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Aussie Workers Taking the Lead
Why Earthworker Cooperative?
The United Nations has declared 2012 the International Year of Co-operatives in recognition of their contribution to socio-economic development and in particular their track record in impacting poverty reduction, employment generation and social integration.
Earthworker Cooperative will provide the vehicle for Australians to establish Eureka’s Future Workers Cooperative.
Eureka’s Future, the first of many manufacturing cooperatives making renewables in Australia, will spring from the work of the active members of Earthworker Cooperative.
Earthworker Cooperative will provide finance, assistance with marketing strategy, R&D and networking of the various, loose strands of the social sector of the Australian economy into a powerful force for the collective good, on behalf of its member cooperatives, unions, shire councils, faith-based communities and individuals.
Earthworker Cooperative has a finance arm, Earthworker Finance, which is an account managed by MECU. As the social sector and its factories grow in numbers, we will invite superannuation funds to partner with Earthworker Finance in providing the critical mass of social capital required for a successful and powerful social sector of the Australian economy.
Eureka’s Future will manufacture solar hot hater (SHW) systems. Through the Enterprise Bargaining Agreements (EBA) negotiated between unions and employers, workers can negotiate the SHW system as part of the wages outcome in the EBA. This provides collective purchase of the goods, the profit from which will be distributed in a number of ways:
• An incentive will be paid to unions and employers for opening their agreement in a way which provides a better-than-cash deal to workers and manufacturing jobs which are sustainable in two ways – environmentally and long term manufacturing jobs which never leave our shores.
• All of the rest of the money will return to the Workers Cooperative(s) to pay wages, invest in more work, fund R&D, provide 5% towards social justice.
Reasons for choosing a cooperative structure
• A cooperative cannot be wholly owned by any one party or entity. It cannot be bought out. This guarantees that the venture will remain Australian owned and operated.
• As a cooperative has a closed loop of finances, the sole beneficiary of the income generated by the enterprise is the cooperative itself. This ensures that in the case of Eureka’s Future Workers Cooperative, products manufactured by the cooperative can be sold at a competitive price and surpluses will be used to further expand activities of the cooperative.
• A cooperative structure is compatible with the philosophy behind the initiative where socially and environmentally responsible approaches to business, in addition to worker’s rights, are paramount.
Partnerships and support base
The most important partnership is with Dandenong manufacturer Everlast. They are a loyal and active partner who, in return for a royalty, will provide the product, assistance with the fit-out and finish of Eureka’s future and training of the first workforce.
Also significant is the relationship with Douglas Solar, which will provide the social enterprise with an approved system configuration and also support in training the system assemblers and installers.
• A 2007 feasibility study showed that around 5% of Victorian trade union members have solar hot water systems.
• According to ABS figures, only 3.5% of households in the Latrobe City municipality currently have solar hot water.
• Around 3% of Victorians currently have solar hot water.
• Industry nominates average longevity of hot water systems at 12 years.
• We believe other states of Australia will see similar statistics.
How much do you think people are willing to pay? Why?
Market Research (Strahan, 2007, commissioned by unions and Moreland Energy Foundation) indicates union members were willing to pay $2500 for a system in ‘06/’07.
For the reasons outlined above, we believe people will pay the final figure below. We give some calculations by way of explanation:
Eureka’s Future gas boosted solar system
RRP $5916 (Conservative in that we will be able to sell cheaper and includes installation cost of $1800)
• RECS 31 @ $35 - $1085 ($5 held onto transaction costs)
• Rebate Melbourne - $1500
• VEEC’s 64 @ $9 - $576
• Total reductions - $3161
• Complete price - $2755 & Higher regional rebate - $2655
It must be noted that these figures were current before recent changes in the federal sphere to government support for renewables, and before the change in government in Victoria in 2010. We are yet to determine what these changes will mean to the figures.
However it is believed that as a price/tax on carbon is introduced, there should be monies available to support ventures like ours to get on their feet.
The prices of competing products are inflated through the margins which are placed on each component of the system as it makes its way through the supply chain. We anticipate the price could be reduced by as much as 30% when the business is in a position to manufacture the solar collectors as well.
As a co-operative, the business model has the advantage of not needing to pay dividends to share holders, which is estimated to reduce profit requirements by around 30% and cash outflow by 1.5 – 2%.
Marketing and sales
• We need to sell 220 tanks per month to break even, or 2650 per annum.
• The business plan assumes that manufacturing levels will increase each year, with the first two years resulting in 5610 tanks manufactured and installed, an average of 234 per month. Everlast currently manufacture well in excess of that.
• For the first two years, there are two target markets for the Eureka’s Future solar hot water system: members of Victorian trade unions and the local community in the Latrobe City municipality.
Key features of trade union member target market
• According to the ABS, Victoria has 452,800 trade union members.
• According to a study by Strahan Research, 76% of a sample of union members were buying or owned their home outright. This level of home ownership is relatively high.
• Most homes tend to have older hot water services, with 53% of the Strahan sample having systems more than eight years old.
• The vast majority of househild would be open to buying a solar hot water system, so long as it met their needs.
Assuming that customers from the trade union member target market will most likely be home owners/buyers with older hot water systems, the market is around 147,160 union members.
Key features of the Latrobe City community target market
• Based on 2006 census data, Latrobe City has 27,284 households.
• The vast majority of these households use electric storage hot water.
• From 2011 – 2012, all of the electric hot water systems will need to be replaced with solar hot water systems or gas systems to meet regulatory requirements.
• Very few of them are currently installing solar hot water systems as represented by less than 1% of households receiving available rebates in 2008/09.
Assuming that every 12 years a hot water service needs to be replaced, the market is around 2274 households.
Other reasons why Australian workers will support this campaign
• As well as concerns around wealth-creating jobs for our country, what we produce, the way we produce it and where we produce it result in health problems for the individual, and ecosystemic problems for the planet.
• Union-supported, worker-owned and -controlled cooperatives manufacturing solar hot water units, and ultimately the full range of green technologies, begins a new stage in Australia's labour movement history which sees it return to a vision of a better world and not merely a bigger share of this one at the expense of others.
• Jobs which never leave our shores.
• Purchase of housing, childcare, health, education and other social products for the cooperative workforce.
• Training for our young.
• Lifelong, wealth-creating jobs.
• Quality control, local access for a real ten year warranty.
• 5% of all surpluses from viable factories towards social justice.
• A working class answer to the Trans Pacific Partnership Agreement.
How much do we need to become operational?
• $287,190 for setting up the installation aspect of the enterprise.
• $2.051 million for factory fit out.
• $862,000 working capital for the first year.
From popular support to governmental inertia
Over sixty community organisations and every shire ccouncil in Gippsland support the Eureka's Future Workers Cooperative project, through the Gippsland Climate Change Network. Despite this fact, and the support which Ministers we have spoken to from across the normal parliamentary divide have expressed for the project, we have continually hit an impasse where, because the entity does not yet exist (the whole point of a Just Transition I would have thought), Eureka's Future does not meet the criteria.
What now, when Governments have failed us?