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The end of the road for Australian car manufacturing

12 February, 2014

Toyota's decision to end domestic production of motor vehicles signals the end of mass car manufacturing in Australia. Toyota, Ford and Holden will all have ceased Australian car production by 2017-18.

Toyota has cited the Australian dollar, high production costs and the removal of trade barriers as factors contributing to the decision to end Australian production.

Toyota built 101,382 cars in Australia during 2012 and 72,886 of these were exported. In 2012, total Australian car production was 221,254 cars, making Toyota worth 46 per cent of the domestic vehicle manufacturing industry.

Toyota directly employs over 2500 workers at its engine plant and assembly line in Melbourne. Although this figure is relatively small in a city of over four million people, subsequent job losses at numerous smaller firms that supply parts to automakers could have a significant effect on the local economy.

Challenges for upstream industries

Until Toyota announced it would follow Ford and Holden in ending Australian production, there was hope that a single domestic vehicle manufacturer would create enough demand to allow Australian parts suppliers to survive.

The motor vehicle parts and accessories manufacturing industry employs 14,838 people in Australia and derives 54.3 per cent of its revenue from sales to vehicle manufacturers. This revenue will decline rapidly over the next four years as motor vehicle manufacturing winds down.

Some motor vehicle parts and accessories manufacturers currently survive only because government subsidies to vehicle manufacturers have underwritten domestic demand. Without a domestic motor vehicle manufacturing industry to supply, motor vehicle parts and accessories firms will have to increase their productivity to compete in international markets.

Despite claims of low productivity and a lack of competiveness (due to the value of the Australian dollar) in the manufacturing sector, parts and accessories manufacturing exports make up 18 per cent of industry revenue in 2013-14.

With the industry in a vulnerable position, firms should be able to extract concessions from unions that will increase productivity and improve the chances of survival.

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The Ninja | Friday, February 14, 2014, 10:19 AM
The unions continually talk about "fighting" for pay levels, "fighting" for terms, "fighting" for conditions and "fighting" employers in general. In three recent significant cases, they have fought their members out of their livelihoods.
Ian Hill | Friday, February 14, 2014, 10:58 AM
Do not understand why the australian government does not take over one of these facilities (we would paid for 1 with subsidies) and manufacture vehicles for the federal, state and local governments.Not saying it would be easy, although we have the know how we have the people with the skills and we have the raw materials.
Former Auto Worker | Friday, February 14, 2014, 11:01 AM
Although I have had my own issues with unions I would not blame them for the closure of the industry. Yes, they have contributed but if you consider the labor component of a car's cost, the cost of the unions extra conditions are a very small component. Toyota also highlighted the $A and FTA's. Do you realise that Malaysian cars can be imported with no duty but Australian made cars (<2l) cannot be exported to Malaysia? That was an item in the FTA signed by the Labor government. The $A is still appreciated by more than 20%. These items have a much bigger impact.
Diarmuid Hannigan | Friday, February 14, 2014, 11:05 AM
Instead of abandoning the manufacturing industry an industry that makes us a first world nation our governments our industry leaders and our bankers must sit down and work out how they are going to manufacture cars in Australia profitably. There are serious structural issues. Government is inefficient and to expensive it contributes approximately 30% to the cost of an Australian made car and they don't even have a coordinated purchasing policy. Currently we are facing a future where the horse and cart will become our mode of transport whilst our local governments continue to support the stone masons and bollard industry, labour supplied locally and the equipment IE stop and go signs witches hats and bollards all made in China whilst our banking sector gouges obscene profits from our nation, In other words a nation run by a bunch of fools who have never used a tool.
Barry | Friday, February 14, 2014, 11:26 AM
Google Mondregon to see how a technologically advanced, high wage economy has no problem with competition. Also google Nucor to see how industry within the home of agressive capitalism does well.
Calvin Wilkie | Friday, February 14, 2014, 1:05 PM
Saddly this has been the agenda of the unions right across the manufacturing base, the state and federal funding only prolonged the final demise, the same situation is happening in Shepparton at SPC with the vic govt throwing money at SPC will have the end result as the car industry. The blame as we put it is partly union intervention but the majority of the problem is the greater proportion of the buying public buys and supports imported products in the supermarket, so eventually we produce nothing import everything, reducing the workforce sending business to the wall and unemployment at figures that look like telephone numbers. It is muted that the retrenched workers will be retrained , yes thats great but for what and in what industries of the future , so the buying public better wake up support Australian made, Australian owned , it is just like "Dick Smith" forecast years ago and we did not listen or support what he was trying to do, maybe we have gone past the point of return ??? My comment again is WAKE UP AUSTRALIA>
Rob | Friday, February 14, 2014, 3:19 PM
One of the major issues the Toyota managers and Japanese owners could not understand is the lack of "pride & ownership" of the Toyota brand by the workers (and their representatives). This was shown last year when there was 30% absenteeism on the Friday after a public holiday on the Thursday. That really irked the Japanese. Then there's the union involvement in management decisions demanded by the union, even in everyday decisions. Those sorts of lazy attitude issues do more damage than wages.
Diarmuid Hannigan | Friday, February 14, 2014, 6:34 PM
There are a multitude of structural changes needed within Australia to allow us to make our own cars profitably. Point one. Wee must all come together to make this happen the thought of loosing such a valuable intellectual asset is incomprehensible, remember there are only 13 countries in the word that have the capacity to make cars. Once that capacity is lost it never returns. We have the materials we have the equipent we have a trained and educated work force and we have a highly developed components sector. Unfortunately we do not have the political mind set to make this happen as our leaders are beset with an outdated adversarial approach to problem solving compounded by an ism, being of course economic rationalism. You notice how those without a lateral mindset flock to the ism as it always simpler to believe an ideology (idiot) than to question it. The first question we have to ask is how do we lift the return on investment in manufacturing from its current woeful lows to a world competitive figure say 15% per annum. Hence we have to look at reducing the current 30$ tax burden that is currently leached from Australian manufacturing by its wasteful and inefficient governments who are abstaining from their responsibilities of developing an industry plan for our nation utilising a collaborative though process.
Lou Furbadamo | Sunday, February 16, 2014, 9:21 AM
Sadly, “Shamra’s” clinically austere, unfounded, treacherously defeatist, errant assessment (30/5/13) “That Gov. assistance to Aust. car manufacturing was a waste of money” has proven fatalistic and incredibly clueless Liberal adopted as “inevitable fait accompli”, without a fighting whimper, by our daft, one term wonder, ” Pet Misogynistic Destructorcon Budgie”! Not that there was any doubt. Because our accepting, dubious blue bloods, neither have sufficient knowledge, intellect, experience nor commitment to successfully tackle & solve the crucial industry issues, as repeatedly fore warned by Car Companies. Toyota , cites blatant primary reasons; “The Australian dollar, high production costs and the removal of trade barriers”. I’d add, low volumes, lack of Gov. support & the interdependence of component suppliers, as factors contributing to their rational termination of local production, that’ll wipe out tens of thousands of jobs. But it’s not their sole responsibility to defend Aussie jobs, industry and best interest. We have over bloated, over represented, most expensive, three tier, taxing, blundering governments charged with that. And they’ve atrociously failed for over thirty years since their dastardly “ Button Plan Sham”. It’s not the companies fault, our untenable manufacturing environment is so uncompetitive and conducive to pulling up stumps and relocating jobs, technology and lively hoods off shore! But our naïve, snorting, commission kick back, she’ll be right, talk-fest fix, Aussie paradigm afflicted, hopeless governments, unions and so called industry experts and advisers, who are to blame! Incredibly, nowhere have car companies requested countless useless, diversionary, non issue, attempted nonsense stunt solutions and wasteful, irrelevant, excuses dished out by our facile governments! Nor their, generous hype, spin, countless industry, Gov and union waffler-thon meetings and expert wishing and hoping, expensive talk fests! Typically, all pathetically delaying, diversion to avoid tackling glaring systemic inefficiencies, uncompetitive operating environment, structural inadequacies and the so called “Henri’s impossible shock”, that continuously burdens, batters and decimates? Instead of committed efforts to properly resolve the multitude of uncompetitive problems and save hordes of condemned jobs and hellish unemployment benefits payable, when their wishful transition planning fails. As has clearly occurred with the Mitsubishi closure. Nebulously, our gutless Budgie Boy, seems naively relieved to be propping “rid of them”, having now given companies, impetus and irrefutable reason to relocate off shore. Disgraceful casual acceptance, when far smarter, visionary, competently supportive governments, have got their globally competitive and/or protective strategies together. Instead of excuses, finger pointing and petty squabbling! Why would anyone want to rely on such a clueless, uncommitted, unpredictable, sapping rabble? Fascinatingly, many naïve hedgers, superficially portrayed profitable, export orientated Toyotas as a shining example of what failing Ford & GM hadn’t achieved and why they should go! Clearly wrong, as “exemplary” Toyota, has also fallen, to the same handicapping, uncompetitive affliction? It also dispels the other impacting myth, that unlike profitable Toyota, Yankee Ford & GM had chosen “wrong, unpopular, doomed models,” that were too large and fuel guzzling! So, it now remains to seen just how badly this transition unemployment failure is, and how far backwards Australia jolts! Way you Go, Budgie & Co! The only cursed Dodos to ever “popularly”, Legacy Destroy a nation’s crucial Auto Industry, in one foul, I desperately warned you so, moronic swoop! Cheers, courageously Banananana Republic acclimatising, Furbo!
Owen Venn-Bron | Wednesday, February 19, 2014, 1:41 PM
The sooner we stop the gnomes of Wall St and Zurich et al manipulating the world's currencies the sooner we can have an even playing field international trade. The root trouble with all our industries is the absurdly high dollar. I calculate using the method described in my bog, "How to measure the value of Money" that, in fact , the Japanese average weekly wage is slightly higher than is Australia's. So far no one has shown my theory of money is wrong. If you can indeed prove it to be wrong please let me know.
Steve | Wednesday, February 19, 2014, 4:18 PM
Maybe our government could help the industry by not helping itself to their profits. Doe the government have any ide how much it will lose in tax revenue from these many thousands of lost incomes? The governmant faces losing the tax it levies on the companies plus the tax it levies on the workers and additionaly will face more demand on the welfare dollar. Surely we can be smarter than this. WE LOSE not only the income for gevernment We LOSE the income for the comunity, WE LOSE the flow on effect of all those dollars, WE LOSE the dignity of employment, WE LOSE much more tyhan an industry as if that is not enough!!
calvin wilkie | Thursday, February 20, 2014, 8:41 AM
I heard on Melbourne radio this morning from an interview with the federal prime minister that the previous federal labor government gave $40 million to Alcoa in Victoria to remain open during the elaction campain, well look whats happened. its closing, so proping up is not the answer,we need to be a lot smarter in our thinking!
Lou Furbadamo | Monday, February 24, 2014, 8:31 AM
Hello Calvin! You heard correct! But aren’t we tired of destructive petty politics and even crasser liberal terminal solutions? The defensive “Aussie Paradigm” we’re the best trap, is to gloss deficiencies and trend to lowest common denominator. Here, by comparing current industrial “Destructacon Budgie Boys”, to previous grossly failed, dudd Juliar, big spending, total exemplary economic & industrial IMBECILES? That delivered us to the edge of industrial abyss and national shame! Hardly much to gloat about, or dopey excuse to liberally jump into? Jump! Go ahead and Jump? But that won’t cure inherited Labor problems, nor clean up the bloodier “future jobs mess”, at the bottom of our fiscal cliff! In a war situation, their attitude is akin to saying, “these bleeding soldier companies are wounded and holding us back! Lets shoot them to relieve ourselves of responsibility and burden”? It’s totally unacceptable, because apart from the humanitarian issue. If you do them in, they’ll never recover to fight another day, so we’re sealing our own wasteful fate! Seems Budgies haven’t a competitive clue either, other than regurgitated spin and perilously jumping into worse disaster and absurdly drag us further down, whist the rest are boosting industries and picking up economic steam? Clearly, “their terminal do nothing and watch the collapses policy”, aided by deception, antagonism and point scoring, is no viable solution! Yes! We must be SMARTER! But you seem to conveniently confuse “propping up” as the opposite of “SMARTER”? Not So! Smarter can’t mean abandonment and failure of Alcoa & car companies, with mass unemployment. But instead, successful strategic planning to revive and “transition working factories” to success & profitability! And save most jobs set to be flippantly lost by Gov. abandonment and cynical, Saint Budgie’s Jesuit Non Compassion! Factory Closure and then hoping for something better, is NOT TRANSITION, but NEWSTART! There’s no credibility nor substance in their promise to create thousands of new replacement jobs, given the failed Mitsubishi experience. So until they can cover future opportunity loss and costs. They’ve no practical choice, other than keep local companies operational and work on making them profitable again. After all, the national industrial rot, isn’t the companies fault, but successive Aust. Govs. that have destroyed our competitive environment. It’s the Gov. that must lead restructure and fix it. So companies become sustainable and profitably continue employing and paying taxes etc.! Closure of Crucial factories, responsibly remains a NON OPTION! Government must, by good planning, strategy or by hook or crook, keep our key employers afloat and producing. To understate the massive negative, domino impact of pending closures, is to be culpable and negligent! Otherwise, what are most of the discarded workers going to be doing, other than mope around on the dole to develop drugged psychosis? Surely, belatedly improved Industrial environments are of no use to pre-failed companies? What is it about Oz, that just can’t make a go of competitive manufacturing? Do we suddenly have some infectious disease, that forces us to seek “special, protected niche shelters” and prevents us from successfully, competing up front and mixing it with the international rest and best? When I voted dubious Budgie Liberal last election, I was hoping they’d sensibly, quickly reappraise the issues and deliver a semblance of good government and SMARTS. Wishful Optimism! Our legacy conscious conservatives, can’t be that Budgie stupid! I didn’t expect our snorters, to be just another fat bean variety of previous bloody IDIOTS!!! So let’s not squabble! Keener You can now have first pick of Favourite Blue Bellied Budgie, Spotted DILLS! Cheers, Furbo!
Former Auto Worker | Monday, February 24, 2014, 10:20 AM
Furbo, When the LNP said "Open for Business", I didn't realise they meant "Open for Imports". In my opinion too many economists think you can start and stop a business at will. If conditions aren't right you close the business and then when things change you open it again. This may work for a coffee shop but not a car industry!
Lou Furbadamo | Wednesday, February 26, 2014, 8:59 AM
Hello, Former Auto Worker! You’ve obviously worked in our threatened industrial factories to experience and credibly raise, what should be very obvious and valid points. Especially the key one on the naïve, “PRONTO STOP-START” of large, highly technical and capital intensive industrial business operations. Like Car Manufacturing, Alcoa, SPC Ardmona Food processing and now possibly QUANTAS. Who’ve flippantly announced closure or substantial cut backs. That’s because most industrially clueless Economists, “Advisers” and Snorting Politicians making key decisions, have never properly been, nor worked in such factory environments. They wouldn’t reliably know what’s involved, nor appreciate and value what they’re allowing to be wastefully scrapped. Most of these “off the farm”, foolish bluff Government pollies! Despite best self intensions, clearly haven’t a clue about what to do, to fix this countries economic demise, other than Dumbo quarry national resources and cheap commission kickback sell the farms! Regrettably, going by our unabated industry and jobs destruction, the current dudd Juliar replacement, predictably one term wonder Budgie Boys! Would laughably, mostly be better back on the farm, expertly tending their lanolin fleeced sheep and intimately milking rich creamed, full udder, Moo Moo Cows? Right? The few with semblance of mechanical and technical skills, would be better, fun operating their jump stump plough tractors, or running their favourite quad bike or combine harvester, rather than painfully clueless ploughing and burying our economy? Regardless, what most people don’t factor, is that our departing industries we’re very expensive and difficult to initially negotiate, design and establish. Taking many years to “deliver” and mostly required massive efforts and even more “Bunny” Taxpayer / “Smart” Government grants and all sorts of other sweetener incentives to start with. So callously, abandoning them is an ever bigger, costlier, infuriating mistake, than might first appear. And will require billions more to “Pronto Restart” them, when this industrially naïve country finally wakes up to itself and or is dopy forced to do it, to keep it’s millions of unemployed productively occupied! So, it seems all our “Don Chipp dishonest Bastards” have now left us of interest! Is how shockingly bad and high, will our future daft ensemble of Unemployment Rate, Budget Deficit, GST, Community Pain Index and other Taxes Go! And how many Billions more, will it cost to get replacement factories going again??? Then you wonder why some accompanying “furbos” remain singing critically negative, dirge tunes to Chopin’s Funeral March! Commiseration to the Aussie forgotten and down trodden strugglers and unemployed! Sombre Furbo!
Bill Fell | Wednesday, December 17, 2014, 9:20 AM
Government doesn't lead, it feeds. Government distributes services from taxes. If you wish to have leadership, stop voting for people without qualifications. Only captains of industry should be in power, not lawyers or bankers, mining magnates or ex army misfits. If I wanted policing in a frontier town, I wouldn't vote for a failed shopkeeper, I'd be more enclined to look at a hardened gunfighter, as was the case scenario in the mythical west as we know it. What i am getting at is that the office of public service is offered on a poularity vote rather than the evidence of qualified management in any form of buisness. Just being a member of a club for many years and placed at the top of its pecking order, doesn't qualify the recipient for managing a nation. For example, The V8 engine was necessary choice in the early days of vehicle development as the side valve designs were fairly pathetic where performance was the issue. the modern version has been developed to deliver more power than the vehicle requires. (Not heavy transport models) Domestic family cars don't need brut power and the overwhelming choice of families has been smaller engined imports. I drove a Gemini in the late seventies, which was an imported Isuzu re branded. Didn't anyone see the writing on the wall over the past twenty years, take a visionary look at our motor industry and make adjustments. Perhaps if we made smaller vehicles incorporating more technology years ago, curbed tariffs and promoted practicality over supercar racing the market would perhaps be more indigenous. Anyway, none of our government options seems to have answers the public can hold onto. Good luck for 2015