Collapse of Car Manufacturing Industry - Literature review Example

Collapse of Car Manufacturing Industry Name: Institution: Collapse of Car Manufacturing Industry Introduction Australia is a large continent whose population carries the characteristic of high car usage and ownership rates. According to Ustun et al. [1], the poor public transportation system in the country contributes to the rise in demand for personal vehicles and ownership which points to a productive automobile market. Its status as a developed country interprets to the availability of multiple industries such as the automobile, contributing to the growth of the economy and market power. However, despite the economic strengths of Australia, the automobile industries in the region continue to close shop with the examples of Mitsubishi, Holden, Toyota, and Ford. Soosay et al. [2], present a common characteristic of these companies which involves their relocation to the Asian countries particularly China. Therefore, the discussion provides reasons for the collapse of the industry in Australia arguing that the policies in the country are the dominant reason for the demise of the industry. Car Industry in Australia The high ratio of car ownership in Australia forms a viable domestic market for the vehicle manufacturer as addressed by Ustun et al. [1]. Moreover, the increase population amidst poor public transport infrastructure makes it vital for the population to purchase a vehicle for mobility services. The imperative is the global rise of technology influencing the population as well as manufacturers to innovate the current automobiles in line consumer demands and global trends in the market. In line with the changes, Ustun et al. [1] notes of the introduction of high-tech vehicles such as hybrid and electric cars. With the availability of new technology, there is a parallel increase in demand for vehicles both in the domestic and international markets. According to Beer [4], global sale of cars is approximately 63 million units whereas the manufacturing capacity stands at 86 million on an annual scale. Focusing on the situation in Australia, Ustun et al [1] includes approximately 85% of the population as owning a car with 60% households having two or more vehicles in Australia. To emphasize this, information in figure 1 below highlights the wide-spread use and dependency on the vehicle for navigation in metropolitan Australia. Figure 1: Passenger Transportation in Metropolitan Australia [1] Comparatively, figure 2 compares the different means of transport, which contributes to the understanding of the current situation on population and means of transport in Australia. In particular, according to the figure and information by Ustun et al. [1], public transport attracts fewer participants owing to some reasons such as insecurity, underdeveloped infrastructure, and expensive cost of tickets. Figure 2: Proportion of passenger-kilometres: Capital cities 1945-2020 [1] The tapping into these potential markets by car manufacturers largely depends on the abilities of the firm to adapt to dynamic features of the external market. According to Soosay et al. [2], a company’s environment faces powerful external pressures including fluctuating economy, globalization, government regulation, technological innovation, competition, and changes in consumer behavior. Therefore, it is necessary for the management to adopt excellent strategies, and align internal resources to the external market trends. Soosay et al. [2], provides that the manufacturing strategies directs the use of resources towards sustaining cost and production advantages of the firm which enhances its profitability and position in the market. The availability of these strategies and their effective implementation interpret to the ability of the firm to identify and manage its operation. The automotive industry in Australia is one of the successful traditional firms that exhibit strong market strategies as provided by Soosay et al. [2]. However, Gibson et al. [3] explain that the changes in the manufacturing industry in Australia is inevitable following the changes in economic development cutting out developed nations from these particular industries. It is from these economic changes that company such Mitsubishi, Toyota, Ford and recently Holden motors are opting out of Australia into developing regions. According to Gibson et al. [3], the automotive industry in Australia provides the population with employment, especially in the South Australia. However, as the companies continue to close, a majority of the population suffer the loss of employment. Beer [4] provides the example of Mitsubishi where following the closure of its plant in Adelaide in 2004; a total of 1167 people became unemployed. The number represents a small fraction of the actual magnitude of the collapse of the automotive industry, whereby as the year’s progress more firms close business escalating the rate of unemployment. Kohler [5] points to the rise of technology and its impacts in the production and manufacturing industry. In particular, through technology, modern industries are tapping automation with the use of a robot to speed up production and cut down labor cost. Therefore, the shift into automation reduces the human input in a majority of the firms leading to reduce wages and redundancy. Australia’s position as a develop nation already taps into the automation, changing the work environment of the population. Moreover, the economic crisis in the country threatens the stability of the automotive industry affecting the job security of the public. Comparatively, Soosay et al. [2] mention of the escalating labor cost in the developed countries which in Australia, is a result of inflation and the high cost of commodities. Therefore, with high labor cost and falling prices of cars, manufacturers in Australia change the working conditions by calling for early retirements and declaring redundancy of the workforce. Following these changes, Beer [4] provides the input by the union such as the Australian Manufactures Union advocating for long-term employment of the population through government interventions regarding these automotive industries. Government Policies The government through the policy makers dictates the operation of its industries, especially regarding their relationship to the different stakeholders. According to Ustun et al. [1], the government policies influence the direction of car manufacturing industries through enforcing laws such as low carbon emission policies and environmental regulations. An example is the introduction of the carbon tax and beyond zero emissions as strategies to ensure a reduction of carbon and a realization of a carbon-free economy in Australia. According to Beer [4], Australia government is structured in a hierarchical system comprising of the federal, state, and local government. Therefore, these government sectors collaborate in developing policies, laws. and regulations. Supporting the centrality and importance of the government in economic empowerment is the argument by Gibson et al. [3] who presents the economy as structure developed through actions, ideas, and opinions by experts. The particular experts include the investors, government agencies, and technocrats. It is the input from these experts that directs the availability of opportunities and markets for the success of industries such as the automotive. Government interference in the economy and trade market influences market accessibility by enterprises [3]. According to Gibson et al. [3], the federal government in Australia designed particular policies in an effort to mitigate the economic recessions. Specifically, it managed to privatize some business sectors, lifted trade barriers, introduced free trade, negotiated industrial relation with the unions, and restructured the manufacturing industry. Consequently, the move by the government to abandon the trade barriers in the manufacturing industry positioned the manufacturers in a challenging situation characterized by fluctuating currency. It is from these restructuring of the trade market that led to the collapse of the manufacturing industries, especially motor vehicle where these companies failed to adjust to these instabilities in the markets. Gibson et al. [3] argue that the death of manufacturing industry in Australia follows the enactment of policies masked by external forces such as globalization, recession, and deregulation of the financial sectors. Similarly, through these policies and the empowerment of the labor unions, Soosay et al. [2] address the increase in labor cost in Australia. Consequently, the costs compel the manufacturers to relocate in Asian regions such as China, where both labor costs and regulation are cheap and flexible. Moreover, Soosay et al. [2] explain the decision to relocate by these manufacturers as an outcome of the need to discover markets will low competition as a plan to establish a strong market condition. Developing countries provide these manufacturers with attractive operational conditions where the firms can manage to cut costs in production while maintaining the value of products and exploit uncompetitive domestic markets. Beer [4] explains about declining tariffs as a contributor to the fall of automotive firms in Australia. The government through the free trade policies encouraged the penetration of national producers and exporter in the region which developed unparallel competition in the manufacturing industries. The decline in operations of the firms and their continued losses despite government interventions through loans and grants, the government's sort of invest in other booming sectors such as mining and defense industries. Conclusion The collapse of the automotive industry in Australia is an outcome of changes in operation policies by the government. In particular, external forces forms a paramount influence about the success of the firms with the examples of globalization, de-regulation of finances, reduction in tariffs, and the free trade policies. Moreover, the external factors direct the structuring of policies parallel to current global trends. Consequently, the presence of these policies has seen the relocation of firms to other regions with flexible terms and less competition. Australia is indeed one of the nations with strong labor unions which advocate for increased labor cost in response to the rising inflation. However, high labor cost fails to attract investment in automotive industries, especially when countries like China offer cheap labor. Therefore, in design a solution, the government is an important are to consider following its central role in the collapse of the industry. References [1] T.S. Ustun, A. Zayegh, and C. Ozansoy, “Electric vehicle potential in Australia: Its impact on smartgrids.” IEEE Industrial Electronics Magazine, Vol.7, no.4, pp. 15- 25, Dec. 2013. [2] C. Soosay, B. Nunes, D.J. Bennett, A. Sohal, J. Jabar, and M. Winroth, “Strategies for sustaining manufacturing competitiveness: comparative case studies in Australia and Sweden.” Journal of Manufacturing Technology Management, vol. 27, no.1, pp. 6- 37, Feb. 2016. [3] C.R. Gibson, C. Carr, and A.T. Warren, “Making things: Beyond the binary of manufacturing and creativity.” Routledge, pp. 86- 96, 2015. [4] A. Beer, “Learning the lessons of Restructuring: Government and Regional Responses to Employment Loss in the Automotive Sector.” 2007. [5] A. Kohler, “What really killed the auto industry,” ABC news, Feb, 2014. Available: http://www.abc.net.au/news/2014-02-13/kohler-the-ogre-of-deflation/5256662 [April 28, 2017]. Read More