The Fall of the Australian Automotive Industry - Essay Example

THE FALL OF THE AUSTRALIAN AUTOMOTIVE INDUSTRY University name City Country Introduction The fall of the Australian industry is argued to have been contributed by a combination of various factors in operation in the Australian automotive industry. Some of the causes include withdrawal of the Australian government protectionism in the form of tariffs, strategic decisions by parent companies, appreciating Australian dollar as well as unions. However, of all these factors and unions have been greatly and heavily criticized for being the major contributors to the fall of the automotive industry. All these factors led to declined local sales and consequently making operations unbearable. Of the companies that closed include GH Holden, Toyota and Ford. This essay evaluates the role that the trade unions played in the fall of the car manufacturing industry in the Australia as well as other factors that contributed. Industry assistance and tariff protection The Howard Coalition government in the years between 1996-2007 went ahead making tariff protection reductions enjoyed by the Australian automotive industry. However, it continued offering assistance to locals in total return for locally available investments through development of competitiveness in the automobile industry as well as varied investment avenues [1]. The bargaining power of unions was continually weakened by the Howard government. Additionally, the Howard government threatened to even withhold assistance in the automotive industry not unless companies in the automotive industry offered employees’ contractual. However, according to [2], when the policies stipulated by the government ignited hostility and attracted resentment from both the manufacturing firms and unions, the Howard Coalition government decided to retreat as the Industry continued to undertake negotiations with respect to negotiate for wages and work conditions through enterprise bargaining. The Rudd –Gillard government of the year 2007-2013 also took part and particularly oversaw a case where tariff protection related to imported vehicles was lowered. Consequently, according to [4], Australia, by the end of the year 2010, enjoyed low tariffs experience compared to other major economies which has an automotive industry. In fact, particularly indicates that Australia, by the end of the year 2010, was third-last in terms of lowered tariffs in economies that had manufacturing industries [5]. However, the Rudd-Gillard government, like the Hawke-Keating government, through Green Car Innovation Fund that was established in the year 2009, offered financial aid particularly to the automotive industry. The Green Car Innovation Fund promised a whopping $6.2 billion of financial aid to local firms in the industry in order to help local firms integrate technological innovation in car manufacturing, technology that is environmentally friendly [5]. Additionally, the fund was also meant to enable local car manufacturers in Australia to produce cars which are efficient in terms of fuel consumption, within an 11 year period, dependent on the other complementary investments in the automotive industry. However, the Green Car Innovation Fund was later seriously reduced due to budgetary difficulties that the Australian government faced at that time because of the 2008/2009 financial crisis and particularly because a good amount of money was relocated to relief of crisis [4]. In an attempt for the Australian automotive industry to shift local producers production strategies from production of larger vehicles towards production of small and much more efficient motor vehicles as far as fuel is concerned, according to the ever changing customer preferences, the Australian government initiatives prompted Ford to produce a new engine plant line, GH Holden to introduce a small sized vehicle and Toyota to produce Camry in Australia [4]. However, it happened that these strategies came in hand too late to be able to salvage the already declining local market shares of Australian car manufacturers. In fact, according to [2], The Rudd-Gillard government, in the year 2008, presided over the closure of Mitsubishi after it had suffered poor local sales and poor export performance for a relatively longer period of time. This is despite the financial assistance, the company enjoyed from the Australian government and the Mitsubishi’s parent company in Japan [4]. However, in as much as there was continued financial assistance from the Australian to government, tariffs continued to decline drastically to reach very low levels in the Australian Automotive industry history [2]. Decision by parent companies Most automotive companies in Australia have been heavily dependent on their parent companies for support. But financial and budgetary assistance from the Australian government coupled with declining tariff protection as well as growing globalization within firms increasingly strengthened head office influences. GM Holden and Ford continued to enjoy a high degree of autonomy for their headquarters situated in overseas, in spite of tariff barriers and very healthy and good domestic sales [2] . Consistent and globally accepted production systems were in the 1990s, introduced into companies by their respective headquarters in Japan and US. This made it possible for headquarters to closely monitor the performance of their individual companies besides also enabling it to undertake price comparison of their firms all around the world by considering each vehicle separately [4]. Subsidiaries in Australia ventured into different strategies of production altogether, strategies with varied levels of independence from their respective headquarters. Particularly, Toyota adopted a strategy that strongly focused on the exportation of large vehicles especially to the Middle East. On the other hand, Ford adopted a strategy that focused on the importation of cars. Subsidiaries in Australia were very much aware that in the hands of managers situated in the head office lay their fate in terms of undertaking a comparison between facilities around the world and their respective operations [2]. Unions The unions played critical role in the collapse of the automotive industry in Australia. The automotive industry in Australia is one of the industries in the economy that enjoyed the maximum government protection particularly through tariffs. In fact, the automotive industry was one of the industries that enjoyed the maximum government protection and has always been heavily unionized ever since its inception [2]. The use of tariffs by the government enabled the government to protect local firms from the competition. This would enhance growth of local automotive manufacturers in the industry. However, at point where the government withdrew the protection from tariffs, this was the beginning of Australia’s automotive industry’s downfall. The Australian Manufacturing Workers Union (AMWU) being the only union that majorly dealt with most non-managerial workers, exerted heavy bargaining power in the automotive industry, especially during the period when a lot of government protection was exercised [5]. Industrial relations arrangements, including unions have been heavily criticized for increasing the cost of production alongside other production inefficiencies. In fact, sometime in the year 2002, the Howard’s government industry minister accused industrial relations movement for being a great threat to the future of the automotive industry [3]. In the year that led to the closure announcement of GH Holden, GM Holden management and staff having a good representation of AMWU officials acted very cooperatively throughout the crisis faced by the company. GH Holden management, the staff and representatives from AMWU entered into varied initiatives. In fact, one of these initiatives was rolling and altering shifts of production workers with increased working weeks. According to [3], these initiatives were agreed upon by AMWU officials despite the lack of a well-established and formal mechanism to undertake during the collective agreement. The government of Australia played a key role of funding the workers’ training, especially during down-times. However, in as much as industrial relations became cooperative in an attempt to save the already falling automotive industry, the corporation was not sufficient enough to convince GH Holden Company to still maintain its operations in the Australian automotive market. In fact, according to [5], GM Holden’s General manager and chairman, Dan Akerson noted that their decision to bring to an end operations of GM Holden and cease its operations is a clear reflection of the kind of negative storm the automotive industry was facing, ranging from appreciation and increased power of the Australian dollar, increased production cost to ever reducing local market [3]. As GM Holden really struggled to survive in the Australian automotive industry, Toyota was seen to be the only company likely to survive the storm. This is owing to the fact that the company was focused to exportation domestically manufactured vehicles to the Middle East. This was also the fact that Toyota had a powerful market status, taking a lead in as much as local sales was concerned [4]. However, despite its previous cooperation with industrial relations that even led to Toyota’s Altona plant success, Toyota eventually closed flowing a bitter dispute and disagreement with AMWU. This is because of Toyota’s frequent selective redundancies that AMWU felt was unfair because there was a perception that the redundancy policy exercised by Toyota company unfairly targeted selected union officials situated in the Altona plant [4]. In fact, in the year 2014, Toyota announced that it would bring to an end its operations by the close of 2017 after undergoing difficult negotiation periods with the unions over the renewal of the bargaining agreement. Conclusion The fall of the Australian automotive industry is as a result of combination of factors as and forces. However, in as much as it was a combination of various factors, including appreciation of the Australian dollar, decision by parent companies, withdrawal of tariff protection and industrial relations (unions), unions played a key role in the closure. The interplay of all these factors led to reduced economies of scale consequently making operations in the industry unbearable in terms of cost. Therefore, in conclusion, it is evident from the essay that unions played a key role in the closure of automotive industry in Australia. References [1] R. Blanpain and G. Brulin, Globalization and employment relations in the auto assembly industry: a study of seven countries, 1st ed. Alphen an den Rijn: Kluwer Law International, 2008. [2] C. Wright, S. Clibborn and R. Lansbury, "Becoming an endangered species? The future viability of Australian automotive manufacturing", International Journal of Automotive Technology and Management, vol. 11, no. 2, p. 172, 2011. [3] S. Clibborn, "Local Responses to a Global Downturn: Labour Adjustment in Two Multinational Companies", Journal of Industrial Relations, vol. 54, no. 1, pp. 41-56, 2012. [4] S. Bracks, "Review of Australia’s Automotive Industry: Final Report", 2008. [Online]. Available: https://industry.gov.au/industry/IndustrySectors/automotive/Documents/ReviewofAustraliasAutomotiveIndustry.pdf. [Accessed: 03- May- 2017]. [5] J. Swan, "Blame game erupts in Parliament over Holden decision", The Sydney Morning Herald, 2013. [Online]. Available: http://www.smh.com.au/federal-politics/political-news/blame-game-erupts-in-parliament-over-holden-decision-20131211-2z5pl.html. [Accessed: 03- May- 2017]. Read More