Toyota Follows Ford; Plans to Cut Its Ties With Australia

Raise your hand if you thought the Toyota Camry was made in Japan. While Toyota, named the largest automobile manufacturer in 2012, is headquartered in Japan, many of its cars are made outside the country’s borders.

The Camry, for instance, is largely produced in Australia. But Toyota said Monday it will cut its ties with the land down under, resulting in the loss of about 2,500 jobs, according to The Associated Press.

Two months prior, General Motors said it, too, would stop manufacturing cars in Australia by 2017. Ford announced earlier last year that it would pull out by 2016. Just what does that mean for the continent?

Perhaps not as much as we Americans think.

Australia’s Take

The car industry is just 5 percent of Australia’s economy, says The Australian. Compare that to administrative and waste services in the U.S., also at 5 percent.

In Australia, one of the largest capitalist economies in the world, its service sector makes up 86 percent of its gross domestic product; mining makes up 10 percent. So losing 5 percent seems like a drop in the bucket, right? Right. Australians don’t appear to be sweating yet.

The Australian Financial Review even goes so far as to say Toyota’s exit is good for the economy.

The Industry Minister, Ian Macfarlane, says he will propose an economic restructuring plan by the end of this month. And officials agree it shouldn’t mean recession, not even where the factories are located.

As an example of recovery, Mitsubishi stopped manufacturing in Australia in 2008. Six months after the plant’s close, one-third of the 1,100 workers laid off had found full-time jobs. After three years, only 5.7 percent were still unemployed.

End of an Era With Toyota Australia

Perhaps the most disheartening news isn’t the economic impact as much as Australia’s shift out of manufacturing. The close of the Toyota plant will mark the end of 66 years of carmaking in the continent, according to The Australian.

In 2012, the continent manufactured 178,000 cars, AP says. But beyond automobiles, during the past few years, Australia has seen the decline of its textile, clothing and footwear manufacturing as well. Car companies blame high production costs and increased competition as the reason for their exit.

In the case of Toyota, it’s been churning out cars in Australia the past 50 years, opening when The Beatles were making headlines across the globe. Toyota didn’t open a manufacturing facility in the U.S. until the early 1980s – think Journey and Billy Idol.

Today Toyota has six U.S. assembly plants: Huntsville, Ala.; Georgetown, Ky.; Princeton, Ind.; San Antonio, Texas; Buffalo, W.V.; and Blue Springs, Miss., Wikipedia says. The car company also has a joint venture with Subaru in Indiana, plus more manufacturing plants in Canada, Mexico, Thailand, France and others. Of course, it also has 16 factories in Japan.

The Problem With Rising Costs

In Australia, Toyota wasn’t the only one to cite rising costs as its reason to leave. GM also said the production costs were too expensive, and GM’s exit resulted in the loss of 2,900 jobs.

When Ford made its announcement, it, too, said labor costs in Australia were too high. Ford Australia’s own Chief Executive Bob Graziano said Australia’s costs to manufacture were double that of Europe and nearly four times that of Asia, reports The Wall Street Journal.

Ford Australia cut 1,200 jobs, and ended its more than 90-year run manufacturing cars. At one point, Australia’s auto industry employed more than 1 million people. But workers say morale plummeted at the plants when restructuring started taking place in recent years.