News National How a lack of political will forced Toyota’s hand

How a lack of political will forced Toyota’s hand

Twitter Facebook Reddit Pinterest Email

· Toyota calls it ‘curtains’ for manufacturing
· Vic premier seeks money for Toyota workers

The beginning of the end for the Australian car industry came a few years ago, when the then Opposition leader Tony Abbott revealed that he would cut $500 million in taxpayer funding if he won office.

Like everyone else, the car industry could read the opinion polls and expected the Coalition to defeat Labor at last year’s federal election.

They tried to engage with the Coalition’s manufacturing spokeswoman, Sophie Mirabella, but got nowhere and reportedly got lectured for their pains.

Their hopes lifted slightly when Mirabella lost her seat and the new Industry Minister was Ian Macfarlane, who had experience in the portfolio during the Howard government.

But the odds of Toyota surviving shrank when GM Holden announced in December that it would cease manufacturing by 2017.

To survive, car makers need to have a kind of ecosystem of suppliers.

And these suppliers need critical mass to survive, particularly after being squeezed by falling volumes of Australian-made cars and the strong $A making exports more expensive and imports cheaper.

It’s true that Australia has higher labour costs than its competitors. And the management of the three local car makers – Toyota, Holden and Ford – failed to bargain hard enough over at least a decade.

But the crucial problem was volume, the lifeblood of manufacturing.

Critics of the industry overlooked that the days of high tariffs were long gone and that Australia has arguably the most competitive new car market in the world, with more brands on sale in in either China or the US.

Australian-made cars now account for just over 10 per cent of the annual new car market of 1 million vehicles.

This was partly due to consumers switching from large sedans like the Holden Commodore to the Ford Falcon to smaller, more fuel efficient cars. And drivers fell in love with sports utility vehicles large and small.

In December, the decision of Holden to pull the pin on manufacturing also had a knock on effect with Toyota and the component supply chain.

Tony Abbott telephoned Toyota chief Max Yasuda after the Holden decision, but the call is said to have been brief.

Treasurer Joe Hockey emerged as a strongman within Cabinet and ran a hardline on assistance to the car makers and the fruit processor, SPC Ardmona.

Toyota management were unable to seek worker approval for a package of measures which cut costs and boost productivity, after a small group of workers and shops steward won an injunction in the Federal court.

The Abbott government made much of the injunction, using it to further criticise unions for standing in the way of much needed economic change.

The Productivity Commission – which is no fan of industry assistance or of trade unions – warned a week ago that the $500 million cut could spell the end of local car production.

The Commission’s interim report said that the $500 million cut to the main funding stream, the Automotive Transformation Scheme, would mostly be felt in the 2015-2017 with the biggest hit coming in 2015.

“Any significant or uneven reduction of subsidy funding in the next few years … could elevate risks of earlier closures by Ford and Holden and increase adjustment costs throughout the supply chain, especially where firms close at short notice,” it said.

“It might also negatively affect investment decisions by Toyota and its component suppliers.”

While about 40 per cent car manufacturing jobs were lost between 2006-2013, that still left a workforce of around 44,000. The end of manufacturing at Toyota, Holden and Ford will cost about 5600 direct jobs, mostly in Victoria and South Australia.

However, past modelling shows that the component supply chain stretches into NSW and even Queensland and that some 30,000 indirect jobs are now at risk.

While the Coalition and dry economists have long argued against industry assistance, car-making has been a crucial part of the Australian economy diversifying from riding on the sheep’s back and the back of a mining dump truck.

A rare Federal Coalition voice in support of industry assistance, Ian Macfarlane said the Toyota announcement was an “extraordinarily significant day for Australian industry, Australian industry will never be the same”.

“I always felt that if we were given the time we could put in place a plan to ensure that Toyota did continue.

“Its situation was entirely different to that of Holden and Ford – Toyota was exporting more than half its production.”

In the end, Toyota ran out of time. But the Abbott government ran out of political will well before that.

View Comments