial police of management.
The crisis that is currently shaking the construction sector, always heralding what is developing in all sectors of the economy, is a striking example of the irrationality of the capitalist system itself.
Why are construction workers idle and resources wasted when there is a desperate need to build vital social infrastructure such as schools and hospitals and high quality social housing to cope with growing homelessness and lack of affordable housing?
This is because these pressing social needs, as well as the provision of decent jobs, working conditions and living standards, do not concern the capitalist system, in which every aspect of life is subordinated to the ruthless search and destroyer of profit.
To fight for decent jobs, wages and conditions, workers must form new organizations of struggle, including rank-and-file committees at every construction site and beyond. Through an interconnected network of these committees, workers can undertake a unified political and industrial counteroffensive against global capitalism and its deepening assault on every aspect of working class life.
This struggle must be guided by a socialist perspective and the struggle for a workers’ government. This includes placing construction and other critical sectors under public ownership and democratic control by workers. Only then can production be reorganized to serve social needs, rather than the profit interests of the wealthy elite.