Toyota Yanks Australian Ops Amid a Harsh Business Environment

2014 Toyota Highlander Side

It seems that Australia’s economic conditions are proving increasingly difficult for businesses to thrive in, as Ford (NYSE:F), General Motors (NYSE:GM), and now Toyota (NYSE:TM) are ceasing their production operations in the country due to a convergence of high manufacturing costs, an elevated Australian dollar, and low economies of scale, Bloomberg is reporting. Ford and GM cited similar reasons last year when they made identical announcements.

Toyota reportedly has about 2,500 employees in the region, and has been manufacturing cars there since 1963. Trade tariffs have fallen, and combined with the small scale of local plants and an Australian dollar that rose nearly 50 percent against the U.S. dollar between 2009 to 2012, consumers favor cheaper imported vehicles, Bloomberg says.

Ford will exit Australia by October of 2016, and GM’s Holden division will be vacating the following year. “Once Ford and Holden went, it was always going to be hard for the last one to survive,” Stephen Walters, JPMorgan Chase’s chief economist in Australia told Bloomberg. “There will be spillover effects in terms of employment lost in the car industry itself and related industries.”

Toyota is Australia’s largest exporter of vehicles — of the 101,424 cars that it made in the country in 2012, 73 were shipped out of the nation, Bloomberg said. The site added that Toyota’s exit will eave Australia with no consumer carmaker for the first time in peacetime since at least 1925. That’s when Ford opened up a plant in Geelong to produce Model Ts.

“We did everything that we could to transform our business, but the reality is that there are too many factors beyond our control that make it unviable to build cars in Australia,” Toyota Australia President Max Yasuda said in the company’s announcement. “Our manufacturing operations have continued to be loss-making despite our best efforts.”

Toyota was in the process of amending its contract with its plant workers as a part of its plans to lower the cost of producing cars by about 3,800 Australian dollars per vehicle, and had reportedly appealed a decision in December by Australia’s Federal Court that blocked a vote among its workforce on the proposed alterations, Bloomberg said.

Toyota will exit its manufacturing operations by 2017.

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