Australia's Auto Industry is Over: Why did this happen and what can we learn?

Great Debates
1

While listening to NPR in the car this morning, I heard the BBC World News report the following:

Preceding Toyota in leaving the Australian market were Ford and General Motors. When the last factories close shop in 2017, Australia will be without domestic automobile manufacture for the first time since the Holden was introduced in 1948 and according to the linked article, 6,500 jobs will be lost between all three companies’ decision and that doesn’t include Mitsubishi whose last domestic car was sold in 2010.

As to why this is happening, the manufacturers themselves are blaming Australia’s economy making it cheaper to build cars in Thailand and America and import them than to build them locally.

However, there is also a political side to the issue:

Although one can easily surmise that Shorten is simply being opportunistic in using this to blast his opponent, there is evidence that he is correct that policy decisions led to this:

I am not Australian and don’t know anything about the situation down there and would welcome Dopers from that part of the world to chime in. To me, this all sounds pretty intense that an entire industry that has been on the continent for over 60 years and was represented by massive car companies with their tentacles spread all across the globe would almost vanish within decisions made only only a few years apart.

Is this as big of a deal as it sounds? Or is 6,000 jobs and the domestic production of automobiles not really that important to Australia’s economic landscape?

Additionally, I can see how activists, politicians and commentators can look at what happened with the auto industry in Australia and conflate it to issues in other countries - specifically America.

On one hand, conservatives can point out how this is what happens when it simply costs too much to make something: the jobs get shipped elsewhere. Although it is odd to me that the Prime Minister who is taking heat for this is from the Liberal Party which apparently in Australian politics is the more conservative party (contrasting the opposition Labor Party), because the Labor party leader is angry that the government is stopping the automotive subsidies.

This seems the opposite here where the more Liberal American politicians would theoretically not be in favor of subsidizing businesses but would sympathize with the workers while conservatives here might speak about “free markets” but will almost always side with business interests. This is also why Republican governors will have no problem making country-wide tours designed to poach businesses from other areas by offering incentives.

It is difficult for me to make direct analogies since I am pretty unfamiliar with Australian governance and also since in America the politicians are all so grouped in the middle that it’s hard to figure out how we would handle such an abrupt withdrawal of an entire industry. And also, I might be ascribing the importance of the auto industry in America (it was so important that the government spent billions to ensure it wouldn’t fail) with the same industry in a country that might not be as reliant upon it.

With this thread I am hoping to learn more about how important this is to Australia, why it happened and what lessons we can learn in America and other countries.

2

What is seen: cutting subsidies leads to unemployment of workers in auto industry
What is unseen: cars are produced more economically elsewhere, lower prices for autos means higher standard of living for Australians in general; lower government spending benefits Australians in general

3

Both Bush and Obama signed auto bail outs. AFAIK the majority of the resistance was from the right.

I remember many years ago the line was that it didn’t matter if manufacturing and tech jobs went away since everyone could join the service sector like salons, fast food, or real estate. Doesn’t seem to get trotted out much post-2008.

4

Hm maybe you quoted me by mistake. It’s all good.

5

I think a major reason is the change in the exchange rate of the Australian dollar vs the U.S. dollar and other international currencies. The Australian dollar has become more valuable because of the massive Australian exports of coal and other natural resources–resulting in locally manufactured products becoming more expensive compared to imports. This would mean the auto industry is not the only industry affected by this.

6

Speculation: Transportation of their finished products might also be a major issue.

Think about it: Who in Asia would buy Australian cars when Japan and Korea have long established brands built in factories in or near their country? Without an export market and a tiny domestic market (Australia’s 2012 population is 21 million, or 3 million people less than the population of Texas) there’s really no way that Australia could afford to sustain an automotive industry.

Also, given Australia’s location away from the markets of Africa, North America and Western Europe the costs of exporting finished vehicles would have to be staggering. Without a sustained market for them (which doesn’t in North America. When is the last time you saw an Australian made car on US roads?) then the industry again falters.

7

I’m by no means an expert on Australian auto production, but from my limited knowledge I know that their auto industry was never as vast as those in the US, the UK, or Japan. There’s obviously some benefit of producing cars locally, but typically they’ve been Australia-only models like the Falcon or Commodore. In the case of Toyota, it was the Aurion, a tarted up Camry (they also built Camrys). Toyota produced about 200,000 cars in Australia last year, a small fraction of the 8.7 million they built worldwide.

I’m pretty sure Toyota wasn’t building engines or transmission in Australia. When you have a limited product range and very few parts suppliers, the benefits of building locally are diminished. On top of all of these parts, Toyota still had to import all of the completed Corollas, RAV4s, Land Cruisers, Highlanders, and everything else that consumers wanted besides Camry and Camry-derivatives.

That was the main problem with the GM and Ford plants – as fuel economy became a larger concern, demand for the V8-powered RWD large sedans waned. Both companies were already importing smaller, more fuel efficient cars and SUVs/CUVs, and it just made more sense to ramp up imports than to retool their factories for new models.

In short, there wasn’t a whole lot of industry worth saving. I guess those 6500 workers might disagree, but it won’t have the same effect as British Leyland shutting down.

8

Malcolm Maiden, who writes about business for the The Sydney Morning Herald, makes the following observations in a column dated tomorrow (which is sneaky of those Aussies!):

9

If you looked really really carefully for it, maybe late last year. Though probably we had a (very slightly) better chance of seeing one between 2004and 2009. They were not resounding successes.

10

Another problem for the carmakers here was the sheer fragmentation of market. We now have 60 (!) carmakers from across the world servicing a domestic market of 23 million. When Holden/GM started in 1948 they had more than half the market for one model alone, so even with only about 7 million people then actual sales numbers per model were quite high. Now no one model sells more than a few thousand, and many down in the hundreds or fewer.

Oh, and I hear we were one of only 13 (IIRC) countries in the world who could design and make a car all the way from scratch to rolling off the production line. I wonder if that number is shrinking or we’re being replaced by others?

11

This may be a stupid question, but if Australia’s auto production is failing, why is Britain’s thriving so? I was just watching the newest episode of Top Gear just awhile ago and they had a whole section on how their automotive industry is just gangbusters…everything from Ford engine plants, Toyota plants, places that make trim and gearboxes for cars like the Bugatti Veyron…everything. They certainly aren’t any closer to the Asian market than Australia…what makes the big difference?

12

They were not resounding successes because GM’s marketing position for Pontiac had evaporated. Pontiac was GM’s “excitement” division, and over the last 20 years thanks to mismanagement they got things like the Aztek, the “Dustbuster” TransSport minivan, and acres of plastic body cladding on nondescript cars that were anything but exciting.

When the first Holden came over in the form of the GTO the styling was nondescript, which is something the GTO historically was not. People couldn’t make heads or tails of it. The G8 was far too late to save a superfluous division of a bankrupt company. They were also far too expensive thanks to the economic conditions previously described.

They were great cars, though. Aside from the styling the GTO got great reviews, and the buff books raved about the G8. GM’s strategy to save the company pre-bankruptcy was to import GM Overseas cars (Saturn and Buick got Opels, Pontiac got Holdens, Chevrolet got Daewoos), re-package them, and hope for the best.

13

My WAG would be they are closer to European and US markets and have a higher (or more concentrated) domestic market. Also, several UK brands are considered premium, so that probably helps.

14

I think that’s the most rational worry. By itself, there isn’t really any problem with a small country with a mediocre history of car manufacture focusing in the stuff its good at and importing cars, rather then trying to keep afloat a non-competitive car industry in the face of several neighbours with lower labour costs and more well regarded car makers.

But modern Australia seems like something of a text-book case for being a victim of the "Dutch Disease. It’ll be kind of interesting to see how the Aussie economy develops if commodities drive out all the countries industrial capacity.

15

No transportation cost is very low. That’s one of the problems the industry here had: there was no barrier to building cars somewhere cheap and getting them to Australia. If Australia had been able to produce otherwise saleable cars effectively, the cost of distributing them around the world would not have been a problem.

16

It’s not the end of the industry. Heck, who and what is going to keep ALL vehicles running in that place? Ozzies will continue to buy cars, albeit imported parts, assembled locally. Just because at one point in history there no is car manufacturer there doesn’t mean there’ll be none in the future.

17

I think with one notable exception the participants in this thread understand that the OP is about car manufacture, not car servicing.

18

By golly you’re right, I never would have noticed that. :rolleyes: My main point is the last sentence, which implies that local car component manufacture is just a segment of the entire auto industry. And while there is clearly a viable alternative (import-assembled or components import) there is certainly a possibility in the future that local manufacturing again be attractive to foreign companies.

19

If its just a matter of the car industry, then I agree its silly to worry.

But I think there’s a decent argument that if Australias reliance on commodity export ends up driving out not just car manufacture but continues to shrink their manufacturing sector as a whole, it’ll be pretty difficult to restart local manufacturing should commodity prices drop or Australia’s natural resources start to run out.

20

Part of the problem is that the ‘flagship’ models of Ford (Falcon) and Holden (Commodore) - both large, V6 or V8 engined, rear-wheel drive family sedans - were exactly the type of car the Australian market was moving away from, with more and more sales being smaller hatch-backs or sedans.

Despite knowing about the trend for years, the big manufacturers stubbornly insisted on producing cars for an increasingly niche market. It was like they were making cars for the Australia that existed 30 years ago when long driving holidays were the norm and air-travel was still relativley expensive.

When I was a kid we would drive from Canberra to Bundaberg (1,500 km each way) every Christmas to see our grandparents for two weeks. These days you fly up for a good holiday once every four or five years and skype the rest of the time.

Add in the fact that the locally made cars I had the misfortune to drive in (for work or a in friends car) were peices of crap. The fit & finish were woeful, they were expensive to maintain and the performance around town was worse than a good Mazda or Hyundai. We purchased a new car three years ago and didn’t even consider anything built here.

While I utterly despise the current government I do think it’s about time we stopped throwing money at an industry that has been dying out for years.