COMMENT: Toyota Australia closure inevitable and ironic
Toyota's most recent big spend in Australia was on a new engine plant in Altona replacing the 1978 original, its first outside Japan
Toyota Australia's announcement of the planned end of local manufacturing in 2017 was both inevitiable and ironic.
Inevitable, because once the first domino - Ford - fell, it knocked against GM's Holden and Holden, in turn, knocked against Toyota. How many countries can you think of support one sole automaker without lots of protection in place? A vibrant competitive components supply industry? Exactly.
Ironic, because Australia was one of the first places, if not the first, Toyota made cars outside Japan. It started, as the Japanese inevitably did in the '50s-'70s - with CKD kits for the Tiara sedan shipped from 1963 to an independent local distributor, Australian Motor Industries, a contract assembler that also built various British Leyland vehicles - and even Mercedes cars for a bit.
In fact, Toyota's relationship with Australians went back to 1958 when a separate company - Thiess Toyota - imported some Landcruisers for the Snowy Mountains hydro-electric scheme. The story went that someone from Thiess had seen the vehicles in action overseas and figured they'd be ideal for the rugged Lucky Country and the Toyotas did not take long to knock Land Rover off its perch down there as they proved far more durable and reliable. For years, Toyota commericals were handled separately by Thiess while AMI did the cars.
Having got a foothold and determined there was a future in a market, the Japanese inevitably bought in. So, in 1972, Toyota acquired British Leyland's interest in AMI and announced plans to spend A$27m on an engine and gearbox plant which was built in Altona, Victoria and began output in 1978.
Exports started in 1986 when the first AMI built Toyota Corona wagon headed for New Zealand. The millionth locally made Toyota was produced in 1992.
Eventually, Toyota Australia was established as a wholly owned unit of Toyota Motor and, in 1994, all vehicle manufacturing was moved from the old AMI Port Melbourne site to Altona. The two millionth local Toyota was produced in 2004 and, a year later, the 10 millionth Camry worldwide came off the Altona line. The 500,000th vehicle export was in May 2006, a Camry, for New Zealand. Toyota became the first carmaker to build hybrids locally, adding the Camry in 2009 and, later, began making the engines, too. In October 2010, the 500,000th export Camry to Saudi Arabia was shipped.
As well as complete Camrys for NZ, the Middle East and some other minor Asian markets, Toyota Australia also shipped CKD kits and, last year, started sending engines to Thailand and Malaysia. This followed the opening of a new engine plant at the end of 2012, replacing the one opened in 1978.
Pretty successful right? Wrong. One thing was missing - profit. At the beginning of 2013, we reported Toyota Australia was losing money to the tune of A$700m in three years after receiving $100m of federal and state taxpayer funding but still wanted more to build a third model line. Today we saw a report that estimated the automaker had lost $1.7bn in 10 years and received $1.2bn in taxpayer subsidies. And that export success was costing $2,500 in losses on each of the 70,000 or so units now shipped overseas a year.
The high Australian dollar, high local labour costs, low tariffs (there were once high tariffs and specific, unique local safety and emissions laws to hinder imports and encourage local manufacture or at least local assembly; today there is a free trade agreement with Thailand, a major Asian car producing nation) and a market shift from large sedans have all now led to the decision to axe Toyota manufacturing 'down under'.
The Japanese automaker doesn't close plants lightly. New Zealand assembly ended in 1998 after tariffs were chopped to unsustainable levels (the equipment went to another CKD plant in Pakistan; the building is now used to refurbish used cars imported from Japan), the NUMMI venture with GM was closed in 2010 (the plant is now Tesla's) and now there's Australia.
But Toyota was the last to pull up stumps. Leyland Australia (some of the site became 2000 Olympics housing and there's a flagship Audi dealership on another part) left in 1975, Volkswagen (CKD from 1954, full local manufacture from 1959 to 1968 and then back to CKD) quit in 1976, local CKD assembly of various brands wound down by the early '80s, Chrysler sold out to Mitsubishi in 1981, Nissan, which had bought the old Volkswagen plant which had built some its cars under contract from 1969, gave up in 1992 and Mitsubishi folded camp in 2008. That left stalwarts Ford and GM and, relative to them, 'newcomer' Toyota, all of whom have announced closure in the last year or so.
Consumers won't notice. Toyota has plenty of still-busy plants worldwide and, for example, top selling Corollas will come from Thailand, and the new Kluger from the Highlander plant in Indiana. I suspect future Aussie Camrys will also come from the US. Parent TMC, presumably, will be able to use Altona assembly equipment and that expensive new engine line in other plants but will still take a financial hit from axing such a manufacturing unit.
Inevitable and ironic. And, for the thousands whose jobs are on the line, sad.
It really will be the end of an era in 2017.