Failure of Australian Car Industry - Case Study Example

FAILURE OF AUSTRALIAN CAR INDUSTRY by (Name) The Name of the Class (Course) Professor (Tutor) The Name of the School (University) The City and State where it is located The Date Failure of Australian Car Industry Australia is about to experience a significant fall in the automobile industry as the year 2017 ends. Major car manufacturing companies such as Ford, Mitsubishi, Holden, and Toyota is about the exit the Australian market taking all their assembly lines overseas. This shift will create a huge gap in the supply and chain process and finance management in the Australian economy. Not only will the economy be affected by this shift, but also this will also make tens and thousands of people lose their jobs along the downstream and the upstream industry. This shift of the automobile sector is also likely to affect the Professional, Scientific and Technical Services (PSTS) sector as well. The Australian Bureau of Statistics defined this sector and states that more than one million people are about 8.5% of the total workforce are employed in it. The fall of the car industry is expected to affect this section of the workforce too (Williams, 2016). Probable Reasons for the Fall of Car Industry World leaders in the car manufacturing industry such as Toyota, Ford and Holden is shutting down its manufacturing units by the end of the year 2017. This is one of the crucial decisions that is expected to greatly affect the economy of the country and a huge gap in the employment status for many industry workers. Although a number of attempts were made to save the automobile industry, nothing much worked out towards the end. This shutdown is undoubtedly going to affect Australia’s economy and the jobs of many people. Companies such as Ford, Mitsubishi, etc., have been employing generations of employees since more than 90 years across its manufacturing units (Bamber et al., 2006). The probable reason for this sudden shutdown is supposed to be the funds involved for the taxpayer. The car industry claims that they have been investing three dollars per every dollar for the taxpayers and this is costing them a big amount. On the other hand, imported cars cost them low or even zero import tariffs. The trade unions and the Labor Parties in Australia have been working in collaboration with the corporate establishments. This is to bring into focus the undermining conditions of the workers across the industries. The trade unions are today blaming Prime Minister Tony Abbot’s newly formed Liberal National Party government to give his decisions to end its manufacturing plant of General Motors in Australia (Bamber et al., 2006. Another reason that caused the downfall of the car manufacturing industry was the rapid fall of the Australian dollar in the international market. Investing in the car manufacturing industry became difficult as the value of the Australian Dollar dropped. The competition other global industries also increased the sales proportion of imported cars and downfall in the number of automobiles manufactured in the local market (Bamber et al., 2006). Role of the Trade Union The trade union says the new Government of Australia failed to retain and save the car manufacturing industry that employed thousands of people since centuries. Members of the Australian trade union claims that the Government Policies of the new leaders are the cause of the potential destruction of the entire car industry. The Labor Union, also in the year 1984 came up with the “Button Car Plan”. This plan helped to restructure the Australian car industry which was then nationally regulated and protected. The trade union worked together with the Government for the benefits of the workers to make them more competitive with the ones working in other countries (Cogan, 2013). The trade and worker union greatly supported car manufacturing industry workers as the business policies changed with the government and funding became difficult. Several rescue plans were provided to the workers as they car manufacturers sent their employees home. Some researchers also believes that it was because of the trade unions that led to the fall of car manufacturing. The trade unions wanted to follow old methods and were said to be resisting the change of workplace or the work practices. We believe the clash of the ethics of the trade unions and the government policies can be one of the reasons for the fall of the car industry in Australia. Recent Working Conditions and Statistics in the Australian Car Industry The production of cars dropped suddenly in Australia due to the shutdown of the major manufacturing units from the big giants. The numbers from 15808 Units to 11246 in the month of February 2017. The Australian market averaged at 21552.77 units from the year 2004 to 2017. This figure reached an all-time high rate of 39306 Units in the month of November 2004. Due to the sudden fall of the car manufacturing towards the year 2017, this number fell as low as 6139 (Tradingeconomics.com, 2017). The numbers appeared to be bad not in the case of car production and manufacturing, but also when it comes to wages and pay scales of people working in this industry. The workers in the Australian car industry from the assembly sector received 19 percent lower wages than any average manufacturing industry worker. This figure was pretty low comparatively (Blanpain and Brulin, 2008). Despite the decentralization efforts of Government in the year 1991, it took some time to fill the wage variation gap in other developed countries. The major disparity that lies even today is between the more profitable companies such as GM Holden and Toyota and the less profitable companies such as Mitsubishi. The gap in the wages of these company workers still remains to be filled since the year 1999 (Blanpain and Brulin, 2008). The difference in the wages is supported by an example where in the year 2005, a car production worker who worked at Toyota was paid a weekly wage of AUD 808.79, on the other hand, a production worker at the same occupational grade was paid a weekly wage of AUD 764.90 (Blanpain and Brulin, 2008). Change in the payment structure for workers in the car manufacturing industry was also one of the reasons for the sudden destruction of the car manufacturing industry. The companies Ford, Toyota, and Holden have employed tens and thousands of employees for many years. Generations of families have been working with these industries, but the sudden decision made by the Government is threatening the employment status of many young as well as experienced workers. The free trade agreement Australia signed with Thailand stamped many plants all over the country and sacked many skilled people putting them in financial danger. Not only workers that are involved directly in the manufacturing process, people involved in other activities such as designing, tooling, and engineering. Although the worker unions have been working with Government to offer support to the people employed across this industry. This support was indeed in the form of financial programs for the employees working in this industry. This support was offered via certain companies. Due to the degrading number of car production in the Australian market, these companies have also started to close their doors. The industry workers in such conditions are becoming vulnerable. The industry workers thus will not be provided similar support as it was provided in the past from their employers (Allianz Australia, n.d.). Domestic and International Demands in the Market As the Australian car industry is moving towards its end, the production rates of the cars cannot be predicted. But the sales of the cars have never dropped in the past few years in the Australian market. This fall of the industry has undoubtedly affected the production of the automobiles, but also have optimized the buying patterns of cars in Australia (Blackburn, 2016). The good sales rates in the country despite the fall of the production scale have kept the economy healthy. In the year 2015, the Australians bought more cars than ever before. More than six small SUV’s were also introduced in the market that was immediately purchased by the people. As big brands such as Ford and Toyota is about to exit, locally built cars along with the Mercedes- Benz C-Class was among the top sellers in the market (Blackburn, 2016). The overall car demand never dropped in Australia, the people bought almost 1,155, 408 new cars in the year 2015. This was an increase in the sales by 3.8 percent over the previous year. Not only had the Hatchbacks, the SUV’s market also saw some amazing sale rates. Two cars that ruled were the Mazda CX-3 and Honda HR-V. Another car that was fairly bought was Mercedes – Benz’s GLC (Blackburn, 2016). The rising demand despite the fall of the car manufacturers opened many opportunities for car imports. The most promising market that is likely to fulfill the car demands is the South East Asia, which is becoming a global automotive hub with a strong economic growth (Blackburn, 2016). Conclusion The fall of the car industry was a crucial decision that was made. Some of the researchers suggest that this was because of the worker unions, on the other hand, some deduced that the trade and worker unions made efforts to save the industry. On the overall basis, this destruction of the car manufacturing industry attacked the employment of many people there. Giants in the Australian market have been employing thousands of families since generations in Australia. The sudden closure of the industry made many people lose their jobs. This close of the manufacturing firms was feared to hit the economy greatly as the Australian market were supplied cars right from inside the country. But soon, it was observed that the demands never fell. Buyers showed equal enthusiasm when it came to car sales and cars were imported on a great number across the international borders. The top amongst them was Toyota which maintained its position in the market and also dominated the import line –up. By the above research and analysis, we believe that that the reason behind the fall of the car industry was the unfavorable trade policies the Government put into practice. The funding and the financial balance disturbed as these policies were applied making the in-hose production nearly impossible and bankrupting of the car manufacturers. These conditions favored only import of automobiles. References Tradingeconomics.com. (2017). Australia Car Production 2004-2017. [online] Available at: http://www.tradingeconomics.com/australia/car-production. Bamber, G., D. Lansbury, R., F. Wright,, C. and Baird, M. (2006). Work systems and employment relations in the Australian automotive manufacturing industry. In: Labor and Employment Relations Association Series: Proceedings of the 58th Annual Meeting. Griffith University. Blanpain, R. and Brulin, G. (2008). Globalization and employment relations in the auto assembly industry: a study of seven countries. 1st ed. Alphen aan den Rijn: Kluwer Law International, p.28. Allianz Australia. (n.d.). Car manufacturing in Australia update. [online] Available at: https://www.allianz.com.au/car-insurance/news/car-manufacturing-in-australia-update. Blackburn, R. (2016). Australia's top-selling new cars of 2015. [online] CarsGuide. Available at: https://www.carsguide.com.au/car-news/australias-top-selling-new-cars-of-2015-37643. Cogan, J. (2013). The role of labor and the unions in the assault on car industry workers in Australia. [online] Wsws.org. Available at: https://www.wsws.org/en/articles/2013/12/13/auto-d13.html. Williams, A. (2016). Collapse of Australian car manufacturing industry. [online] Swinburne.edu.au. Available at: http://www.swinburne.edu.au/news/latest-news/2016/10/collapse-of-australian-car-manufacturing-industry-.php. Read More