Commentary: The Last Australian Automobile

Photo courtesy of General Motors/Holden

October 20, 2017, will become a date in Australia's infamy.

That will be the day when General Motors' production facility in Elizabeth, South Australia will close for good. It will also mark the end of automobile production in Australia – period.

GM, Ford, Toyota, Leyland, Nissan, Renault, Volkswagen, Mitsubishi, and Chrysler were among the manufacturers that built automobiles from the Lucky Country. The business of automotive production dates back to before the turn of the 20th Century with steam cars being made in Melbourne. GM's Holden, Ford, Chrysler, and Leyland heralded the country's manufacturing heyday as they built powerful cars for a growing nation. Chrysler was bought out by Mitsubishi and continued local production and Toyota rose to the top by the end of the 1980s. Ford's assembly lines closed last year. Toyota shuttered their South Australia line a couple of weeks ago. Mitsubishi has since closed down years ago.

What happened? Why will there be no automotive production in Australia?

This has been an issue dating back decades. High tariffs, the value of the Australian dollar, high wages, and import inequities with Asian countries were to blame. When things got tough, the Australian Parliament could not continue subsidies to sustain the business of building cars in their own backyard.

GM, Ford, and Toyota had no choice but to wrap up production operations. Australian workers could not compete with lower wage nations, such as Thailand, India, and China. String trade agreements with Japan and the Republic of Korea could be leveraged favorably by importing their vehicles into Australia.

Yet, Australia has a small vehicle market – compared to 31 other countries ahead of it in terms of production numbers. Its export opportunities were limited. Even the small number of automobiles exported to the USA by GM only represented a drop in the bucket. American consumers could not justify paying a high price for the Chevrolet SS compared to a Dodge Charger R/T.

While we mourn the loss of automotive production in Australia, we should look back at what it has yielded to the world. We often think of how iconic the Holden HQ was at a time when they ruled Bathurst and other tracks across the country. Ford's Falcon may have begun life as an American-designed and engineered compact car, but it took on a life of its own when placed in the hands of Dearborn's counterparts down under. Chrysler did the same with the Valiant and gave it the Australian treatment by engineering unique versions of the HEMI V8 and the Slant-Six. They even combined the two – a HEMI head Slant-Six!

Their big cars were the cornerstone of the nation. Yet, they also became victims of global economic forces. Australian consumers are more apt to buy SUVs than cars. They chose smaller automobiles over big ones. Just like the USA, pickup trucks sit at the top of the sales chart – led by the Toyota Hilux and Ford Ranger. Toyota still rules the sales charts as a brand, which is followed by Mazda, Hyundai, and Holden. Even Mitsubishi outsold Ford recently.

There are a few explanations here – some already stated in terms of trade, tariffs, global economies, and government policy. You can count on every pickup truck sold in Australia to be built in Thailand. You can also count on most SUVs coming from the same origin, of not India, the Republic of Korea, Japan, China, and other countries in Asia.

In a twist of the plot, the Michigan-built Ford Mustang has been a success in Australia.

Ford's transition away from building Falcons in Australia to selling imported Mustangs is already felt in the gut. What will hurt the most is the fact that Holden will replace the last rear-drive Commodore built in South Australia with an imported front-drive version developed in Europe. It will significantly smaller than the large sedan Australians knew and loved. This has already been a huge slap in the face to the Australian consumer.

A larger slap to the country's economy should be the job losses that have already taken place. Plus the ones that will be lost after October 20. Some say “well, that's just a drop in the bucket” in the Australian economy. A job loss is a job lost. This is not just true for Australia, but true for every nation.

Walking away from automotive manufacturing activities may have saved money for the manufacturer and the government, but it will bite the latter in terms of providing unemployment insurance, lost tax revenue and the ability to attract new manufacturing business to Australia. These were the basic arguments for keeping Ford, GM, and Toyota in the automotive assembly business.

The pride and joy of Australia have been taken away, thanks to their own economy and trade agreements. It will take a leap of faith in terms of favorable economics and trade to bring it back.

All that's left are the memories.

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