The Australian Automotive Manufacturing Industry

The Australian automotive manufacturing industry has experienced substantial structural change (“Productivity Commission”, 2014). This has been in response to changing market and competitive conditions overseas and in Australia, and reduced levels of assistance from governments (“Productivity Commission”, 2014). Following similar decisions by Holden and Ford, these factors have led to Toyota’s decision to abandon manufacturing in Australia by 2017. AMWU National Vehicles Secretary Dave Smith said “the decision would cost thousands of jobs, not only at Toyota but all the way down the supply chain” (“Devastating day”, 2014) and represents the “collapse of the automotive industry in Australia” (Novak, 2014). The purpose of this report is to analyse and evaluate this decision by Toyota according to Shareholder and Stakeholder theories of corporate social responsibility and to identify the consequences of this decision along with responsibilities borne by Toyota, the Australian Government and the Australian Manufacturing Workers Union for these consequences.

TOYOTA SHAREHOLDERS

The high dollar and the substantially higher labour costs of automotive manufacturing in Australian compared to other countries such as China and Thailand have led to it not being viable for Toyota to continue to manufacture in Australia. Toyota’s decision to cease manufacturing in Australia will have consequences for numerous groups. However, according to Shareholder theory, as advocated by Milton Friedman, a narrow focus of profit maximisation is taken, in that the responsibility of Toyota is to generate profits for its shareholders (within the constraint of the law). The relentless pressure on vehicle producers worldwide to reduce manufacturing costs (“Pro...

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... in Australia, the automotive component sector will lose 30000 workers (Wallace &Ferguson, 2014). Automotive component manufacturers that are highly geared towards Toyota will be significantly affected if they don’t take immediate action.

The government should increase the Automotive New Markets Initiative’s funding in response to Toyota’s announcement that it would cease manufacturing in Australia by 2017. This program provides “grants of up to $1 million for firms in the automotive supply chain” (“Productivity Commission”, 2014). These grants will encourage component manufacturers to diversify into other industries or into export markets, if they remain reliant on passenger vehicle production in Australia for their business they will be heavily affected by the closures of the assembly and engine manufacturing plants in Australia (“Productivity Commission”, 2014).