Toyota had stated in February 2014 that it will end its production operations in Australia due to mounting losses. Though Toyota’s losses in May was at an all time high of $437 million losses for other firms was higher with Holden announcing loss of $552 million and Ford declaring $267 million. Though Toyota had announced closure of operations in February it is yet to close down all operations in Australia. Toyota’s local president for the region has stated that though it had tried to reduce costs and secured investment to start production of latest Camry the mounting losses are too much to continue operations. External factors related to government policies have made it unsustainable for carmakers like Toyota, Holden and Ford to continue building either cars or engines in Australia therefore all are keen to move operations out of the country.
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These losses have created a significant impact on its long term results and their focus is to now support existing employees when Toyota transits from being a sales firm to a distribution organization. Toyota had to bear very high reconstruction costs during past financial year which amounting to $889 million comprising of $ 505 million in asset write downs followed by $384 million for employee redundancy payments. If these would not have existed than Toyota would have managed to make nearly $266 million in profits during early part of 2014. These costs have reduced Toyota’s profits in Australia for financial year 2012-13 and it posted only $144 million though its global profits were at an all time high of $ 19 billion.
Despite these losses Toyota is confident that its brand power will help sustain sales until it finally closes down all operations and moves out of Australia. Presently Corolla is its top selling imported model which is doing good business along with Camry and Hilux. Local production at Toyota’s unit in Australia is being used within local markets and also exported to Middle East, New Zealand and islands in South Pacific. Its overall exports stand at 67000 units and it employs around 3700 people across Australia who will be retrenched phase wise until the firm shuts down operations in 2017. Though Toyota will be shutting down manufacturing operations in Australia it will continue selling cars which will be wholly imported as a CBU unit.
Toyota’s decision to curtail production in Australia has been based on accumulating losses over the years due to high cost of production followed due to rising salaries and price of inputs. High rate of Australian dollar has also affected exports as its products can now be sold to nations with higher currency value. Free Trade Agreements have also contributed to reduction in profits for multi-national firms like Toyota and Ford as now they have to work in fragmented economic conditions. Once Toyota’s manufacturing unit at Australian comes to a halt in 2017 it will put an end to the nation’s automobile industry leading to loss of jobs within the unit and with retailers working with Toyota. During previous financial year Toyota lost $3000 on production costs which forced it to take a hard decision of closing down manufacturing operations in Australia.
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