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Toyota Australia’s factory shutdown now seems a formality, with the head of General Motors’ international operations declaring it is “impossible” to manufacture cars locally regardless of government assistance levels.
“Since the market is so open, with a lot of Free Trade Agreements coming up, it is fundamentally impossible to produce vehicles in Australia, regardless of what the government is saying,” Stefan Jacoby, formerly the boss of Volvo and a high-ranking Volkswagen executive, told Australian media at the Detroit motor show.
Even if the Federal Government were to raise import tariffs it still does not make sense to build cars in Australia, he said. “If they would make barriers and would truly support their local automotive industry it would lead to an uncompetitive business,” said Mr Jacoby.
Ford has announced its factories will close no later than 2016, Holden says it will follow in 2017 -- but Toyota is now expected to shut the Altona plant in 2018, when the current Camry comes to the end of its production cycle. “We understand also that this decision has an impact on the entire automotive industry in Australia,” said Mr Jacoby. “Local production, even if would be a pure assembly (operation) doesn’t make any sense.
“Our business is driven by scale of economics, of productivity, of an efficient supplier industry … optimised logistics … Australia is just too small in these scales.” A statement from Toyota Australia yesterday said: “Recent factors have put our manufacturing operations under unprecedented pressure. We are now studying all relevant business impacts and a decision will be made on future investments sometime this year.”
Last week, at the announcement that Toyota was the top-selling brand for the 11th year in a row in 2013, the company’s executive director of sales and marketing, Tony Cramb, admitted the situation is dire but insisted “the writing is not on the wall”.
But Mr Cramb said Holden’s decision to end manufacturing in 2017 “puts unprecedented pressure on Toyota and makes it more difficult for us to be the sole manufacturer here in Australia”. Mr Cramb confirmed that a decision about investment in the all-new Camry due in 2018 would come from Japan by “the middle of the year”.
However, News Corp Australia has been told by Toyota insiders that Japan may delay the announcement until later in the year because the relationship has soured between the global headquarters and the Altona factory floor. Meanwhile, Mr Jacoby said “I really reject … to say we demand something from the government” because the decision to close the factories would have happened any way.
“The decision was not made on any (government) incentives or any reduction of incentives”, said Mr Jacoby. He said the Federal Government’s proposed Free Trade Agreements had a bigger impact on the Holden shutdown. “If you just see these rationales, (manufacturing in) Australia doesn’t make sense when you put this in a global context,” said Mr Jacoby.
Mr Jacoby said he pulled the initial trigger on the Holden factory, but the sign-off came from the board. “I proposed the decision and ... the final approval came from the board,” said Mr Jacoby. It now seems that this recommendation may have been made during the GM Board meeting in November. The initial leaks that Holden was shutting its factories came out of the US after that meeting.
But, as it transpired, the board didn’t agree to it until an extra-ordinary Board meeting was held on the afternoon of December 10, the same day as the Productivity Commission, which was the evening of December 9 in Detroit. As Holden boss Mike Devereux left the PC hearings that day he said “no decision has been made”, but neglected to mention he was on his way to a phone conference that would seal the factory’s fate.
“After the Productivity Commission hearing we had all the elements together to make this decision. It was a very serious decision,” said Mr Jacoby. When asked specifically about Federal Treasurer Joe Hockey goading Holden to “come clean” during Question Time, Mr Jacoby said: “We are business driven. We have our own agenda and we are not pushed by anybody from the Australian government to make that decision.
“I initiated this decision, being the leader of these markets, and the decision was driven purely by business rationale.” Mr Jacoby said the formal decision to shut the Holden car assembly line in Elizabeth and the engine plant in Port Melbourne was made at the highest levels of the company, and involved CEO Dan Akerson and members of the board. The German-born former head of Swedish car maker Volvo -- previously a high ranking Volkswagen executive -- said Holden’s future was one of his top priorities after arriving at the company in August 2013.
This reporter is on Twitter: @JoshuaDowling