Pay For A Car Industry Australia Consequences
Ford’s Australia Tuesday announcement of 440 job losses is the culmination almost 40 years worth of failures in automotive industry policy. Ford will reduce 15% of its workforce, and produce 29% less as the industry struggles with the double pressures of the strong Australian dollar and falling large-car sales.
It is not surprising, in some ways, that Ford still operates in Australia. Ford 2000, the strategy that was develop in 1996 at Ford’s global headquarters in Dearborn, envisaged several regional production centres. Australia wasn’t originally one of these.
This changed in 1999 when Jac Nasser (a boy from Broadmeadows) became the CEO of Ford Motor Corp. Nasser was previously the Ford Australia and Ford Europe CEO. Although a cost-conscious leader, Nasser still saw the future of Ford Australia’s automotive manufacturing, even if this would require significant government subsidies and the preservation of protective tariffs.
Tariffs. Protection Subsidies. These are the three key words for the Australian car industry. How did we get to this point? What are the potholes in the road ahead?
The shift away from labour-intensive forms of production in Australian industry has essentially resulted in a phase of de-industrialisation. Deindustrialization was define by Barry Bluestone and Bennett Harrison in 1982 as a widespread, systematic and systematic disinvestment of the nation’s basic productive capability. The way capital in terms of financial resources, real plant and equipment, has been divert from productive investments in basic national industries to unproductive speculation, mergers, acquisitions and foreign investment.
The history of foreign industries in Australia has been shape by one purpose, to avoid the protectionist policies that characterize post-Federation Australia. These policies were abruptly abandon in the 1970s and increase in the 1980s. This coincided with rapid deindustrialization of Australia. It is not a coincidence that there are correlations between the removal of protection and the inability of local industries adapt to and restructure under the highly competitive pressures placed on them by global industries qq online.
The Australian auto industry grew rapidly in the 1950s and 1960s. Foreign subsidiaries Holden Ford, Ford, and Chrysler made large, national investments that were almost solely aim at the Australian market. Exports to New Zealand, Australia and other Commonwealth countries were minimal. Smaller local assemblers include Renault and VW (Heidelberg in Melbourne) as well as British Leyland (Zetland in Sydney).
The majority of political support for protecting the Australian automobile industry has been bipartisan with two notable exceptions. In 1973, Whitlam’s Government announced a 25% reduction in tariffs across the board. Holden announced immediately 5,000 sackings in an attempt to flagrantly political blackmail. Ironically, Bob Hawke, the then-ACTU leader was the one who led the industry-union campaign against federal government cuts. The compromise reached was a 85% local production plan and an agreement that Holden would hire the retrenched.
The Button Plan Australia
In the 1980s, Australia’s auto industry was hit hard by the oil crisis, high import penetration (despite protection) as well as low productivity. Holden closed Pagewood (NSW), Acacia Ridge, (Queensland), and Chrysler sold its equity to Mitsubishi in 1980, including its Tonsley Park (South Australia), plant.
Although the Fraser government increased tariff protect, Philip Lynch, Industry Minister, developed a gradualist approach in 1981 to reducing protection. John Button, Hawke’s new industry minister in 1983, amended these proposals and quickly tracked them down. Button’s reformist approach was corporatist. Button envisaged bureaucratic regulation (establishing Automotive Industry Authority); phased reductions in tariffs (2.5% per year); export credit schemes; minimum model production (40,000 units per model); joint ventures; model-sharing; R&D cost sharing; fewer manufacturing facilities; and fewer domestic producers.
The Button car plan continued to provide subsidies. In the late 1980s, both Falcon and Commodore were funded by the Commonwealth. Ford and Holden then developed new models. Further plant closings were inevitable due to industry rationalization. With Homebush (NSW), closing its doors in 1994, Ford also pulled out of Australian manufacturing in 1992.
Despite these closures Toyota Australia made a significant $AUD500 million investment commitment for 1992. Paul Keating and Bob Johnston negotiated Australia’s first union agreement behind closed doors. Without which Toyota would not have built the plant in Malaysia.
Liberal Party Leadership
John Hewson was elected to the Liberal Party leadership in 1990. This was the moment when the second political disjuncture in car industry policy occurred. Hewson’s Coalition policy in 1990-93 envisaged a zero tariff regime for 2000. Industry leaders were vocally against such proposals.
Hewson’s confrontationist attitude towards the Federated Chamber of Automobile Industries was further damaging to his position. Bob Johnston (Toyota), recalled Hewson walking into an FCAI meeting, and declaring: Make no mistake. When I become prime minister, you’ll get zero tariffs.”
Jac Nasser, Ford’s executive vice president of marketing, shockedly responded: You have to be joking. Are you not interested in a car industry? Hewson responded: If you require tariffs and subsidies in order to survive, then no, I don’t want an automobile industry.
Hewson’s position was a perfect example of the flat earth policy and level playing field approach to industry policies that the Federal Coalition promoted during the 1990-1993 period. FCAI warned about the devastation of the car industry in Hewson’s government. This was an unusual venture into Federal politics by industry leaders and was instrumental in Keating’s narrow victory in 1993.
Hewson believed, incorrectly, that industry leaders were crying out for help and had been hiding behind tariff walls for too long. Two things were wrong with Hewson: First, the protection level had declined significantly since 1973’s Whitlam cuts. The second was that the amount of investment needed to create a car for Australia’s market was not worth the risk associated with a zero-tariff regime. Jac Nasser’s threat that Ford would stop manufacturing in Australia was very real.