Australia Car Manufacturing Industry - Essay Example

Collapse of the Australian Manufacturing Industry Student’s Name Institution Course Email Date of Submission Abstract The car manufacturing industry is closing down in Australia. This industry has not been productive over the years even after the Australian government investing in it massively. Additionally, it has caused the taxpayers a substantial amount of money for it to stay in business. However, after many years of being in operation, it has proven not to be productive as expected and following this it has collapsed. Many employees who were employed in that industry will lose their jobs including the engineers. After this collapse, several reasons have been brought forward. The paper has highlighted some of the dominant reasons for its collapsed. According to the findings of the paper, the unions, the government, and the size of the Australian market has played a significant role in the collapse of the manufacturing sector. Keywords-manufacturing industry, trade unions, market, Australian government, collapse I. INTRODUCTION The car manufacturing industry in Australia is undoubtedly closing down with the main car companies, which are Toyota, Holden, Mitsubishi, and Ford closing down their curtains in Australia; this closure will be a forever one [1]. Over the numerous years that the car manufacturing industry has been in operation in Australia, different generations of employees were employed and more so, the engineers who played a significant part in the production process [2]. This, therefore, means that its closure will have a major impact on this group of people. There have been numerous blames that have been put forward following the closure of the industry, but one evident thing is that the unions played a significant role in its collapse [2]. Following this, the paper will seek to evaluate the role that the trade unions played in the fall of the car manufacturing industry in the Australia as well as analyze other dominant reasons for the same. II. REASONS FOR THE COLLAPSE OF THE CAR MANUFACTURING INDUSTRY IN AUSTRALIA The internal causes of the fall of this industry in Australia are numerous and are widely known. One of the principal grounds for the failure of the car industry is that Australia is ranked or considered as a high wage state [3]. It has been associated with these high wages since the year of the 1820s. Some of the reasons why Australia is regarded as a high wage country are that it had abundant pieces of land, low taxes, there were various generous investments by the British, among others [3]. As highlighted above in the paper, the car industry employed numerous people, but it was the Australian taxpayer who was responsible of footing that bill where they shelled out approximately $5 billion which was intended to assist the industry to become stable over the last about ten years only [3]. Therefore, since the car manufacturing industry was carrying heavy burdens regarding their operation and sustainability costs, the industry was rendered uncompetitive as compared to the other countries where the manufacturing industries had lighter burdens [2]. There are also other three distinct reasons which have been linked to the failure of the industry where the federal governments and the unions played a significant role in it [6]. The federal governments in Australia are blamed for signing the Free Trade Agreements as well as creating some low import tariffs [6]. Through doing this, the federal governments gave way for the cheap and foreign cars to have the upper hand in the Australian automotive market. In the same light, it has also been argued that the trade unions resulted in the collapse of the industry [6]. These unions were intended to protect the workers and their welfare in various aspects. In so doing, the unions began demanding better working conditions and wages for the employees in the industry [1]. Therefore, given that the industry was already financially struggling, increasing the salaries of their employees as well as their working conditions would mean that their profits would be minimized and will, therefore, be unproductive [5]. Following the unproductivity, the industry closed down. The management of these car manufacturing industries who were based abroad has also been said to have been treating the Australian governments as if they were cash machines [5]. This follows the significant amount of investment that the governments were willing to make for the struggling industry. Making such massive investments and failing to obtain returns at the same rate would, of course, result in massive losses which led to the ultimate closure of the industry [5]. Regarding the trade union’s role in the collapse of the industry, they were responsible for the divisive and disruptive roles which led to the failure of the industry [4] . This is because they made some unsustainable and unreasonable claims for their workers and also did some political campaigning which in the end resulted in the productivity subversion [4]. As they were playing their role of being protective, they tended to encourage the proliferation of the inefficient and sub-scale car manufacturing firms in Australia. Additionally, following these claims that were being made by the trade unions, to meet the needs of the workers, government tended to over-rely on foreign investments [4]. As the country heavily depended on these foreign investments, numerous branch offices of the international cooperation had been put under the command of some of the primary strategic factors. Therefore, the major problem was that the Australian protectionism was needed in keeping the car manufacturing industry afloat, but again the same protectionism robbed the industry its vitality, as well as the innovation pulse [4]. Another principal reason for the failure of the Australian car manufacturing industry was that they had a rather dispersed and small nation market. The national market in Australia only makes about 3.7% of the overall market of the vehicles which is really small [1]. This small market has been largely attributed to the signing of the Free Trade Agreement which encouraged the national market to import cars from the foreign manufacturers which proved to be cheaper as compared to buying in the Australian market [1]. In addition to the small market, it was highly fragmented into distinct regions which resulted in the difficulties of achieving the labor-replacing technologies as well as the acquisition of the economies of scale [2]. Following the lack of adequate entrepreneurial ad technical talent and the cultural tradition of manufacturing cars that are highly esteemed, the Australian nation turned out to be struggling with achieving success in car manufacturing business [2]. Therefore, the car manufacturing industry ended up collapsing because of the small domestic market, high welfare costs, as well as the high wages for the employees. The car manufacturing industry in Australia had employed about more than 39,000 individuals directly and in the same light had employed another about 150,000 individuals indirectly [5]. The collapse of this industry, therefore, poses the risk of losing about $21.5 billion which will probably result in triggering some form of a recession in two manufacturing states which are South Australia and Victoria State [5]. According to studies, the government had the possibility of losing the same amount of money if they continued to invest in the industry. This is because this huge number of employees needed to have better working environments and better wages which the industry could not manage to sustain because of its high levels of productivity [6]. When the industry was on the brink of collapsing, the trade unions started persuading the employees to accept lower wages and working conditions for the workers to save this industry from collapsing [3]. Additionally, the unions through its political campaigns impacted the productivity of the workers and consequently the productivity of the entire industry. For example, the Holden model was given approximately $150 million which was obtained from the taxpayers’ money to fund its operation, but it ended up just generating about $2.7 million in return [3]. Concerning the income-tax revenue only, the car manufacturing industry in the country was a derailment in the national economy. Even as the trade unions agreed, it would be difficult for the sector to thrive without them obtaining some public subsidies [3]. Therefore, since the taxpayers could no longer support sponsoring the industry, it led to its collapse. Australia experienced massive challenges as they strived to sell their cars to the international market in North America and Europe. This was primarily attributed to the unfavorable exchange rates that existed among these countries [2]. The failure of their exporting the vehicles into the international markets and having an overcapacity of the vehicles with few customers, then the industry was just bound to fail [2]. Even after the unions started asking the workers to accept low rates and lower working conditions with the aim of salvaging the industry, there was no way that the workers could just accept their wages and working conditions to go lower. Additionally, the import tariffs of Australia could not just be increased like that and the Free Trade Agreements could not just be ripped like that [5]. It would cost the country and the taxpayers a lot of money which would probably not reap the necessary benefits in the end. Following these hurdles, the government withdrew its financing of the industry which ultimately led to its failure [5]. III. CONCLUSION The car manufacturing industry in Australia has collapsed following the decision by the government to stop financing the industry. The car models that have closed down their manufacturing operations in that country are Holden, Toyota, Mitsubishi, and Ford. This industry employed a significant number of people, most of them being engineers. Various reasons have come up for the failure of the industry whereby it is evident that the trade unions and the governments have played a crucial role in it. These reasons have been discussed in the paper some of which include the unions asking for more wages and better working conditions for the employees, the government signing the Free Trade Agreements, and a small national market among other reasons that have been incorporated in the paper. REFERENCES [1] Cassin, R. Who killed the car industry? Eureka Street. (2013). Available at: https://www.eurekastreet.com.au/article.aspx?aeid=38636#.WQm9I2mGNdg [Accessed 3 May 2017]. [2] Dowling, J. Why Australia’s car manufacturers — Toyota, Holden and Ford — all conked out. The Courier Mail. (2014). [online] Available at: http://www.couriermail.com.au/why-australias-car-manufacturers-toyota-holden-and-ford-all-conked-out/news-story/e58e685cc75d3f68feb40d8d0f0711c7 [Accessed 3 May 2017]. [3] Gratton, K. REVIEW: What happened to the Car Industry?. Motoring. (2016). Available at: http://www.motoring.com.au/review-what-happened-to-the-car-industry-102536/ [Accessed 3 May 2017]. [4] Maher, S. and Akerman, P. Toyota's warning to unions on future. The Australian. (2013). Available at: http://www.theaustralian.com.au/national-affairs/toyotas-warning-to-unions-on-future/news-story/432edb4fae04430932eaa50a7a84994d [Accessed 3 May 2017]. [5] The end of car production in Australia. Autocar. (2017). Available at: https://www.autocar.co.uk/car-news/industry/end-car-production-australia [Accessed 3 May 2017]. [6] Westbrook, J. The Death Of Australia's Automotive Industry Was A 30-Year Plot To Avoid Economic Collapse. Jalopnik. (2017). Available at: http://jalopnik.com/the-death-of-australias-automotive-industry-was-a-30-ye-1794688752 [Accessed 3 May 2017]. Read More