Ollapse of the Car Industry in Australia - Essay Example

Failure of the Car Manufacturing Industry in Australia Student’ Name: Institution: Date of Submission: I. Introduction The car manufacturing industry in Australia has collapsed. The car manufacturers in that country including Holden, Ford, Mitsubishi as well as Toyota have exited that industry and have taken their lines of assembly abroad where they find the production cost to be lower as compared to Australia [2]. The impact of this collapse is that there is a significant vacuum for approximately 260 businesses which supply the components and accessories to the automotive sector in Australia [2]. Engineers, who are among the professions who are largely employed in this sector, have also suffered detrimentally because of the collapse. Various reasons have been given for this collapse which has become more like being a blame game [2]. However, it is evident that the unions played a significant role for the failure of this industry. The paper will, therefore, evaluate some of the dominant reasons for the failure of the car manufacturing industry in Australia, more specifically regarding the role of unions in this particular collapse. II. Failure of the Car Manufacturing Industry in Australia One of the reasons for the collapse of the car manufacturing industry in Australia is that the unions collaborated with the Australian Labor government to demand that the workers in this industry accept the job cuts as well as the compromised working conditions [3]. This was being emphasized, according to the unions, so that the industry could turn out to be ‘internationally competitive’ against the other employees in the other nations [3]. It is, therefore, evident that the unions actively made the workers compromise their wages, and working conditions so that they could reduce their cost of production [3]. In the process, they intended to make more profits and in turn make the industry become competitive in the global scale as well. Among the various other reasons for the failure of the collapse of the industry is that the Australian market for the cars was very small. Following their small size, they were unable to exploit the economies of scale fully [1]. Therefore, for the industry to manage in remaining solvent, they had no option aside from using the foreign production inputs which are considered to be cheaper [1]. This use of foreign inputs includes the import of manufacturing parts as well as labor. Additionally, the conditions of the domestic market in Australia also turned out to be untenable. This is following the reduction of the import tariffs, the Australian dollar increasing in value, as well as signing the Free Trade Agreements [4]. Therefore, it turned out to be rather hard to compete with the international market because the labor costs in the other countries are very low as compared with the other countries [4]. For example, the labor cost in some of the Asian countries is just about one-fourth of the ones that are incurred in Australia. The primary function of the Australian trade unions was to act as the industrial police for the companies as well as the government. Its mandate was also to suppress any form of resistance through promoting the corporatists ideology which is usually utilized in the justification of the overarching assault on the workers’ working conditions and their jobs [2]. However, the unions did the opposite through repeatedly telling the Australian workers in the car industry that every round of downsizing and restructuring was done to oversee that the industry becomes globally competitive while protecting the jobs which remained. This was undermining their role of protecting these jobs and their working conditions. Given that the car manufacturing sector, according to the Australian Bureau of Statistics, employs approximately a million individuals who represent about 8.5% of the entire Australian workforce, the lack of efforts of protecting their jobs and working conditions poses detrimental risks to this vast number of workforce [1]. Precisely, in the year 2008, the unions and the Labor decided to organize an ‘orderly closure’ of manufacturing plant of Mitsubishi in Adelaide [5]. This resulted in the destruction of approximately more than 1000 jobs. In the same year, Holden manufacturing model slashed approximately 500 jobs, and in the year 2009, 500 more of them were slashed as well [5]. Toyota and Ford followed suit through slashing a significant number of jobs as well. In the end, the industry collapsed with the lack of a competitive workforce [5]. Another reason for the failure of the industry was the size of that automotive industry in Australia as compared to the other players in the global context. The sales of the new vehicles manufactured in Australia which was just more than one million units were approximately 1.3% out of the 85 million commercial and passenger vehicles that were sold globally in the year 2013 [1]. In the same light, the share of Australia in the global production of the vehicles that were slightly more than 200,000 units was approximately 0.25% in the year 2013 [1]. Toyota was the model which produced the highest number of cars in the year 2012 in Australia which was just slightly more than 100,000 cars which were inclusive of approximately 75,000 vehicles intended for export in the Middle East [1]. In the same year 2012, the Ford model just manufactured less than about 40,000 cars, while Holden model made just more than 80,000 cars [1]. As compared to the global car manufacturing industries, it is evident that Australia is rather small as regarding its production scale which made it rather incompetent on a global scale in ultimately in its collapse. The other cause for the failure of the Automotive industry is that the working arrangements in that industry have been continuously limiting the employers’ flexibility as well as the ability of the employees in responding to some of the challenges that are facing while striving to improve the productivity of the sector.[5]. It is the purpose of the union to help the employers and the employees in developing the capacity of addressing these challenges and become flexible when it comes to them remaining competitive and flexible in this industry [5]. In the same light, the unions have justified the low wages that the employees often get matches their low productivity levels. Although the unions agreed that the working conditions of the workers that they agreed upon reducing their flexibility significantly, they did not address these issues efficiently [4]. Such matters that tend to reduce this flexibility include the alterations in their production levels, the utilization of casual and contract staff, as well as the rosters which include the conditions where employees can work overtime. Following this ‘ignorance’ by the unions, there has been no distinct improvement in productivity targets [4]. There has also not been any links which have been associated with the improvement of the employees’ productivity and the increase in wages. Some of these issues that have not been addressed mainly regarding enhancing the employers’ and employees’ flexibility as well as striving to improve their productivity has led to the decline in the car manufacturing industry detrimentally. The international location of the automotive plants has significantly changed, especially since the international financial crisis [3]. This has, in turn, resulted in the significant change in the demand for the vehicles as well and more so in Australia where the cost of production is quite high. On the side of supply, a rather stiff competition is also faced between the various segments of the car manufacturing industry as well. Since the car manufacturing industry in Australia was still staggering, they suffered a substantial amount of pressure to strive in lowering the cost of production in the supply chain so that it would remain competitive [3]. Additionally, the producers of the motor vehicles are continuously moving towards the global platforms where they are striving to invest in the regions which are associated with low costs where they could establish some of their large-scale plants [2]. Some of the countries that are low-cost regions include Thailand, India, China, and Brazil. However, in Australia, there are very high costs that are associated with car manufacturing plants which have led some of the largest car model brands shying away from investing there [2]. Also, these high costs have led to the industry in Australia not being so much productive and competitive which resulted in its closure. III. Conclusion The car manufacturing industry in Australia has collapsed with the car models like Ford, Toyota, Holden, and Mitsubishi moving their manufacturing plants in other low-cost production regions. This collapse has had and will continue having detrimental effects on the workforce which mainly consists of engineers in that country. Following the fall of this manufacturing industry, various reasons have been brought forwards for the same. The unions in this country have played a significant role in this collapse which has been discussed in the paper. Some of the reasons that have been brought forward for this collapse include the unions championing for the workers to accept the job cuts and wage cuts to remain competitive, the small size of the industry, and the failure of the unions to support the employees and employers among other reasons. References [1] Cooney, R. Is “lean” a universal production system? Batch production in the automotive industry. International Journal of Operations & Production Management, 22(10), pp.1130-1147, 2002. [2] Haugh, D., Mourougane, A. and Chatal, O. The automobile industry in and beyond the crisis, 2010. [3] Humphrey, J. and Oeter, A. Motor industry policies in emerging markets: globalisation and the promotion of domestic industry. In Global Strategies and Local Realities (pp. 42-71). Palgrave Macmillan UK, 2000. [4] Timmer, M.P., Dietzenbacher, E., Los, B., Stehrer, R. and Vries, G.J. An illustrated user guide to the world input–output database: the case of global automotive production. Review of International Economics, 23(3), pp.575-605, 2015. [5] Sturgeon, T. and Florida, R. Globalization and jobs in the automotive industry. Final report to the Alfred P. Sloan Foundation. International Motor Vehicle Program, Center for Technology, Policy, and Industrial Development, Massachusetts Institute of Technology, 2000. Read More

Given that the car manufacturing sector, according to the Australian Bureau of Statistics, employs approximately a million individuals who represent about 8.5% of the entire Australian workforce, the lack of efforts of protecting their jobs and working conditions poses detrimental risks to this vast number of workforce [1]. Precisely, in the year 2008, the unions and the Labor decided to organize an ‘orderly closure’ of manufacturing plant of Mitsubishi in Adelaide [5]. This resulted in the destruction of approximately more than 1000 jobs.

In the same year, Holden manufacturing model slashed approximately 500 jobs, and in the year 2009, 500 more of them were slashed as well [5]. Toyota and Ford followed suit through slashing a significant number of jobs as well. In the end, the industry collapsed with the lack of a competitive workforce [5]. Another reason for the failure of the industry was the size of that automotive industry in Australia as compared to the other players in the global context. The sales of the new vehicles manufactured in Australia which was just more than one million units were approximately 1.

3% out of the 85 million commercial and passenger vehicles that were sold globally in the year 2013 [1]. In the same light, the share of Australia in the global production of the vehicles that were slightly more than 200,000 units was approximately 0.25% in the year 2013 [1]. Toyota was the model which produced the highest number of cars in the year 2012 in Australia which was just slightly more than 100,000 cars which were inclusive of approximately 75,000 vehicles intended for export in the Middle East [1].

In the same year 2012, the Ford model just manufactured less than about 40,000 cars, while Holden model made just more than 80,000 cars [1]. As compared to the global car manufacturing industries, it is evident that Australia is rather small as regarding its production scale which made it rather incompetent on a global scale in ultimately in its collapse. The other cause for the failure of the Automotive industry is that the working arrangements in that industry have been continuously limiting the employers’ flexibility as well as the ability of the employees in responding to some of the challenges that are facing while striving to improve the productivity of the sector.[5]. It is the purpose of the union to help the employers and the employees in developing the capacity of addressing these challenges and become flexible when it comes to them remaining competitive and flexible in this industry [5].

In the same light, the unions have justified the low wages that the employees often get matches their low productivity levels. Although the unions agreed that the working conditions of the workers that they agreed upon reducing their flexibility significantly, they did not address these issues efficiently [4]. Such matters that tend to reduce this flexibility include the alterations in their production levels, the utilization of casual and contract staff, as well as the rosters which include the conditions where employees can work overtime.

Following this ‘ignorance’ by the unions, there has been no distinct improvement in productivity targets [4]. There has also not been any links which have been associated with the improvement of the employees’ productivity and the increase in wages. Some of these issues that have not been addressed mainly regarding enhancing the employers’ and employees’ flexibility as well as striving to improve their productivity has led to the decline in the car manufacturing industry detrimentally.

The international location of the automotive plants has significantly changed, especially since the international financial crisis [3]. This has, in turn, resulted in the significant change in the demand for the vehicles as well and more so in Australia where the cost of production is quite high. On the side of supply, a rather stiff competition is also faced between the various segments of the car manufacturing industry as well.

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