Australia Automobile Industry - Essay Example

Australia Automobile Industry By: Professor: Class: University: City: State: Date of submission: Australia Automobile Industry Introduction In the following years, the doors are likely to close for the Australian car manufacturing industry after almost a century of car making. Holden is the second company after Toyota that announced that it would close its Camry factor. General Motors also shut its Australian outpost. For many years, Toyota has been the biggest manufacturer of vehicles in Australia as well as being the biggest automotive exporter. Australia is the first country outside Japan in which Toyota made vehicles; as a result, the business fought hard to keep its Altona running. Generally, the three automobile brands have deep history in Australia and has assisted the country to shape its culture (5). After 91 years of operations, Ford managed to shut both Broadmeadows and Geelong factories. The car industry has employed generation of employees through the years and currently, it offers jobs to about 50,000 people. Escalating operational cost Throughout the years, the taxpayers highly footed the bill through shelling out more than $5 billion in form of industrial assistance. According to the industry, it invested about three dollars in each dollar funded by the taxpayer. Although such figures may be debatable, one thing is clear: the end, which is experienced by the industry, was inevitable. Australia has had low or zero import tariffs in the past years making it to be flooded with the foreign cars considered cheaper to purchase than the locally manufactured models or was better equipped. These activities had negative impacts on the volume of cars that the Australian manufacturers needed to remain viable in the market (6). About fifteen years ago, the Holden Commodore became the market leader through registering about 100,000 sales annually. However, in the last past years, small vehicles like Toyota Corolla and Mazda3 topped the list with more than 40,000 sales. The latest scenario was Toyota HiLux ute which became the market leader with almost similar number of vehicle sales. With such values, there is no car factory globally with the ability to survive with such volumes. Only brands like Ferrari and Lamborghini that sell supercars with very high prices can survive with such volumes. With increased floods of imports, the Australian car buyers have numerous options than ever except China. In Australia, there are 64 automotive brands while United States and United Kingdom have 38 and 42 brands respectively. Even though the Australian market is spoilt literally with the options, the market continues to be fragmented; therefore, the car manufacturers are not able to rely on the domestic sales for their survival. Since Australian car manufacturers have no capacity to export their way out of such troubles, they remained within the pincer movement. In addition, Australian market is surrounded with the developing countries, which offer labor at low costs. In Thailand, the minimum wage is less than $2 an hour. However, the car assembly line employees are paid generously: approximately $6 per hour equivalent to $12,500 annually. The payment is even higher in Australia. The Australian car manufacturing employees earn wages of $69,000. By the time businesses consider adding the currency exchange rates into the bargain, they can cross exports off the list of the possible survivors within the local car industry. Of the existing Free Trade Agreement that the country has with other states, the brutal and swift deal is that with Thailand that was agreed on in 2005. Australia lifted import tariffs on the cars that come from Thailand; as a result, Australia bought about 2 million vehicles with origins from the Asia-Pacific countries from the renowned brands like Toyota, Ford, and Holden, which are set to close their doors in Australia. Consequently, Australia exported about 100 cars to Thailand: the smallest volume ever. The low levels of imports from Thailand were due to its maintenance of hidden or the non-barrier tariffs but Australia opened its doors completely for the importers (3). Inventively, Thailand has continued to impose greater levels of registration fees especially the cars with larger engines including the products from Holden and Ford. The two countries signed the free trade deal that elapsed after a decade but currently Australia seem to be shutting the doors to the whole automobile industry including the 50,000 jobs created. Globally, Australia was the only country that manufactured cars but failed to protect its domestic industries. Consequently, such jobs have been transferred to Thailand making the country the second biggest source automobiles in Australia. The role of labor and unions in automobile failures The unions and high wages were responsible for killing the Australian car industry. For many years, the trade unions have collaborated with the corporate entities with an aim of splashing the jobs and undermining the working conditions. Currently, the unions are blaming the Liberal-National Party for the decision made by the General Motors Holden to end its manufacturing activities in Australia by the end of 2017. However, with both Ford and Toyota weighing up the options of shutting their operations in Australia, many jobs are prone to destruction. Initially, the aim of the unions was to restructure the nationally regulated and highly protected Australian car industry to ensure adequate integration into the rising international production networks within the auto conglomerates. The unions and labor entered into accord to endorse government’s plans (1). Both labor and unions joined together to demand that the workers accept the cuts to the jobs and working conditions with an aim of becoming internationally competitive against the employees within the other countries. The unions played important roles in suppressing the opposition within the assembly plants especially within the areas with long history of militancy. Initially, the unions had the rank-and-file shop steward committees, which had greater levels of independence from the top level management. Moreover, the unions played important roles in assisting the major plant of Ford located in Broadmeadows to victimize and sack the militia employees. Some week later, the business announced a cut in about 500 jobs. The unions also organized the “orderly closure” of Ford plant leading to the destruction of about 430 jobs. The rhetoric against the trade unions aimed to disorient the employees and ensure adequate prevention of discussions on utter bankruptcy. Like the unions globally, they are committed to the defense of the capitalist system; as a result, they do not challenge right of industrial owners to destroy the productivity of the employees from which they derive their livelihoods. Car industry employees require the organizations to be independent commencing with the immediate formation of rank-and-file committees that is responsible for organizing a united defense of the jobs and reaching out to the automobile employees globally for adequate industrial and political support. The future of manufacturers such as GM Holden is more complex than the simple yes-no proposition based on job retaining by the Australian Car manufacturers. Therefore, it is important to consider a rational approach while considering the competitive edge of businesses like innovation and design including the opportunity cost associated with reliance on the imported products. The certain thing is that even if the cars available to the Australians were imported, other jobs would still be available including repairs, distribution, sales, and marketing. In Australia, the cost of the non-tariff protection is that Australians pay largely for the over-inflated prices associated with the new cars. Nonetheless, the price advantages seem to be stepping from the traditional protectionism theory inform of luxury car tax (4). The Australians struck with the new vehicles from the poor countries as Ireland, Vietnam, and Cambodia seem to buy more cars that are new; thus, creating jobs in various disciplines: sales, marketing, and services. In addition, the new cars are also better for the environmental condition. The misadventures of labor within the automobile industry were associated with policy clumsiness and political expediency. Instead of putting the burden on the management to improve the level of productivity, the handouts contributed to the businesses’ caving into the demands associated with the militant unions. The aims of the handouts were to prop up the union power base. Initially, the car industry protection amounted to $12 billion as much of it was directed towards to the handful labour-held seats. The role of the Australian government was to remove the regulations, reduce the level of taxes, and allowing adequate flow of the competitive forces but not chasing the businesses. If the Australian automobile industry is to survive, there is need for it to be part of the global supply chain and produce the vehicles’ components in millions. Moreover, it is important for the labour cost to fall to the required competitive levels (2). According to Toyota Australia, the combative industrial relations played significant role in assisting to trigger organizational decision to making the cars. Automobiles are frustrated by the unions’ resistance to change the workplace entitlements and practices; therefore, for better performance within the industry, it is important that the old fashioned ideas of the labour unions change. For example, the Australian Manufacturing Workers Union offered Aisin Australia “two-fingered salute” when it considered blocking the workplace changes decided by the court instead of opting for negotiations. Such practices motivated manufacturers such as Toyota to pull-out a finely balanced decision. Conclusion Three major Australian car manufacturers are threatening to pull out of the industry. These businesses are Toyota, Ford, and Holden. Despite the ongoing blame games on the factors that contributed to such steps, there is neither conspiracy theory nor any reason. Through the years of difficulties, the Australian car manufacturing sector shrank to an extent that they depended on each other for survival. The employees out of the Ford Factory, Broadmeadows, are among the affected. These factories require the economies of scale at the best times leave alone the worst moments to enable them compete effectively with the cheap brands of cars. Generally, the best car factories often produce a minimum of 250,000 cars annually; however, the manufacturers combined fairly failed to reach such number. The grim reality is that very soon these businesses would shut operations in Australia to prevent exposure to financial losses. The main question that has remained unanswered is the person to take the responsibility: the government that created the low import tariffs and ratified the Free Trade Agreement that offered greater opportunity to the cheaply imported cars or the unions that demanded better wages and conditions for the employees. Based on the analysis, these factors greatly contribute to impossibility of earning profits from exported cars especially when surrounded with Asia-Pacific states, which do not require the Australian-made cars as they are able to make their own. If Australia is able to sell into the massive markets created by the European and North America, then its automobile industry may have a chance. However, it needs to ignore for a moment the challenges associated with the unfavorable exchange rates. References (1). Clibborn, S, R Lansbury, and R Wright. "Who Killed The Australian Automotive Industry: The Employers, Government Or Trade Unions?". Economic Papers: A journal of applied economics and policy 35.1 (2016): 2-15. Print. (2). Cogan, James. "The Role Of Labor And The Unions In The Assault On Car Industry Workers In Australia - World Socialist Web Site". Wsws.org. N.p., 2013. Web. 26 Apr. 2017. (3). Dowling, Jason. "The Death Of The Australian Built Car". The Sydney Morning Herald. N.p., 2015. Web. 26 Apr. 2017. (4). Hawthorne, Jared. "Australia's Car Industry One Year From Closing Its Doors". The Sydney Morning Herald. N.p., 2015. Web. 26 Apr. 2017. (5). Kohler, A. "What Really Killed The Auto Industry". ABC News. N.p., 2014. Web. 26 Apr. 2017. (6). The Australian. "Sky-High Costs Are Killing Industry". Theaustralian.com.au. N.p., 2013. Web. 26 Apr. 2017. Read More