Australian Car Manufacturing Industry - Essay Example

The Car Manufacturing Industry in Australia (KHALED) COLLAPSE Name: Institution: Course: Tutor: The Car Manufacturing Industry in Australia (KHALED) COLLAPSE Introduction The collapse of the Australian car manufacturing industry can be linked to many reasons ranging from inability to exploit the economies of scale, conditions of the domestic markets to union demands among others. The industry collapse affected over 73, 772 employees who were working full time and other impacted on other important aspects in the Australia’s automotive manufacturing industry. Therefore, the impacts of the death of this industry were deeply felt by many because the key players such as Toyota, Mitsubishi, Ford, Holden, and Nissan closed their operations in Australia [4]. However, manufacturers such as Toyota wanted to continue their business but the blame games and other issues lead to the closure of the industry. Evidently, the automotive industry in Australia fails to provide adequate transitional support to the firms while at the same time effecting numerous significant adjustments in the industry. This paper seeks to discuss the dominant reasons that led to the collapse of the Australian car manufacturing industry particularly the role unions played towards its demise. The car industry in Australia The giant vehicle manufacturers such as Toyota, Holden, and Ford are some of the business that were unable to survive due several reasons. The highly competitive domestic and global automotive markets have affected the business in many ways making sustainability difficult. The Australian automotive markets are characterized with numerous challenges especially the lack of sufficient support from the governments and the supply chain partners making business struggle to realize a competitive advantage. In fact, Australia’s car manufacturing industry has been faced with considerable structural changes and policies over recent decades making survival complex for the car manufacturers. The composition and scale of the industry, the location of economic activities, and employment have all been seriously affected increasing the risks of business survival. The Australian car manufacturing industry has also been increasingly subsidized and has experienced struggles to survive in a highly competitive global environment and domestic market. Australia’s automotive industry comprised of different brands from the giant global firms Ford, Toyota, and Holden whose sales declined over the years coming to a peak when all the three forms only sold a combined total of only 87000 vehicles that were manufacturer locally. The industry received on $500 million from the government as funding which was extremely low in comparison with the other internal standards. However, the car manufacturing industry contributed greatly to the country’s gross domestic product with billions being earned from the foreign direct investment from this industry. Indeed, the car manufacturing industry was one of Australia’s most advanced deploying superior technologies and techniques and employing approximately 50,000 people where at leasr 17,000 worked for Toyota, Ford, and GMH. However, the industry experienced multiple issues and challenges that necessitated closure particularly due the big role played by trade unions by failing to support free trade and making competitiveness impossible for the businesses in the automotive industry. The supply chain complexities The supply chain systems of the car manufacturing firms globally has been supported by a complex logistical system in supply chain that integrates numerous businesses in the engineering design, manufacturing, and tooling of various automotive components. The Australian market does not allow the full exploitation of the economies of scale because of the comparatively small market segment [4]. Notably, the major vehicle manufacturers General Motors (Holden), Ford Motor Company of Australia (Ford), and Toyota Motor Company Australia (Toyota) are all subsidiaries from foreign countries of global companies and with numerous affiliates worldwide. The supply chains are thus an important element in every nation to enable the businesses meet the logistical, transportation, and distribution standardization requirements in the global supply chains effectively. The role of trade unions Trade unions in the Australian business environment were the primary cause of the Australian car industry death. The unions failed to provide adequate trade protection to new car markets in the country evidenced by the high Australian dollar which has been historical an issue to most multinational business [5]. Therefore, the concerns that emanated from the car industry were faced by hostility from the federal government as well as the Australian productivity commission. Clearly, Toyota, Ford, and Holden among other car manufacturers operating Australia experienced the effects of unfair Free Trade Agreements (FTAs) and inadequate protection of tariffs from the federal government [5]. The role of unions was therefore greatly responsible for aggravating the storm of many negative influences for the car manufacturers necessitating their closure. The Australian free trade and protection of the industry specific operations have over the years failed to adequately take responsibility of the tariffs to enable firms to transition effectively into an open market. The automotive manufacturers requires to integrate global systems to improve their efficiency and become export oriented by government support has terribly failed to promote this fundamental function coupled with the strong Australian dollar [3]. The car manufacturing industry is one of the major employer’s and the closure of the firms was also influenced by both the domestic and international competitive pressures that are very crucial in workplace relations. Australian work practices are not flexible and entail relatively high costs of labor that affect the competitive ability of Australian business negatively. Australia’s dynamic labor market Australia has a highly dynamic labor market which makes labor costs very high and consequently affecting the operations of multinationals. The lack of appropriate strategies to ensure a controlled labor has significantly increased the costs of operations for the firms in Australian in comparison to other global markets [1]. The automotive manufacturers depend on highly skilled engineers and designers in all their global projects, the domestic supply of such labor is very costly compounding the issue of inadequate government support and the all time high Australian dollar. These factors contributed to the increased industry stress reducing competitiveness particularly in the export market. Free trade has been part of the neoliberal policies which has been greatly affected by the global economic crisis impacting many nations. Australia’s free trade policies have serious imbalances that make multinationals experience various challenger because trade unions consider the FTAs and other multilateral negotiations [2]. These consequences are damages to the workers as well as the environment causing weaknesses that destabilize business and the economy promoting developments that are export oriented and tremendous trade imbalances. Fair trade is an important aspect of effective trade union agreements globally, Australia’s failed to explicitly address the need for fair trade to shape and promote businesses in the automotive manufacturing sector. The role of Australian trade practices and legislations not only served as an obstacle to the car manufacturing industry but also contributed complexities in the foreign direct investment agreements that provided some degree of support to multinationals. Market Challenges The Australian market creates one of the primary challenges to the automotive manufacturers in realizing sufficient and sustainable scale of profitability. For instance, the research and development costs for the manufacture of new vehicles are significant. Therefore, it is important that the firms realize sufficient volume of their total sales in order to recover their investment. The vehicle industry in Australia became highly competitive, with automotive manufacturers from India and China which are emerging economies entering the global export markets complicating the market challenges that were experienced by giants Toyota, Holden and Ford; this factor compounded the pressure on these established multinational brands [1]. The exchange rates also play a vital role in the performance of automotive manufacturers particularly productivity. All the car manufacturers in the industry operate in a global market, with most of the manufacturers depending on exports to achieve sufficient scale in their operations. Indeed, some car manufacturers are usually able to reduce the exchange rate risk by locating manufacturing in proximity to where vehicles are sold but Australia fails to provide adequate support to the firms. Moreover, the strong Australian dollar makes it difficult for Australian manufacturers to sustain competitiveness in the wider global market and dynamic environment. Additionally, the competitive nature of the Australian market makes exports necessary for domestic manufactures to realize sufficient scale. The vehicle manufacturers had indicated that their survival during the high exchange rates period required the willingness of the Australian government to support this important industry which was on the verge of collapse. Conclusion The collapse of the car manufacturing industry in Australia involved the exit of multinational manufacturers of automotives Toyota, General Motors, and Holden among others. The decision was triggered by a variety of factors that led to the prolonged decline in the Australian domestic market and other numerous challenges that prompted the closure decisions. The factors included reduced government support for the industry, global strategic issues, trade unions, and volatile exchange rates among others. The various automotive manufacturers operating in Australia expressed their concerns particularly about the workplace relation systems and role of trade unions that failed to deliver particularly workforce commitment to the changes in various practices and also in terms of productivity. The industry has been occasionally disrupted by industrial activities and bargaining exercises that have been protracted creating difficult working conditions and disappointing outcomes. Bibliography [1]. Auer, P., Clibborn, S., & Lansbury, R.D. (2012). Beyond our Control. Labor Adjustment by Multinational Auto Companies in Australian in Response to the Global Recession. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.459.1393&rep=rep1&type=pdf [2]. Australia. (2010). Australian trade practices legislation: Trade Practices Act, trade practices regulations, related regulations. Sydney, CCH Australia. [3]. Australian Government Productivity Commission. (2014). Australia’s Automotive Manufacturing Industry. Productivity Commission Inquiry Report. Retrieved from http://www.pc.gov.au/inquiries/completed/automotive/report/automotive.pdf [4]. Dowling, J. (2017). Why Australian Car Manufacturing Died – and What it Means for our Motoring Future. The Courier Mail. Retrieved from http://www.couriermail.com.au/technology/why-australian-car-manufacturing-died-and- what-it-means-for-our-motoring-future/news- story/0428dc235d1b44639459959f5a3bbf9b [5]. Lloyd, J. (2012). The Automotive Industry: Workplace Relations Impediments to its Survival. Retrieved from https://www.ipa.org.au/library/publication/1354745972_document_061212_submission_auto_paper.pdf Read More