By: Kate Tilley
February 25, 2014
MELBOURNE, AUSTRALIA — After 2017, the auto industry will come to a halt in Australia.
Toyota Australia's announcement that it will stop manufacturing in Australia by 2017 is the death knell for all mainstream auto manufacturing in the country, resulting in widespread job losses and potential closures for plastic parts manufacturers.
Toyota's decision follows a similar announcement from General-Motors Holden Ltd. last December — the Australian arm of Detroit-based General Motors Co. — and from Dearborn, Mich.-based Ford Motor Co.'s Australian unit in June.
All three manufacturers are headquartered in Melbourne.
Toyota Australia, a subsidiary of Toyota Motor Corp. in Toyota City, Japan, said the decision is due to "the unfavorable Australian dollar that makes exports unviable; high costs of manufacturing; and low economies of scale for vehicle production and [the domestic] supplier base."
Melbourne-based Federation of Automotive Products Manufacturers (FAPM) CEO Richard Reilly told Plastics News the latest announcement will have an "enormous impact" on the automotive supply chain.
"Companies are trying to diversify out of auto manufacturing but not all of them can. It will be a real shakeout," he said. "All FAPM's members (about 12 of which are plastics companies) will be affected. The auto manufacturing industry in Australia is losing its only three domestic customers. This will result in real changes for businesses in their employment and sustainability."
Reilly said there are 30,000 to 33,000 jobs in the automotive supply chain, but it is too early to tell how many will be lost. He said some but not all workers can be retrained and reemployed.
FAPM is leading a trade mission to Malaysia and Indonesia as part of its effort to help suppliers find new business.
Melbourne-based Plastics and Chemicals Industries Association (PACIA) CEO Samantha Read told Plastics News the vehicle manufacturers' announcements are "very disappointing, with many implications through a range of supply chains and communities.
"Some companies will need to significantly shift, especially those more heavily weighted in auto manufacturing. Several have already diversified their portfolios and have special techniques in other industries. There is enough talent in Australia to be able to innovate, but the question is whether we will have the markets."
Read said the value of Australian auto manufacturing companies was $A2.4 billion ($2.1 billion U.S.) in 2012, down from $A5 billion in 2004.
"That is a significant adjustment in the Australian supply chain, and plastics make up about 20 percent to 25 percent of it."
Whether companies can diversify depends on their individual business models on how much they now rely on auto manufacturing.
"I'm certain companies have the capacity to innovate and look at ways to diversify. It seems a short time frame, but they may be able to see fundamental changes. The announcements came sooner than expected, but there have already been significant changes in the component sector between 2004 and 2012. If the market allows, companies will work out how to get there."