Car Manufacturing Industry - Term Paper Example

Car Manufacturing Industry Name: Institution: Car Manufacturing Industry Introduction Car manufacturing is one of the vast industries influenced by the rise of technology amidst the need to manage environmental sustainability. The participants in the industry manage to thrive following the rise in demand for cars as a means of navigation on both the domestic and international markets. However, recent events in the developing countries which host most of the manufacturing industries threaten the existence of the firms. In particular, Beer [1] cites the closing down of major car manufacturers such as Mitsubishi, Holden, Toyota, and Ford in Australia one of the developed countries. The closure of the plants resulted in massive unemployment and loss of transferable skills in the population. Moreover, the frequent closure of the plant led to the loss of a significant source of economy. This essay discusses the reasons for the collapse of the car manufacturing industries in Australia including government policies, labour regulations, unions, and external features of the market. In particular, the essay points to the government through its policies as the primary factor that led to the fall of the firms. Government Policies Governments through governance influence the availability of development programs in their regions of authority. According to Beer [1], the structure of the government dictates the decision-making process towards the success of the particular development program. The form of governance in Australia falls in a hierarchical model composed of the federal, state and local functions. In the federal spheres of government, governance follows a horizontal form of relationship between the various institutions and agents [1]. The imperative is the role of governance in developing a positive or negative form of interaction among the stakeholders of a firm. In particular, Beer [1] includes that the rise of governance in a region introduces a parallel increase in competition following the alteration of the company’s operation structures. Focusing on the case of Australia, the government follows a neoliberal form of governance where the perception of problems only takes into account its nature [1]. The adversity of such governance is the absence of an ideological input in managing a long-term and effective solution to the problem. An example of the central role of governance in generating positive changes in an urban environment is the case of Sydney, where the urban government strategically prioritise economic development in the form of investment from the Australian and the New South Wales governments [1]. Manufacturing of cars includes the combination of the process in the fields of knowledge-policy-advocacy. Based on Gibson et al [2] the integration of the three fields realises economic empowerment following the input by experts on the actions and ideas. The participants or the experts include the technocrats, investors, and government agencies who manage to avail opportunities in markets such as the automotive industries. Focusing on government agencies and policies that identify with the success of the industries, Gibson et al [2] present the case of the recession in Australia. Following the events of the recession, the government introduced measures to deregulate the economy such as privatising enterprises such as the insurance agencies and the banks, lifting barriers on foreign traders, initiated a restructuring of the manufacturing companies, and reduced the tariff by floating the national currency. However, much as the initiatives aimed at managing the economic downturn at the time; the policies by the government placed the manufacturers at a competitive position from other producers. Moreover, Gibson et al. [2] mention of the reduced tariff as invoking a fluctuating economy straining the operations of the manufacturing industries. In particular, the car manufacturers were unable to adjust to these instabilities in the market economy and financial systems influencing the closure of the business in most parts of Australia. Government policies have influenced the decline in profit performance of the firms leading to the collapse of big names such as Ford, Toyota and Holden. According to Clibborn, Lansbury, and Wright [3], a change in profit margin for the local companies followed the lifting of trade barriers and the introduction of free trade policies. In particular, Clibborn et al. [3] include the rise of domestic consumers trading in imported vehicles from 31% to 82% by the mid-2000’s. Tables 1 and figure 1 illustrate the characteristic of the domestic market and profits respectively. Moreover, Bamber [6] includes a decline in sales of locally made vehicles from 63% to 41% between 1993 and 2000. The imperative in these changes is the effects on the producers whose dominance in the local markets faced stiff competition from other international firms. Moreover, Clibborn et al. [3] address the shift in contract on sales of fleet cars from the local company Holden to the BMW a German manufacturer. Agreeing with the view of Gibson et al. [2] on the instability in the financial sector, Clibborn et al. [3] mention of the fluctuating Australian dollar as increasing the cost of vehicle production, thereby losing its competitive advantage over other competitors. Figure 3 illustrates the relationship between the dollar, local and international markets. Figure 2: Motor Vehicle Produced in Australia and the Trade Weighted Exchange rate, 1995- 2012 Labor Regulations and Unions Labour unions in Australia are a powerful source of structuring policies and directing the operation of industries. Based on Wright, Clibborn, and Lansbury [4] the period of economic downturn in Australia saw the upsurge of worker strikes with an aim to undermine the organised labour. Significant in this period is the role of worker unions such as Australia Manufacturing Workers Union (AMWU) providing a consistent bargaining power between the manufacturers and the employees [3]. The presence of these union demanding flexible labour and increase in worker wages significantly contributed to the decline in the car manufacturing industry. According to Clibborn et al. [3], the rise of cost of labour through the active campaigns by the unions generated a parallel increase in the production cost in time where the firms experienced limited support by the government amidst other external factors. Nevertheless, it is important to include the advantages provided by the union towards retaining the operation of these firms in Australia. An example of this effect includes the cooperation of the unions with the employers as a means to secure the employment of the workers and continued production [3]. The union introduced initiatives of the rolling shift in managing both the labour and cost saving of these failing companies. However, Armstrong et al. [5] argue that the presence of the unions and their involvement in establishing flexible labour markets failed to improve the existence of these firms as well as securing the employment of the workers. The labour policies in Australia significantly contributed to the effects of car manufacturing, especially compared to other competitors such as China and the Asians. In regards to Bamber [6], industrial relations in the labour market of Australia have progressively undergone some reforms in light of the financial and economic characteristics. In particular, Bamber [6] focuses on the period of 1980- 1990 where reforms about the aforementioned areas reduced job classification for the production employees. Consequently, with a reduced work classification, there is a parallel reduction in organisation levels and restructuring of the organisation to include more competencies and skills. Therefore, the altering of operation procedures following the introduction of rationalisation strategies altered the norm in these companies straining their production efforts as well relation with employees about the specifics of their job. External Features of the Market Economic downturns occurring around the globe influence the success of firms, especially the manufacturing firms whose operations depend on the characteristics of the external markets. According to Soosay et al. [7], the external markets are characterised by features such as globalisation, technology innovation, competitions, and changes to consumer preferences. Similarly, Armstrong et al. [5] agree that it is the characteristics of the external markets in Australia and other developed countries that influence the economic success about these regions in relation to operational industries in their localities. The imperative about these external forces is the ability of the firms to adapt to these dynamic environments and implement strategies that enhance the alignment of internal resources to the conditions of the external environments [7]. Through technology advancement, the consumer is more attracted to purchase technologically advanced motor vehicles. However, the cost of production in developing countries limits their ability to tap and implement enhanced techniques in the manufacturing process [7]. Based on Soosay et al. [7], competition from the East, especially in China contribute to the much strain in these companies to continue their operation in developed regions, where the cost of production including labour and trade tariffs are relatively higher than in developing countries. It is for these comparisons that car manufacturers in Australia are migrating to China and other Asian nations to tap into domestic market as well as gain a channel to earn profits in an economically challenge era. Focusing on globalisation, Soosay et al. [7] include its role in opening up formerly impenetrable markets to the investors. Moreover, globalisation of these industries fuels more competition shifting the competitive advantage to companies operating in the developing regions. Conclusion The collapse of the car manufacturing industries in Australia is not solely an outcome of the activities of unions. The comprehensive discussion of the essay include factors such as the government policies, labour regulations, and the characteristics of the external markets altogether contribute to the unsuccessful outcome of the businesses in Australia. More importantly is the primary contribution of government policies in regulating the financial, trade, and economic spheres of the region leading to the introduction of unsuitable operating environments. Moreover, the essay points that it is through these policies that competition escalated limiting the dominance of these firms in the domestic markets. Therefore, the future of manufacturing industries in Australia should focus on implementing flexible government policies to prevent their collapse and relocation. References [1] A. Beer, “Learning the lessons of Restructuring: Government and Regional Responses to Employment Loss in the Automotive Sector.” 2007. [2] C.R. Gibson, C. Carr, and A.T. Warren, “Making things: Beyond the binary of manufacturing and creativity.” Routledge, pp. 86- 96, 2015. [3] S. Clibborn, R.D. Lansbury, and C.F. Wright, “Who killed the Australian Automotive Industry: The Employers, Government or Trade Unions?. Economic Papers: A journal of applied economics and policy, vol. 35, no. 1, pp. 2- 15, Feb. 2016. [4] C.F. Wright, S. Clibborn, and R.D. Lansbury, “Becoming an endangered species? The future viability of Australian automotive manufacturing.” International Journal of Automotive Technology and Management, vol. 11, no. 2, pp. 172- 188, Jan. 2011. [5] K. Armstrong, D. Bailey, A. De Ruyter, M. Mahdon, and H. Thomas, “Auto plant closures, policy responses and labor market outcomes: a comparison of MG Rover in the UK and Mitsubishi in Australia.” Policy Studies, vol. 29, no.3, pp. 343- 355. Sep. 2008. [6] G.J. Bamber, “Work systems and employment relations in the Australian automotive manufacturing industry.” Members-only Library. Jun. 2015. [7] C. Soosay, B. Nunes, D.J. Bennett, A. Sohal, J. Jabar, and M. Winroth, “Strategies for sustaining manufacturing competitiveness: comparative case studies in Australia and Sweden.” Journal of Manufacturing Technology Management, vol. 27, no.1, pp. 6- 37, Feb. 2016. Read More