Impact of Holden's Closure on Australian Automobile Industry

The closure of Holden's manufacturing unit in Australia has adversely affected the automobile industry. The article discusses the five forces model and competitive analysis of the industry. It also provides a situational impact analysis of the closure on political, economic, social, and technological aspects.

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Background to the Study:
The closure of Holden Plant at Elizabeth on 20th October 2017 clearly means the closure of the
factory and also the car manufacturing in Australia for the foreseeable future. It is considered as
turning point of Australian history and also emotional aspects for the workers who lost their job.
Holden is a constant brand, but from now cars will be imported. Holden initiated as the Adelaide
Saddler and converted to car body building during the World War I (Ladd, 2017).
On constant basis, Holden manufactured the motor vehicles in Australia as the subsidiary of
General motors, and also indulged in the export of vehicles and engines to other countries.
Headquarters of the organization are still established in Port Melbourne, which is accompanied
with the engine manufacturing plant on-site and vehicle manufacturing operations in the northern
Adelaide suburb of Elizabeth (ABC, 2014).
From the year 2017, GM Holden close down the manufacturing of cars and this result in 2900
employees out of work in its automobile industry and almost 45000 workers in immediate
danger.
It must be noted that, closure of Holden is actually followed by the closure of Ford, and this
closure of Ford also effect the decision of Holden. The decisions in terms of close down the car
manufacturing in Australia clearly reflect the negative issues faced by the automotive industry in
Australia. These negative issues include the sustained strength of Australian dollar, high cost of
production, small segment of domestic market, and highly competitive and uneven automotive
industry. However, there is no such case that Holden is Leaving Australia and ceased its
dealerships. Holden adopts the strategy of Ford, the local general arms will close down their
manufacturing operations but continued as the importer of cars (Scott, 2013).
Announcement made by Holden gives utter shock to the government of Australia, because it
affects other automobile organizations also. Toyota responds to this announcement of closure by
the Holden and stated that this decision of Holden will directly affect the manufacturing industry
in adverse manner. Toyota further stated that decision of Holden impose unparalleled pressure
on the local supplier network and the ability to manufacture cars in Australia. It becomes
necessary for the other organizations in automobile industry to work with their suppliers, key
stakeholders, and the government to determine the future actions and also whether it is possible
for Toyota to continue their operations as the sole vehicle manufacturer in Australia (Taylor,
2013).
Five Forces Model & Competitive Analysis:
Automobile industry of Australia face number of issues from last few years and its situations
gotten worsened after the extinction of well-known brands. Non-intervention of government
during the time of crises made it difficult for these brands to survive. This section defines the
five forces analysis of the automobile industry of Australia and also conducts its competitive
analysis:

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Threats to new entrants- Large amount of investment is required in the automobile industry
and because of this it is difficult for the new entrants to enter in this industry. Another issue in
this context is the high competition from the existing brands, and it becomes difficult for the
organizations to grab the market share in such high competition. In terms of discouraging the
foreign brands, high taxes on imports are applied by the government of Australia.
Bargaining Power of Supplier- It must be noted that bargaining power of suppliers in this
industry is weak and this happen because maximum players are small organizations. The threat
related to forward integration is less from the suppliers, and these suppliers are forced to take
actions as per the instructions of the brands (IBIS, 2018).
Bargaining power of buyers- Bargaining power of buyers in this industry is strong, as large
portion of buyers are those that buy single vehicle. However, few corporations and government
agencies are there which purchased the vehicles in bulk. These buyers are in the position to
bargain for the lower prices, because they hold the power to switch to the new brand. These
buyers hold the position to bargain for the lower prices because no big cost is involved to switch
off the new brand.
Threats of substitutes- There are number of substitutes and alternative modes of transportation
such as planes, buses, trains, etc. However, these substitutes and alternatives do not provide the
accessibility and convenience that provides by the automobiles. Owning the car is considered, as
matter of pride and prestige, and because of this threat of substitutes is weak. Still threat related
to substitute products are present and number of people fined these substitutes easier and
cheaper.
Competitive Rivalry: Number of recognized and influential brand in this industry is low and the
present barriers are very high. Loyalty of customers is high and because of this large extent of
the market, it has matured. All these things enhance the competition or market share. Brands are
competing on different factors such as price, design, quality, technology, customer safety and
several other points. Therefore, it can be said that competition in the auto industry is strong.
Competitive Analysis:
Holden deals with high competition in the automobile industry, and this section determines the
manner in which all these organizations affect each other. In case of Holden, external factors are
considered as key drivers to the strong force of competitive rivalry in the automobile industry of
Australia such as high aggressiveness and strong force on part of firms, high variety of
differentiation of firms, and also the less number of large organizations.
Automobile firms are aggressive in nature while competing with each other’s in terms of
different factors such as innovation and marketing. Holden deals with different types of firms
and all these firms differentiated through cost, electronics, fuel efficiency, style, brand image,
and some other factors also. However, there are number of small auto firms, but still Holden
competes with the large firms, which are of small number.

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On the basis of above facts, it can be said that it is necessary for the organizations operates in
automobile industry to frame required strategies in terms of dealing with the high competition in
this industry (Ashford, 2013).
Situational Impact Analysis:
The closure of Holden manufacturing unit is considered as death of car manufacturing industry
of Australia, and results in divesting effects on different areas of country such as political,
economy, society, and technology. It is not possible to strives the economy of Australia without
the car manufacturing units, and withdrawal of these units had adverse effect on the economy of
Australia. This section defines all the relevant impact of the closure of Holden on these specified
areas-
Political- During the closure of manufacturing unit, it was demonstrated that in terms of
defending their jobs and wages, workers are breaking their relations with the labour and unions,
and tis trike down the new political paths. Isolation forced by the unions are broke down by the
workers, and this creates the situation of political disruption in the country (Grenfell, 2017).
Economy- Constant increase in the Australian dollar and also the immediate closure of Ford
Victorian operations are the biggest reasons which results in the closure of Holden. This closure
mainly affects the economy of South Australia in adverse manner and shattered number of
things. As per the new evidences, cost related to this closure for South Australia economy is very
high that is almost $1.24 billion and 13200 jobs.
Car manufacturing industry does not operates in isolation, as in 2009-2010 there were almost
73772 full time employees which also includes the employees of component manufacturers
which collectively generate the gross output of almost A$20 billion (Mann, 2013).
Social-These closures will result in the social crises that already exist in the areas of working
class such as Elizabeth (Unemployment rate is 33%). The entire generation of working class
youth in these areas are directed towards poverty and hardships, because there is lack of
prospects related to full time employment. Closures of car manufacturing units are considered as
part of roader onslaught against the working class. This is the reason because of which it is
necessary to drawn the lessons and exposed the responsibility of political parties in this context.
Another impact of society is the low standard of living, which means, standard of living of the
workers are directly impacted by this closure and this effects number of things in the coming
future generations such as their education, health, etc (ABC News, 2013).
Technological- Activities related to research and development are majorly affected by the
closure down of these manufacturing units from the automobile industry of Australia, and it
further impact the innovation techniques used by these organization for upgrading their products.

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These manufacturing units give major business in terms of technology, and this business get
affected in negative manner (Novak, 2017).
References:
ABC News, (2013). Share market drops on Holden's decision to cease manufacturing in
Australia. Available at: https://www.abc.net.au/news/2013-12-11/share-market-drops-on-holden-
decision/5151014. Accessed on 5th December 2018.
ABC News, (2014). Timeline: Holden's history in Australia. Available at:
https://www.abc.net.au/news/2013-12-11/timeline-holden-history/5150240. Accessed on 5th
December 2018.
Ashford, K. (2013). The ripple effect from Holden's closure is set to spread far wider than just
the car maker and its component suppliers. Available at: https://www.sbs.com.au/news/the-
ripple-effect-of-holden-s-closure. Accessed on 5th December 2018.
Grenfell, O. (2017). Political lessons of the Australian car industry closure. Available at:
https://www.wsws.org/en/articles/2017/10/20/cars-o20.html. Accessed on 5th December 2018.
IBIS, (2018). Automotive Industry - Australia Market Research Report. Available at:
https://www.ibisworld.com.au/industry-trends/market-research-reports/thematic-reports/
automotive-industry.html. Accessed on 5th December 2018.
Ladd, M. (2017). Holden closure: Australia's history of car manufacturing comes to an end.
Available at: https://www.abc.net.au/news/2017-10-08/holden-closure-australia-history-car-
manufacturing/9015562. Accessed on 5th December 2018.
Mann, A. (2013). Holden closure could cost South Australian economy $1.24 billion: report.
Available at: https://www.abc.net.au/news/2013-11-05/holden-closure-cost-south-australia/
5071704. Accessed on 5th December 2018.
Novak, L. (2017). Holden to end car manufacturing in Australia and import cars. Available at:
https://www.news.com.au/holden-to-end-car-manufacturing-in-australia-and-import-cars/news-
story/35a9521c87efb63e2185fc693e9ab789. Accessed on 5th December 2018.
Scott, P. (2013). Holden's demise started with the Hawke government. Available at:
https://www.smh.com.au/opinion/holdens-demise-started-with-the-hawke-government-
20131212-2za8a.html. Accessed on 5th December 2018.
Taylor, L. (2013). Holden confirms it will leave Australia in 2017. Available at:
https://www.theguardian.com/business/2013/dec/11/holden-confirms-leaving-australia-cars.
Accessed on 5th December 2018.

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