Toyota Says Sayonara To Australia

The death of the Aussie car industry…what will become of the Aussie V8?

Aussie car industry hit by perfect storm.

The final death knell for the Aussie car industry has been struck by Toyota after they announced the cessation of vehicle production by 2017 in Australia, ending 50 years of local production. Toyota was the last car manufacturer still committed to manufacturing Down Under and the announcement has been taken hard by business leaders, politicians, trade unionists and the nation’s media.

The Aussie car business was born in 1948 driven largely by a post-war mix of fear and exuberance, but it failed to make it to the biblical age of three score and 10 years. The first car manufacturer to pull out was Mitsubishi who quit their Adelaide manufacturing base in 2008, although some argue that this was not much more than an assembling operation and just 900 jobs were lost.

However, in the past 12 months, both Holden, a subsidiary of GM, and Ford have announced that they are both stopping production by or before 2017. Neither company has a large direct workforce and, in fact, the closing of Toyota will only mean some 2500 redundancies directly, but opposition politicians and union leaders are warning of a mini-recession on the eastern seaboard of Australia with as many as 200 000 jobs threatened in the dependent parts industry and some AUD21.5 billion being wiped out of the local economy.

Australian Prime Minister, Tony Abbott, also took a hard line on Toyota’s decision to close local manufacturing. ”While some businesses close, other businesses open, while some jobs end, other jobs start,’’ he said ‘’The challenge of government at all levels is to ensure there are more jobs starting than ending.” Of course this is little comfort to all of those who will be losing their manufacturing jobs. The local Union Secretary, Dave Smith of the Australian Manufacturing Workers’ Union, said the decision would have a devastating impact on everything from road transport to shipping and beyond.
There already has been a torrent of words written about who killed the Aussie car industry and amongst them there will be some truths, although emotion and spin seem to be winning the day at the moment. The truth is the industry in Australia has been in trouble since the 1980s and has been hit by what economists are starting to call the perfect storm of high production costs, strong currency and low production, and trying to compete in the most globalised and fragmented car market perhaps in the world where 60 brands are competing for the attention of the 23 million population who bought a little over one million cars in 2012.

The decline of the industry can really trace its roots back to the 1980s when the demand for raw resources chiefly from China sent the Aussie Dollar soaring and, maybe a little less obviously, made high wages and incredible working conditions the norm but one that the manufacturing sector could not sustain. Both workers and management of auto manufacturing companies failed to see the perfect storm of ever cheaper imports and sustained higher local costs. Basically, the industry committed suicide.

Government could have helped by imposing a higher tariff on the cheap imports that started to flood in from all over the world, not least from China, but a measly 5% import duty did nothing to help the indigenous industry. Arguably, they could have also thrown taxpayers’ dollars at the problem, but it is very doubtful that the industry could have been saved as long as four basic truths remained, as inevitably they would.

These truths are: the small production runs, a high Aussie Dollar, the absence of protectionism and the union’s refusal to embrace massive and revolutionary reforms to working conditions. In short, it is arguable then that the union voted to retain their working practices over retaining their jobs.

Perhaps as the final and somewhat embarrassing irony is the next G20 summit which will be hosted in Australia when the country will be partnered with Saudi Arabia as the only two G20 countries without an indigenous car manufacturing industry.


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