AUSTRALIAN AUTOMOTIVE INDUSTRY IN DECLINE1
Veena Keshav Pailwar wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
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Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-06-24
TOYOTA’S EXIT ANNOUNCEMENT: HUE AND CRY
On February 10, 2014, Toyota announced that it would exit from manufacturing in Australia by the end of
2017. This declaration came within nine months of a similar announcement by Ford and Holden, the other
two car manufacturers in the country, and it effectively marked the end of the Australian car
Toyota’s exit was expected to affect not only its workers but also its input suppliers and the economy as a
whole. Indicating the impact of Australian car manufacturers’ exit on local car component suppliers and on
the industry, Richard Reilly, the chief executive of the Federation of Automotive Product Manufacturers,
pointed out that most component suppliers lacked any kind of revenue stream outside the automotive
industry. He stated, “This [withdrawal] will have absolute ramifications throughout the whole sector.”2
Fearing large, local job losses and a significant adverse impact on economic activity, Australian Council of
Trade Unions secretary Dave Oliver said, “The Abbott government goaded Holden into leaving, they’ve
done absolutely nothing to keep Toyota in this country, and as a result, Australia will lose up to 50,000
direct skilled jobs, $21 billion will be wiped out from the economy and regions will go into recession.”3
In spite of the expected large, direct job losses throughout the supply chain and their adverse multiplier
effect on the economy, the government declared a rationale for leaving the automotive industry to its own
fate. Upon hearing of Toyota’s exit plan, in an attempt to justify the government’s stand, Australian Prime
Minister Tony Abbott said, “While some businesses close, other businesses open; while some jobs end,
other jobs start.”4
Further defending the government stand, amidst a sustained opposition attack, Abbott
told Parliament that the government’s job was not to preserve every single business indefinitely. Its
priority was to protect economic fundamentals and ensure that people move to better jobs.5
What went wrong with car manufacturers in Australia? What factors led to their exit announcements?
Why were industry observers expecting the demise of the automotive industry in Australia? Why was
there such a great hue and cry, and was it justified? Should the government have tried to prevent the car
manufacturers’ exit from the country?
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