Government-Business Relationship in Australia Automotive Industry - Case Study Example

Australia Automotive Industry Student’s Name Institutional Affiliation Date Australia Automotive Industry Introduction The car market in Australia has been relatively small as compared to the other large car manufacturing regions like Japan, Europe, and North America (Simpson, Power & Samson, 2007). However, this industry has had a significant impact on the economy of Australia. The relationship that the car industry has had with the Australian government can be said to be of vital importance to the industry (Simpson, Power & Samson, 2007). The Australian government has stopped providing the financial assistance to the sector which is evidently rather shaky and small. This withdrawal has resulted in more collapse of the industry because the manufacturing and operational processes are very costly which the industry cannot manage to sustain (Simpson, Power & Samson, 2007). Therefore, the paper will discuss the government-business relationship that exists in the automotive manufacturing industry in Australia. The paper will also argue that the government did not make the right decision to terminate their financial support to the sector that is already struggling. Government-Business Relationship Recently, there has been a significant change in the car manufacturing industry in Australia (Cooney, 2002). The automotive manufacturers who that are remaining in Australia, that is, Toyota, Ford, and Holden have also made an announcement that they want to terminate their production in the Australian state which will be implemented by the end of the year 2017 (Cooney, 2002). This industry has had a rather long history of obtaining support from the government. The Australian government has always had some industry-specific measures on their budget which was intended to assist the car manufacturing industry to adjust to the international market (Cooney, 2002). One of the schemes that the government established to help this industry was known as the Automotive Transformation Scheme (ATS) which was a government-initiated program aimed at providing the necessary financial assistance from the year 2008/2009 all through to the year 2020/2021 (Blismas & Wakefield, 2009). The government also intended to make use of this program to encourage innovation as well as competitive investment in the car industry which will consequently place the Australian automotive industry on a sustainable footing economically (Blismas & Wakefield, 2009). Therefore, despite this long-term relationship between the industry and the Australian government, and after about 90 years of this car manufacturing industry in Australia, it seems that it is going to be terminated or come to an end (Blismas & Wakefield, 2009). The relationship between the government and the Australian automotive industry began deteriorating following the massive losses that the business has been incurring (Porter, 2008). For example, the Australian Federal government offered about 24 million dollars to the production of the Camry model which was said to require about 800 new parts which did not happen (Porter, 2008). The country will still need to import this model from Thailand following the Free Trade Agreement that they have with Australia. Additionally, the Australian government argues that they will save a substantial amount of money of up to about 215 million dollars after terminating their financial help to this industry over a period of four years only (Porter, 2008). This only means that the government started to perceive its relationship with the industry as non-beneficial and they would rather channel these resources in other more productive initiatives. The Australian government intervened in assisting the car manufacturing industry in that country in rebuffing of the global pressures (Cooney, 2002). Some of these global forces include acquiring cheap labor from different places, excess of the factory capacity, and the deterioration of consumer confidence. Following these pressures, the Australian government strived to prevent this industry from shutting down through intervening to manage several cases of bankruptcies (Cooney, 2002). Additionally, it came in diligently to offer payments and the necessary financial support to build new car models in the country. All of these were done with the primary purpose of striving to keep the industry aloof of the highly competitive industry in the globe (Cooney, 2002). Assessment of the Government’s Decision The government did not make the right decision to terminate their financial assistance to this already struggling industry because of a variety of reasons which will be discussed in the following paragraphs. A substantial number of entities in the automotive industry around the world are in agreement that the Australian car companies will shut down if they will not be accorded the necessary financial assistance for them to grow (Conley & Van Acker, 2011). It is documented that it takes approximately seven years averagely for a given industry to establish new customer base as well as find and develop some alternative income streams (Conley & Van Acker, 2011). Therefore, it is evident that by the Australian government withdrawing their financial help to this industry they will injure them severely. Additionally, taking into consideration the employees in this sector, they will be left very vulnerable and will change their lifestyles significantly (Conley & Van Acker, 2011). Thus their withdrawal will not only affect the industry detrimentally but also their workforce as well. One of the reasons for the government withdrawing their financial help to this industry is that it was unproductive or when compared to the other industries, the automotive sector was the most unproductive (Gregor, Hart & Martin, 2007). In Australia, productivity is usually measured as the value that every worker adds to the economy. Following this measurement, the car industry in Australia is significantly above average (Gregor, Hart & Martin, 2007). According to the ABS data, the levels of productivity of the car industry in Australia are approximately 100,000 million dollar per each worker when compared to just about 85,000 dollars per worker across the economy (Gregor, Hart & Martin, 2007). Following these statistics, the Australian government withdrawing its support means that there would be a significant reduction in the levels of productivity in the country which will, in turn, affect the country and its economy (Gregor, Hart & Martin, 2007). Studies have also documented that approximately 80% of the average employment growth in the economy of Australia has been in the industries which are considered to have low productivity just like the car industry (Buchanan & Hall, 2002). Following this, as Australia shifts to an economy that is service oriented, then the industries that are likely to have a significant growth in employment opportunities are those that are service-oriented like the car industry (Buchanan & Hall, 2002). The increase in the employment levels have some great positive outcomes some of which include the growth in taxation and real wages as well as the income distribution. This reflects a paramount development, and sadly it is still not being accorded the attention which it deserves (Buchanan & Hall, 2002). Therefore, if the car industry is shut down, the government is basically cutting down these employment opportunities which are beneficial to the Australian economy. According to research, the car industry in Australia spends approximately more than 600 million dollars in a year only on research and development (Porter, 2016). Despite the fact that the volume of production is declining, the expenditure rates have always grown rapidly. On the other hand, it becomes rather unrealistic to have the assumption that if Toyota, Ford, or Holden leave the country, that the car industry will still thrive and survive (Porter, 2016). The component makers usually work very closely with the car manufacturers at during each time that a new car model is developed (Porter, 2016). Therefore, through terminating this assistance means ending the very effective collaboration with other companies across the world when it comes to development, and innovation which is many ways beneficial for the country; collaboration is always important (Porter, 2016). Through the Australian government terminating its financial help for the Australian company, they are probably staring at the loss of an essential part of the technological base in Australia (Van Berkel, 2007). This is because of the breadth of the technologies which are utilized when producing a motor vehicle. Some of these technologies include the paints and chemicals, the machining systems, metallurgy, as well as the engineering and technical skills which are utilized in the car making industry (Van Berkel, 2007). Following this, it is not prudent and beneficial for Australia to lose their technological capacity which is mostly embodied in their automotive industry (Van Berkel, 2007). This is more so because the country is still rather lagging behind concerning implementing the advanced technology in this light. Conclusion The car manufacturing industry in Australia is relatively small and struggling as compared to the other industries in the various regions. After a very long government-business relationship of the automotive industry in Australia, the government decided to terminate their financial assistance basing the primary reason as unproductivity of the industry. The government has been assisting this industry in different capacities including developing a program, ATS for this purpose, rebuffing the industry from the global pressures among other ways. However, the paper has argued that this decision was not right because of various reasons as having been discussed. References Blismas, N., & Wakefield, R. (2009). Drivers, constraints and the future of offsite manufacture in Australia. Construction innovation, 9(1): 72-83. Buchanan, J., & Hall, R. (2002). 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