Sustainable-Final-Assignment-4

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Case Study The Collapse Of Australian Car Manufacturing Industry Prepared by : Student ID : Teacher : Pradeepa Dahanayake Unit Name : Sustainable International Business Strategy Unit Code : INB30020 Due Date : 29 October 2021 1

Abstract This study presents an overview of the Australian automotive sector and investigates the different causes that have contributed to the downturn in the fortunes of vehicle manufacturing enterprises. It will be crucial to analyse how idea generation and a creative approach may have rescued the Holden Manufacturing Group. While examining external environmental elements, the study demonstrates the potential management insight that may have helped Holden stay competitive in Australia's automotive market. A summary of the Australian car sector as well as the corporation's origins are included in the report. 2

Introduction The Australian car manufacturing industry has exhibited a proud past in the entire 20th century, after which things began declining. In 1901, the Australian federation eliminated all the custom huddles that existed in states to allow efficient trading among one another (Conley, 2017, p.8). The actions considered triggered the first stage of spreading out of manufacturing to New South Wales and Victoria. The industry in 1963 was a source of about 328000 jobs and amounted to about 13 percent of the GDP (de Percy, 2021, p.4). During the occurrence of WWI, the Australian government discovered that its economy relied on imports. It was challenging to find products at war, and the state had to decide to begin manufacturing various products. Several manufacturing organisations were formed in the nation, and they had a significant position to improve the economy. The manufacturing of cars in Australia started in 1920, whereby Ford and General Motors (GM) instituted plants. Such American manufacturing leaders realised more profits by quickly assembling cars by utilising various imported parts. The manufacturing industry in 1929 had recruited at least 440,000 employees, which accounted for approximately 18 percent of the entire populace (Beer et al., 2019, p. 383 & Stanford 2017, p.202). The great depression of 1920 posed a severe threat to the manufacturing sector, particularly the intensive manufacturing of cars (de Percy, 2021, p.15). To limit the impacts of the great depression, the nation enforced duties on imported products to motivate the nationals to acquire more merchandise locally. 3

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The Australian manufacturing sector began deteriorating in the 1970s since the cost of producing cars had increased. Consequently, locally manufactured goods became more costly than imported ones. The predominant situations impeded the local manufacturers' favourable competition with those products being imported. Government bureaus and other entities began to extend their programs and products outside the country (Yates, Sweeney, & Mordue 2017, p.3). The move reduced the chances for employment in the Australian manufacturing industry in the nation. As we speak, some car manufacturing companies like Ford have ceased operating. Australia still depends on the industry for its economic strides, but the sector has failed. The main objective of this case study is to evaluate the possible reason behind the closure of the car industry. Furthermore, the study will examine the variables that might have prompted Holden to alter its corporate plans and prevent the shutdown of its Australian operations. Relational and Industry based view ideas and principles will be applied to a real-world business situation in this research. The purpose of this paper is to enhance theoretical abilities and to present individuals with business-related ideas and concepts. 4

Literature Review and Conceptual Framework Reasons for Car Manufacturing Failure At the beginning of 2014, Toyota Australia declared that it would stop making cars in the country. The news emerged after GM had also announced in 2013 that all making of vehicles would stop in 2017 as the South Australian assembling factories would stop operation and Victoria engine plants. The previous year was 2012, and Ford Australia had also hinted at their move to cease producing engine facilities in Broadmeadows and other regions (Beer 2018, p.430). Within two years, all the other sections of vehicle making in Australia indicated their exit from production processes, denying people more than 130,000 jobs (Yates, Sweeney and Mordue 2017, p.4). In the eventual, seven decades of large-scale vehicle manufacturing in Australia significantly ended in 2017, leading to a possibly extensive labour market interruption, loss of confidence by the community, a substantial shakeup of regional economies, and significant issues came up among the agencies in the state and at local levels as they endeavour to adjust to the change. The failure of car production in Australia was never an expected result of market forces, but alternatively depicts the cumulative effect of developments in global production systems, issues of scale and layout of passenger automobile making and marketplaces, and the determinations of following governments above three decades. The failure of car production in Australia is also an outcome of the universal industry witnessing reformation due to economic distress. Aspects of labour market versatility and the negotiating models of labour intermediaries were some of 5

the factors that led to the car industry's failure in Australia. Beer (2018, p.434 ) wondered, “Who killed the Australian Car Industry?” and determined the fact that an increased cost of the labour force, with elements of rigidity in terms of employment circumstances, was partially a cause of the industry failure. However, they seconded that other aspects like decisions made at the strategic apex of the industry could also be blamed. Expensive nations that maintained their automotive manufacture in the last years witnessed a significant change in the employment situations of employees. Conley (2017) noted that Canada’s Great Lakes region thrived in car manufacturing partly as the unions advocated for flexible workplaces regarding privileges and rights, wage rates, and pensions. It is significant to recognise that Australian car production has always been placed at the edge of worldwide manufacturing, with local factories not intensely entrenched in the locality. Stanford (2017, p.58) investigated employment in specialised, technological, and manufacturing professions in Australia. He found out that the collapse of car production was expected to have a substantial effect on the financing of research and development and job opportunities nationwide. Part of the activities will persist – with Ford Australia dedicating to continue research and development in (R&D) Victoria. Nonetheless, R&D processes in the Australian region have not been extensively explored to positively influence the course of car production. Such is contrary to what is happening in the Great Lakes region in Canada, where much effort has been dedicated to research and innovation. High innovation and engineering expertise in the Great Lakes region have determined the sector’s continued existence (DePercy 2021, p.15). In this region, multinational organisations were compelled to exploit the skills in the region and overcome the challenging 6

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economic situations by its competent experts and skills base, not forgetting accessing the United States market. Negative Impact of Collapse of Car Manufacturing on the Economy The entire collapse of the vehicle industry would deprive the world of between 2.5 and 3 million opportunities of jobs, and thus required governmental support and other shifts could have been advocated for. Significantly, the United Automobile Workers “was a productive collaborator in the United States’ auto industry’s revival.” It shifted from a state of majorly threatening to limit labour to one that centrally creates work opportunities (Kalogiannidis 2020). It included allowing not just one product to be created in a single product line, but also permitting the reduction of wages for those that just joined the factories as workers (at about 60 percent of average wage rate) and actions to limit the cost to the employer of healthcare advantages and other cost benefits to the workers. The move by Ford and Toyota to shut down their Australian manufacturing activities led to a noticeable reduction in profit margins, which all began in the mid-2000s (Beer et al. 2019, p.384). Moreover, a rise in the percentage of the local consumers that were more inclined to imports, which rose from 31 percent of all motor vehicles sold in 1992 to 81 percent one decade later (Rix 2019 p.49). It heightened the challenge of the Australian automotive industry to maintain their plants (Newman, Kenworthy, & Laube 2019, p.329). As a large portion of their domestic market declined, local producers were more dependent on fleet sales, which was also a huddle as the government of Australia had shifted a crucial fleet motors’ deal with Holden to BMW at the end of 2013. 7

External Environmental Factors that Led to the Collapse of Car Manufacturing Political factors influenced the Australian car industry, including the regulatory practices, predisposal to terrorist attacks, democratic aspects, transitional government, and variations in policies, government regulations, and others. The regulatory practices were determined by the worldwide norms and regulations, which could either help the country perform the automotive businesses efficiently or complicate matters (Kalogiannidis 2020). In addition, following the terrorist attack of 9/11, automotive corporations in Australia had been operating under the threat of similar attacks (Beer et al. 2019, p.389). Democratic institutions in Australia are also not so strengthened that businesses touching the Australian motor industry could succeed in an open, transparent, and dependable political atmosphere (Lansbury & Bamber 2018, p.207). The Australian nation could reinforce democratic institutions to cultivate greater transparency and limit the corruption rates in the nation. Conceptual Framework 8

The independent variables are the factors internally and externally that directly influenced the production of vehicles and their eventual sale. The cars or vehicles become the dependent variables (Rix 2019, p.50). This can be interpreted that the production of cars was limited by factors such as customers having preferences for imports and other external aspects, which explain the collapse of the car industry in Australia. It is recommended that the company should consider taking relational based views into their account as relational views attempt to establish a more long-term connection between the parties involved. The goal of an exchange connection is to build credibility and devotion between the parties. As in any trading connection, the main purpose is to build faith and devotion. Offering a greater bargain or value- added will attract a number of customers and returning customers will benefit the company. Case Analysis In reaction to Ford’s statement on their shutting down in May 2013, the Commonwealth and Victorian administrations launched the distribution of innovation and investment funds. The funds were distributed as $29.5 for the Geelong Area and $24 million for Melbourne’s North region (Martinus et al. 2018, p.38). The revenue financed 37 business opportunities and generated $305 million more shares. The Ford employees in the “Transition Project” were granted $5.25 million from the Commonwealth so that workers could be granted the chance to take on jobs (Freedman & Blair 2010, p.108). Immediately, Toyota and Holden opted to seize their Australian activities from the end of 2013 to the beginning of 2014. 9

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The protectionist policy era that Australia and many other governments adopted to advance their automotive industry, the time between the start of the 20th century and the 1970s became meaningless over time (Newman, Kenworthy & Laube 2019, p.330). The governments abandoned those protectionist policies. Despite some facts regarding temporary success, the assistance dimensions shared following the protectionist period to motivate domestic production of vehicles to compete and upgrade their technologies and technology eventually did not materialise into a continuous performance enhancement (Martinus et al. 2018, p.38). The prolonged tendency of the protectionist policy approach and the withdrawal of the government’s direction into the automotive organisations' managerial decision-making processes restrained the manufacturers and agencies from performance-related issues, making the industry less competitive. The struggles of being dominated by the higher value and less costly imports from Japan and different nations quickly industrialised, many domestic manufacturers collapsed, and thousands of job opportunities were lost. The Hawke Labour government took over the vehicle manufacturing sector when it was about to dwindle, succeeded by the change from isolationism to the Passenger Motor Vehicle (PMV), which happened in 1984. The PMV strategy endeavoured to reduce the automobile products, raise the efficiency of the remaining products, limit tariff securing and suspend import plans for the automotive sector. The PMV plan was incredibly significant in fulfilling several intentions, such as heightened automotive industry productivity and efficiency, reducing the prices of vehicles, and increased 10

export potential among domestic producers. On the other hand, the consensus-guided strategy of the PMV plan pushed a market-motivated strategy to reform (Newman, Kenworthy & Laube 2019, p.330). It happened by pushing the automotive sector very deliberately to global pressures by quickly lessening charges and initiating a framework of enterprise-founded joint bargaining as the primary technique to guide wages and the working environment. Immediately after the introduction of this government policy, Toyota planted a new branch in Altona that adopted "lean production" approaches and targeted to form a "regional manufacturing centre within Toyota's worldwide manufacturing plant" (Lansbury & Bamber 2018, p.209). The Australian administration also concentrated on challenging the negotiating power of agencies and wanted to limit manufacturing help unless the organisations subscribed to more specific legislative occupation arrangements to their workers. Nonetheless, the policies triggered aggression of the producers and agencies, the government surrendered, and the motorised industry persisted in negotiating salaries and working environment through innovative bargaining, which was another reason for the industry's collapse. Discussion To change production approaches of homegrown manufacturers from outsized automobiles to smaller and cost-efficient ones in terms of petrol consumption, the government's actions initiated dedication from Toyota to come with a hybrid Camry in Australia Ford to adopt another engine line, and General Motors Holden to launch its Cruze small car (Martinus et al. 2018, p.42). Nonetheless, such policies were exposed too late to counter the deteriorating domestic market segment of the Australian producers. Rudd-Gillard supervised the termination of 11

Mitsubishi in 2008, which proclaimed its closure after an extended history of reduced sales realised locally as well as export performances, even amidst financial contributions of the Australian governments and Mitsubishi in Japan (Newman, Kenworthy & Laube 2019, p.328). Despite heightened government help, tariff levels during this era reduced to their minutest stages, which they have never witnessed other times and were essentially very much reduced about what is happening in large automotive industries. During the time of Tony Abbot under the Liberal-National Coalition (afterward, Malcolm Turnbull took over power two years later), the government showed that there would be no more tariff security and entire reliance on donors for the motorised sector. It was amidst the attempts of the Victorian and South Australian regions to sustain vehicle production and the supplier base. The pronouncements by Ford, GM, and Toyota to terminate their manufacturing came after the Abbott government's resistance to dedicate to persistent financial help, which as of 2013/14 was a victim of reduction (Fahey 2019, p.490). Nonetheless, supportive industrial associations were not enough to challenge GM to continue creating a space for GM Holden worldwide. One of GM's managers reiterated that GM's automotive operations "reflects the intended atmosphere of negative impacts associated with the automotive sector such as the persistent strength of Australia's currency, scarce resources" (Newman, Kenworthy & Laube 2019, p.330). Implications for the International Business in Practice Globally, countries, including the US, face strict regulations such as controlling emissions to the environment and safety. Such demands were challenging to an already dwindled industry 12

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experiencing enormous losses following the 1990/91 recession and the demand for the limited market share (Fahey 2019, p.489). Fuel economies have been dealt with differently in countries since 1981 (Beer et al. 2019, p.390). Reduced gasoline pricing in some regions has made customers concentrate on the prices of vehicles, luxury, style, and the ability of a car to perform. The fuel-economy standard is variable but mainly affects the fuel economy (Fahey 2019, p.490). Regardless of what is expected in the fuel economy standards, United States automakers should deal with the issue of the Japanese pushing to have sidelined enhanced fuel economy as a field requiring specific reinforcements (Perl & Burke 2018). The enlargement of Japanese reach into the automobile and truck parts of the market has triggered a battle even with other competitors for the market share. Some companies have recorded losses, for example, the US automakers, because of restricted market share. Recession in the early 1990s influenced car companies in Australia differently, with some experienced losses that reduced their profits based on the shrinking market share (Rix 2019, p.61). The industry's earning potential became reliant on the increased marketing costs beyond the local boundaries, R&D spending, and many others that vary because of the external factors of the business environment. The North American car market is still the most dominant market preferred globally (Martinus et al. 2018, p.45). Consequently, it is the target market for car manufacturers externally that intend to extend and shift manufacturing or production of vehicles. For instance, the moment the European car producers are retreating from North America, Korean manufacturers propose offering cars in the US through a self-instituted dealer environment. 13

Conclusion R&D, the extended legacy of tariff security, external forces, and many other aspects elicited serious inadequacies that at the beginning of the 1980s had already challenged the car industry in Australia, which was at the edge of falling. Efforts by subsequent administrations to revive the sector through a mixture of reduced charges and assistance options provoked short-term enhancements in some examples. Eventually, they did not enhance the long-term potential of the domestic industry, thereby causing its eventual collapse. A likely indicator of the incompetent government policy is that many local plants continually restricted the new entrants, with a single plant built in 1984. Another sign is the rise in the ratio of the locally consumed products dominated by imports and the reduction of the homegrown market in Ford, GM, and Toyota, about twenty years before the companies announced the closures. Nonetheless, currency variations are another element leading to reducing the industry that we could also want to re-examine. 14

Reference Lists Beer, A 2018, ‘The closure of the Australian car manufacturing industry: redundancy, policy and community impacts’, Australian geographer , vol. 49, no. 3, pp. 419-438. Beer, A, Weller, S, Barnes, T, Onur, I, Ratcliffe, J, Bailey, D & Sotarauta, M 2019, ‘The urban and regional impacts of plant closures: new methods and perspectives’, Regional Studies, Regional Science , vol. 6, no. 1, pp. 380-394. Conley, T 2017, ‘From protectionism to economic liberalism: the managed decline of the Australian automotive industry’ Big P Political Economy . De Percy, M 2021, ‘Models of government–business relations: industry policy preferences versus pragmatism. In: Podger, A., de Percy, M. and Vincent, S., eds’, Politics, policy and public administration in theory and practice: essays in honour of professor John Wanna , Canberra: ANU E Press, pp. 1-18. Fahey, J 2019, ‘The cultivation of an Australian identity: new insights into public relations at General Motors-Holden in the Interwar Era’, Australian Historical Studies , vol. 50 , pp. 483-502. Freedman, C & Blair, A 2010, ‘Seeds of destruction: the decline and fall of the US car industry’, The Economic and Labour Relations Review , vol. 21, no. 1, pp. 105-126. Kalogiannidis, S 2020, ‘Impact of plant closures on urban and regional communities: a case study of South Australian gas industry and its workers’, International Journal of Economics and Business Administration, no. 8, no. 4, pp. 994-1010. Lansbury, RD & Bamber, GJ 2018, ‘Australia: restructuring for survival. In: Kochan, T. A., Lansbury, R. D. and MacDuffie, J. P., eds’, After lean production: evolving employment practices in the world auto industry , Ithaca: Cornell University Press, pp. 205-228. 15

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Martinus, K, Sigler, TJ, O’Neill, P & Tonts, M 2018, ‘‘Global restructuring’ two decades on: Australia’s relational economy in the twenty-first century’, Australian Geographer, vol. 49, no. 3. Newman, P, Kenworthy, J & Laube, F, 2019, ‘The global city and sustainability—perspectives from Australian cities and a survey of 37 global cities. In: Brotchie, J., Newton, P., Hall, P., and Dickey, J., eds’, East West perspectives on 21st century urban development: sustainable Eastern and Western cities in the new millennium , Philadelphia: Routledge, pp. 327-354. Perl, A & Burke, MI 2018, ‘Does institutional entrenchment shape instrument adjustment?: Assessing instrument constituency influences on American and Australian motor fuel taxation’, Policy and Society , vol. 37, no. 1, pp. 90-107. Rix, A 2019, ‘Japan and Oceania: strained Pacific cooperation. In: Ozaki, R. S. and Arnold, W., eds’, Japan’s foreign relations: a global search for economic security, Philadelphia: Routledge, pp. 47-63. Stanford, J 2017, ‘Automotive surrender: the demise of industrial policy in the Australian vehicle industry’, The Economic and Labour Relations Review , vol. 28, no. 2, pp. 197-217. Stanford, J 2017, ‘When an auto industry disappears: Australia's experience and lessons for Canada’, Canadian Public Policy , vol. 43, no . 1, pp. S57-S74. Yates, C, Sweeney, BA & Mordue, GD 2017, ‘Introduction: public policy and Canada's automotive industry’, Canadian Public Policy, vol. 43, no, S1. 16

Sustainable-Final-Assignment-4

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