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Manufacturing In Australia Is A Deteriorating Industry

2219 words - 9 pages

Manufacturing in Australia is a deteriorating industry, which has seen over 125,000 jobs dry up since the global financial crisis (Biddle 2013). With the decline in demand for Australian made vehicles (Biddle 2013) and a rapidly evolving global economy, car manufacturers have taken to decision to cease the production of vehicles in Australia. With the demise of an entire industry, a large percentage of skilled workers will be out of work forcing unemployment up and a loss of skills no longer required in Australia. The decision has the potential to have drastic effects on the economy, as the flow-on effects will have consequences for other industries, which heavily rely on automotive ...view middle of the document...

Multi national companies often seek to improve their profitability by transferring resources to lower cost locations and improving markets (Auer, Clibborn and Lansbury 2012). With sales plummeting and recent trends shifting from Australian vehicles, it was ideal for manufacturers to seek other locations to produce automobiles or cease production of particular models altogether.

Since the early 2000s the automobile industry has undergone an extensive restructure as the traditional manufacturers North America,and Europe have become over saturated (Auer et al. 2012). With a diminishing market and a drop in demand, large Australian automobile manufacturers are not able to produce economies of scale and maintain sufficient cost reductions through large scale of output. It has been determined that plants manufacturing mass-marketed vehicles need to produce upwards of 200,000 to have any hope of saving on production through economies of scale (Economist 2014). This however is not the case for Australian manufacturers with Toyota, Australia’s largest plant, just able to produce 100,00 vehicles (Economist 2014). Large multi national companies like Ford and GM have a responsibility to all stakeholders. When large corporations are performing below their optimum they are forced to take action to alleviate under performing operations in the best interests of all concerned.

With an industry on the back foot, emerging economies such as Asia and Latin America are developing a strong demand for new vehicles. These emerging economies also offer attractive incentives to relocate, which can improve efficiency and profitability for the automotive manufacturers. Where there is market efficiency, labour market efficiency, financial market stability and technological sophistication, countries are better able to perform (Atul, Dilip, Paroma 2013). Toyota, Ford and GM have all made decisions to leave Australia due to a range of macro environmental problems. The macro environmental forces, which affected the industry included a strengthening Australian dollar, a reduction in tariffs and growing labour costs without an increase in productivity. Without improving output despite government support, it is a strategic decision for multi national companies to leave Australia to remain competitive in a globalizing economy.

In emerging economies such as India and China there has been a vast increase in the percentage of middle class citizens’. This percentage of society have increased purchasing power to spend on material goods, such as vehicles (Agrawal et al. 2012). With a middle class expected to exceed 300 million, there is a demand for four wheeled cars, which make India one of the fastest and most lucrative car markets in the world (Nanda 2009). These quickly developing economies have the potential to yield massive profits, and is therefore why a focus in automobile manufacturing has shifted to these parts of the world (Atul et al. 2013).

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