Australia’s Car Manufacturing Industry: A Casualty of Globalisation?
October 20 2017 marked a significant day in Australia’s car manufacturing industry. It was the last time the General Motors plant in Holden would roll a car off its assembly line. A red Commodore sedan will be remembered as the final unit that signalled the end of an industry that thrived for 70 years in the southern city of Adelaide.
GM issued a statement that it would maintain a workforce of 1,000 personnel in Holden which would include 350 people involved in design and engineering. Still, the closure of the plant would mean thousands more would lose their jobs and be sent back to the unemployment line.
The red Commodore also ushered the age of car importation in Australia. Moving forward, all cars to be sold in the country will be imported overseas.
The demise of the car manufacturing industry had its writing on the wall as early as 2013 when U.S. car maker Ford announced it would be closing down its plants in Australia.
Seven months later, GM made a similar announcement. Finally in February 2014, Japanese car maker Toyota decided it would shut down operations in Australia.
According to Michael Mol, Australia simply did not present the conditions necessary to support much less sustain its car manufacturing industry:
“It was a toxic combination of problems that just means it makes little economic sense to produce cars in Australia.”
Mol, who is an international business professor and presently heads the department of strategic management and globalisation at the Copenhagen Business School believes Australians were not willing to pay a premium for cars that were made in Australia.
Mol continues that car manufacturing represents a very small local market. The availability of cheaper manufacturing facilities in other parts of Asia no longer made it viable to produce vehicles in Australia.
The demise of Australia’s car manufacturing industry is another example of the destructive effects of globalisation. The existence of comparative cost advantages and economies of scale can have negative repercussions on local industries and consequently employment.
Protectionist trading policies would have tilted the balance in favour of local manufacturers and saved jobs while retaining the viability of industries.
Toward its final days, the GM plant in Holden remained consistent in its commitment to produce only fine quality cars.
Richard Holden, Executive Director of Manufacturing at GM Holden explains:
“In the final years of production, we have been building categorically the best quality cars to ever roll out of this plant, and our last car was our best.”
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