Professional Engineering Practice - Essay Example

Professional Engineering Practice Student’s name Institution’s Affiliation Course +Code Professor’s name Date Professional Engineering Practice Introduction The Australian automotive industry experienced a long period of decline due to several factors in both domestic and international economy. Imperatively, experts have been debating factors surrounding the collapse of the car manufacturing industry and the cessation of operations by three multinational automotive manufacturers in the country: Holden General Motors, Ford Motor Company of Australia, and Toyota Motor Corporation Australia [7]. These firms closed their Australian operations and moved to economies with lower cost structures. Analysts have pointed at three fundamental factors that may have led to the collapse of the industry. Some state that the reduction in government assistance to the industry, and global strategic decisions by these organisations aimed at shifting production to lower cost markets in Asia are responsible for the closure of their Australian operations [3]. However, others are emphatic that the labor unions played a huge role in the collapse of the sector; which forms the basis of the argument in this essay. The Automotive Industry in numbers According to a Productivity Commission report in 2014, the automotive industry accounts for about five percent of employees in the manufacturing sector. The report states that this figure includes both direct and indirect employees in the sector through the supply chains. By 2013, about forty-five thousand people were employed in the industry and parts manufacturing. Of this, over eleven thousand were employed directly by the three primary car manufacturers; Ford, Toyota, and Holden [1]. However, these figures have been declining in the last three decades where the proportion of overall employment declined from close to 1.8 percent of employed people to about 0.7 % by 2015. Therefore, the collapse of the sector will have tremendous impact on the economy, with conservative figures stating that close to 200,000 jobs will be shed off by the end of 2017 once all the car manufacturers cease their Australian operations [9]. Further, a fall of about 2% in the GDP is expected. Imperatively, the significance of the industry to the national economy cannot be ignored if all these factors are at play. Reasons for the collapse of the sector As mentioned, three factors have been cited as the causes of the collapse of the industry. One of these factors is the role of government in helping the industry. It is important to note that before the closure of the three firms, Nissan Motors closed its plant in the 1990s followed by Mitsubishi in the later part of 2000. Further, the industry has been on decline for a long time with production falling to below 200,000 units in 2015, as opposed to a domestic demand of about one million units per year (Dowling 2017). As a result, the government has supported the industry through taxpayers’ money to help the firms to stay afloat in a competitive global environment and help them meet the local demand. However, even with the government support, these firms have never met the local demand and even imported some of their manufactured units. The government, at federal and state level, has on several occasions offered financial support to the industry. According to independent figures, the three companies in the industry received close to $ 4.5b in state and federal government funding since [1]. For instance, the Victorian and federal governments gave close to $ 103 million in a co-investment deal aimed at helping Ford Motors to continue its local production for four years. While the government has supported the sector, many analysts believe that its trade policies and tariffs have had great impact on the industry [6]. Because of these policies and agreements, the Australian car market opened up to importation, albeit, at competitive prices than the local units. Many believe that the flood of imports, particularly from Asian markets, has hurt the manufacturers since they cannot enjoy scale economies due to lower productivity in those countries. Further, government’s policies on industrial relations and labour laws have made Australia an expensive destination for these organizations. For instance, the average wage in Thailand for a car manufacturing worker is about $ 12, 500 per year in comparison to Australia’s $ 69,000 a year. The Free Trade Agreements signed by the government have significantly led to the decline and subsequent collapse of the sector. For example, since signing the FTA with Thailand, Australia has bought close to two million units from the Asia-Pacific country but in return has exported only one hundred units since 2005 [6]. Thailand continues to impose higher, hidden, and non-tariff barriers, especially on vehicles with larger engines like those produced by the three giant manufacturers that are now exiting the local market. Secondly, some have postulated that the closure and subsequent collapse of the industry is due to the global strategic decisions by the companies to shift to lower cost production destinations in Asia, as demonstrated by the Thailand case [8]. Indeed the three companies have been importing vehicles and parts from their operations in the Asian countries, with Thailand enjoying much of the exports. The change in the global strategies is a business phenomenon since these organisations have consistently stated that it is not tenable to continue production in Australia. These companies have been categorical that many factors have informed their decisions to exit the Australian market, especially after it became evident that the government could not offer more support [1]. These companies have struggled in the market due to a high Australian dollar that hurts exports, especially for Holden and Toyota, high cost of production and labour costs, and a shrinking car market that is so fragmented. These organizations state that about fifty brands compete for a share of a small market of close to one million units per year [3]. Further, they posit that despite government support, these car makers have struggled financially with Ford recording about $ 600m in loses since 2008. Holden has only been profitable twice since 2000, as it only recorded profits in 2005 and 2012. On its part, Toyota only recorded profits in 2012 of about $ 149m yet it had losses close to $ 150m in a period of three years before. In a nutshell, the three companies have lost close to $ 1.5 billion in their Australian operations in the last ten years, despite getting more than twice that from taxpayers [6]. These factors indicate why these companies could not remain not only competitive but sustainable in the Australian market. However, many believe that industrial relations and labour union issues have had a significant contribution to the closure of these plants and the subsequent collapse of the industry. By the time Holden closes their plant in 2017, labour unions will be dealing with issues on how to sustain their members since the drive for higher hourly wages has been a cost that has translated to higher production costs in Australia [5]. The labour unions, particularly when the Labour Party is in power, have been combative and encouraged militancy among the employees. In most of these incidences, these companies have been formed to resort to job cuts in the last three decades. For instance, the 1984 Labour government restructured the nationally regulated and protected Australian car industry and integrated it into the competitive global production sector of these multinationals. The labour unions did not oppose the move, despite its potential impact to the local car industry [4]. In fact, the unions joined the government and asked workers to accept job cuts for better working conditions so that the industry can compete. The unions suppressed any resistance in the plants. For instance, they helped Ford Motors to sack about twenty militant employees and about five hundred jobs were cut. More plants followed suit in the 1990s and in 2000s many workers lost their job due to union activities that demanded for better wages and working conditions. The demand for higher wages coupled with poor industrial relations and clandestine operations of the union leaders have had huge impacts on the industry [2]. Many believe that some of these companies have weighted a raft of issues concerning labour relations in the country and decided to close shop for an industry that had spanned over one century. Many believe that the combative industrial relations have helped in triggering the decisions by the organizations to leave the country. They cite unions’ opposition to changing workplace practices and entitlements. For example, there was need to increase productivity by having workplace flexibility and reducing long-term absenteeism, increasing the number of days for plants to open, and reduction in the 21-day Christmas shutdown. The unions have overtly challenged any changes and reduced to negotiate, instead pursuing the court process to the detrimental effects to the car manufacturers in light of reduced sales [8]. These organisations, for example Toyota, have not broken through the industrial relations’ issues that would help them stay in the market. Conclusion It suffices to note that the Australian car manufacturing industry’s collapse has been aided by several factors. However, it would be inaccurate to state that one factor out of the three has had the dominant effect, though government policies and industrial relations and unions may have contributed more than the organizations’ strategic decisions to locate operations in lower cost economies in Asia, like Thailand. References 1. Automotive Supply Chain Competitiveness Initiative, “Case study on the Australian automotive Industry”, ASCCI Quarterly. 2014. Accessed on April 28, 2017, from http://ascci.co.za/wp-content/uploads/2015/12/ASCCI%20Quarterly%20Newsletter%20July-September%202015%20-%20Case%20study%20on%20the%20Australian%20automotive%20industry.pdf 2. Cogan, J, “The role of Labor and the unions in the assault on car industry workers in Australia. 2013. Accessed on April 28, 2017, from https://www.wsws.org/en/articles/2013/12/13/auto-d13.html 3. Dowling, J, “Why Australia’s car manufacturers — Toyota, Holden and Ford — all conked out,” 2014.Accesses on April 28, 2017, from http://www.couriermail.com.au/why-australias-car-manufacturers-toyota-holden-and-ford-all-conked-out/news-story/e58e685cc75d3f68feb40d8d0f0711c7 4. Dowling, J, February. “Why Australian car manufacturing died — and what it means for our motoring future,” The Advertiser. 2017Accessed on April 28, 2017, from http://www.adelaidenow.com.au/technology/why-australian-car-manufacturing-died-and-what-it-means-for-our-motoring-future/news-story/0428dc235d1b44639459959f5a3bbf9b 5. Dunckley, M. and Potter, B., “Former Toyota boss says unions must take some blame for exit,” Financial Review, 2014. Accessed on April 28, 2017, from http://www.afr.com/news/former-toyota-boss-says-unions-must-take-some-blame-for-exit-20140212-ixt2q#ixzz4fZmJRAy4 6. Spinks, J, “End of Australian-made cars: what happened and what it means.” 2014. Accessed on April 28, 2017, from http://www.caradvice.com.au/269528/end-of-australian-made-cars-what-happened-and-what-it-means/ 7. Stanwick, J., Circelli, M., and Lu, T, “The End Of Car Manufacturing In Australia: What Is The Role Of Training?”, 2015. Accessed on April 28, 2017, from http://files.eric.ed.gov/fulltext/ED561217.pdf 8. Tay, L, “The Productivity Commission Reveals Why Australian Car Manufacturing Has Collapsed”, Business Insider, Australia. 2013. Accessed on April 28, 2017, from https://www.businessinsider.com.au/the-verdict-is-out-heres-why-australian-car-manufacturing-is-at-an-end-2013-12#PC-cars-scale 9. Williams, A, “Collapse of Australian car manufacturing industry. ”2016, Accessed on April 28, 2017, from Read More