The Impacts of Automotive Plant Closure

A Tale of Two Cities

Andrew Beer, Holli Evans, Andrew Beer, Holli Evans

• Editorial: Routledge
• Año: 2013
• ISBN:
  9781317989219
• Edición: 1
• Categoría: Commerce
• Categoría: Commerce Général

Economic restructuring has been a notable feature of so-called mature industrial economies such as the UK and Australia in the last two decades, with deregulation, privatisation, technological change and globalisation combining to reshape such economies. Some industries have grown, while others have declined. Moreover, while overall employment in the UK and Australia has grown, many newly-created positions require skills not found in the industries shedding labour, or are in casualised and low paid occupations. Many lesser-skilled workers leaving declining industries are therefore at risk of long-term unemployment or leaving the workforce entirely. Both mental and physical health can be affected after redundancy. It is therefore crucial that the measures put in place in many domains of social policy (such as formal health policy, employment assistance, community development, housing assistance and so on) to adequately address the difficulties confronting this group. This volume takes a closer look at the impact of manufacturing - notably automotive - plant closures in the UK (Birmingham) and Australia (Adelaide) in recent years and policy responses to those closures. It attempts to tease out differences in policy response and effectiveness, and attempts to identify areas where policy could be made to work better in terms of adjusting to large scale manufacturing change and resulting job losses. In so doing, it begins, for the first time we believe, to take a comparative approach to understanding the impact of plant closures and policy responses.

This book was published as a special issue of Policy Studies.

INTRODUCTION

A tale of two cities: auto plant closures and policy responses in Birmingham and Adelaide

Andrew Beer and Holli Evans

 

Economic restructuring has been a notable feature of so-called mature industrial economies such as the UK and Australia in the last two decades, with deregulation, privatisation, technological change and globalisation combining to reshape such economies. Some industries have grown, while others have declined. Moreover, while overall employment in the UK and Australia has grown, many newly-created positions require skills not found in the industries shedding labour, or are in casualised and low-paid occupations. Many lesser-skilled workers leaving declining industries are therefore at risk of long-term unemployment or leaving the workforce entirely. The research of our colleagues at Flinders University shows that the mental health of displaced workers plummets relative to their peers in the first 12 to 18 months of redundancy, followed by a recovery to population norms. Physical health, however, is high at the time of retrenchment but declines over time, which suggests that such events have both short-term and long-term impacts on affected individuals. It is therefore crucial that the measures put in place in many domains of social policy (such as formal health policy, employment assistance, community development, housing assistance and so on) adequately address the difficulties confronting this group. This book takes a closer look at the impact of manufacturing — notably automotive — plant closures in the UK (Birmingham) and Australia (Adelaide) in recent years and policy responses to those closures. It attempts to tease out differences in policy response and effectiveness, and attempts to identify areas where policy could be made to work better in terms of adjusting to large-scale manufacturing change and resulting job losses. In so doing, it begins, for the first time we believe, to take a comparative approach to understanding the impact of plant closures and policy responses.

Plant closures remain an important and topical issue in many developed economies, especially as the automotive sector has continued to restructure on a global scale. In the case of Australia, the plant closure discussed in this special issue has been followed by the announcement of the closure of Ford's engine-making plant in Geelong, Victoria; a reduction in the number of shifts worked at General Motors' Elizabeth plant; a commitment by Ford to produce a new four-cylinder car at Broadmeadows on the outskirts of Melbourne; and the announcement of the closure of Mitsubishi's remaining plant in South Australia, Tonsley Park. Such shifts have continued to challenge policymakers at all levels, with the newly-elected Rudd Labour government exhibiting a greater commitment to the maintenance of the automotive industry than its predecessor and discussing new policy instruments, including an offer of AU$500m for Toyota to produce hybrid vehicles in Australia. At a more local level, the Government of South Australia is currently considering potential uses for Mitsubishi's soon-to-be-closed plant at Tonsley Park. It is significant that amongst other inputs, policy-makers will examine the Longbridge experience and outcomes, thereby highlighting the value of comparative analysis and scholarship.

Overview

The book begins with two scene-setting chapters on restructuring in the car industry generally (by Kim and McCann) and the impact of such change on the West Midlands in particular (by Bailey, Kobayashi and MacNeill). These are followed by three chapters looking in detail at the experience of manufacturing decline and adjustment in Birmingham, with chapters by Barber and Hall, Burfitt and Ferrari, and Chapain and Murie. Experience in Adelaide is then examined by Beer and then Verity and Jolley. Finally, two chapters examine the comparative dimension, with Armstrong et al. providing a comparative longitudinal analysis of the impact on workers, and Thomas, Beer and Bailey comparing and contrasting the industrial policy responses in each case, and the capacity of each to deliver long-term benefits to their affected communities.

The first scene-setting chapter, by Kim and McCann, begins by providing a brief introduction to the different inventory and supply-chain management approaches dominant within the industry at different stages of its evolution, before moving on to outline the spatial implications of these different approaches. The chapter then presents a transactions -costs conceptual framework for analysing key features of the auto manufacturing and supply-chain system, using a taxonomy approach. Interestingly, the logic of both a transactions-costs approach and a consideration of knowledge spillovers both point towards the increasing spatial concentration of higher value-added activities. This may have a number of policy implications in terms of the industrial, technology and regional policies required to support and sustain such higher value-added activities. Overall, they suggest that the opposing positive and negative impacts on regional ‘winners’ and ‘losers’ will be more greatly amplified than would previously have been the case. As such, regions benefiting from the immigration of integrated supply-chain networks will tend to maintain their advantageous position in the industry over time. On the downside, regions which lose such supply-chain systems, as seen over the last two decades in many regions in the US, UK and Australia, face a challenging situation, with very limited prospects for redeveloping such systems via policy initiatives.

The second scene-setter, by Bailey, Kobayashi and MacNeill, follows on by outlining the form of the auto cluster in the specific case of the West Midlands, the nature of structural changes unfolding in the industry, and the decline and eventual collapse of MG Rover (MGR), one of the firms that this book examines. Structural changes highlighted include: greater pressure on firms to recover costs when technological change has been intensifying, driving up the costs of new model development; increased international sourcing of modular components; and a shift of final assembly operations towards lower-cost locations. All of these make maintaining mature clusters such as the West Midlands more challenging for firms and policy-makers. The chapter then looks at ‘what went wrong’ at MGR. Given long-run problems at the firm and its inability to recover costs, BMW's sale of the firm in 2000 left MGR virtually dead on its feet, and by 2002/2003 it was clear to many that the firm was running out of time. Whilst recognising that the firm's demise was ultimately a long-term failure of management, the chapter also looks at other contributing factors, including government policy mistakes over the years. The considerable volatility of sterling in recent years hastened the firm's eventual demise.

The broader impact of restructuring in Birmingham is then examined by Barber and Hall. They note that the economic difficulties and wider disadvantage experienced by much of the city's population and many of its neighbourhoods have endured and even deepened since the early 1990s, despite the efforts of numerous area-based regeneration programmes funded by central government. The chapter reflects upon this by asking the question whose urban renaissance? The authors make clear that the dominance of the ‘boosterist’ discourse is significantly tempered by the uneven and enduring socio-economic divides within the city and the partial nature of the city's overall recovery, particularly in terms of providing employment for its residents. In this sense, significant policy challenges remain despite the clear achievements of the past 20 years. The authors conclude by considering new spatial policy approaches that could bind together the dual imperatives of creating new economic opportunities, and addressing aspects of acute need among the local population.

Such spatial and social policy requirements are then highlighted by Burfitt and Ferrari in the specific context of the MG Rover closure at Longbridge. This is explored through a study of the proposals for a science park at the Longbridge site in Birmingham in the UK, following the closure of the MG Rover automotive plant in 2005. The chapter examines the capacity of local workers to take up the anticipated high technology jobs; the likely configuration of an incoming workforce; and the fit between the housing requirements of these new workers and the residential offer of neighbourhoods in the Longbridge area. It concludes that there is likely to be a poor match between the housing and residential characteristics of neighbourhoods most closely associated with the plant closure and the requirements of an incoming high-tech workforce. This in turn raises a policy dilemma. On the one hand there is a necessity to secure economic diversification for the local economy as a whole, whilst on the other is the requirement to address the specific needs of the discrete neighbourhoods most affected by the closure and whose quality of place offer is often furthest from the requirements of the incoming workforce. A number of policy implications are discussed, drawing on the experience of recent housing and regeneration policy.

The third chapter looking at the MG Rover closure, by Chapain and Murie, suggests that the spatial impact of the Rover closure has been much wider than would have been expected 20 or more years ago, owing to the development of longer-distance commuting and the restructuring of the housing market. They conclude that researchers should be cautious about dramatising a highly localised neighbourhood effect of a major factory closure, but that equally they should not swing to the opposite extreme and imply that there is no neighbourhood effect at all. Rather, the evidence points to a wider zone experiencing a ‘relatively concentrated’ impact. In addition, some two years after the closure, even though most Rover workers are officially recorded as having found new jobs, levels of long-term employment are still not back to their initial levels. The authors conclude by suggesting that there are second-wave effects from factory closures not picked up by methodologies that focus on short-term impacts or that are wholly focused on tracking individual redundant workers. Future research concerned with spatial as well as other impacts of factory closure should explore these issues as well as the relationship between the place of residence and the location of the factory that has closed.

The book then turns to look at experiences in the wake of the Mitsubishi plant closure in Adelaide. The chapter by Beer examines the interaction between housing tenure and the propensity of displaced workers from the auto sector to be employed one year to 18 months post-redundancy. It considers the ‘Oswald thesis’ that home ownership contributes to higher rates of unemployment in advanced economies and focuses on the experience of workers retrenched from the Lonsdale and Tonsley Park plants of Mitsubishi Motors Australia Ltd and, unlike some other research, finds general support for the Oswald thesis. The author suggests that a number of factors contribute to a lower rate of re-engagement with the formal labour market by home owners, including the absence of locally-available employment, the high cost of transport to regions where employment is on offer and a strong sense of attachment to their region.

The broader community impact of retrenchment at Mitsubishi is examined by Verity and Jolley. They explore one aspect of this community impact, namely what happens for a work-based community when capitalist production decisions result in redundancies from a South Australian-based manufacturing plant. This work draws on longitudinal data and uses Tonnies' conceptualisation of types of social relations as a reference point. Accounts of retrenched workers suggest Gemeinschaft (community)-type relations in the workplace that had developed and deepened over time. With retrenchment many respondents identified a rupturing of these valued social connections that had, for some, not re-formed beyond common employment. These social changes have been associated with loss and grief. The authors conclude that policy attention to the community impacts of retrenchments is required, given the health-enhancing factors attributed to social connectivity and the evidence that disenfranchised grief is associated with psychosocial health issues.

The final two chapters look specifically at comparative aspects of plant closure and policy responses in Birmingham and Adelaide. Armstrong et al. provide an initial comparative longitudinal analysis of the impact on workers made redundant in each case. Longitudinal surveys of ex-workers from both firms were undertaken over a 12-month period in order to assess the process of labour market adjustment. In the Mitsubishi case, given the skills shortage Adelaide was facing, together with the considerable growth in mining and defence industries, the authors suggest that policy intervention should been redirected to further training or re-skilling opportunities for redundant workers. This opportunity was effectively missed and as a result more workers left the workforce, most notably for retirement, than could have otherwise been the case. In contrast, the MG Rover case is seen as a more successful example of policy intervention, with greater funding assistance available and targeted support available, and with more emphasis on retraining needs to assist adjustment. However, despite the assistance offered and the rhetoric of successful adjustment in both cases, the majority of workers have nevertheless experienced a deterioration in their circumstances. This suggests that a reliance on the flexible labour market is insufficient to promote adjustment, and that more active policy intervention is needed, especially in regard to further up-skilling.

The final chapter, by Thomas, Beer and Bailey, examines the different policy responses to the two plant closures in Australia and England. The authors argue that governments in each case responded in significantly different ways: in England the focus was on competitive advantage through the modernisation of the auto cluster and the diversification of the regional economy into new, high-technology industries. In Australia, the national and state governments introduced policy responses based on the pursuit of comparative advantage, notably an emphasis on the growth of extractive industries. This chapter compares and contrasts the two sets of government responses and examines the capacity of each to deliver long-term benefits to their affected communities.

Background on the plant closures studied

Bailey et al. discuss the history of MG Rover and events surrounding the closure of its plant at Longbridge in Birmingham in this book.

The closure of the Lonsdale plant of Mitsubishi Motors Australia Limited (MMAL) and the voluntary redundancies from the Tonsley Park assembly plant, announced in April 2004, are briefly highlighted here to avoid repetition in later papers. These resulted in the loss of 1200 jobs in the southern region of metropolitan Adelaide. The factory had been in operation since the mid 1960s and had performed a number of roles, including foundry work and component assembly. Tonsley Park remained in operation as an assembly plant, but in February 2008 its closure was also announced by MMAL.

MMAL's operations in Australia had been in doubt for a number of years, with several rounds of bail-outs from state and federal governments. Since further tariff reductions were announced in the late 1990s, MMAL had been threatening closure of its operations. In 2001 Mitsubishi received AU$200m in federal assistance as well as a AU$20m interest free loan from the state government. In 2002 a further AU$85m package of assistance was received from state and federal governments. This was in addition to the funding available through the federal government's AU$4.2bn Automotive Competitiveness and Investment Scheme. Despite claims that this would secure Mitsubishi's future in Australia, with Mitsubishi pledging to employ extra workers, the reality was that between 1999 and 2002 Mitsubishi shed more than 1000 jobs. By 2004 MMAL was suffering falling domestic sales and declining exports. Meanwhile the parent company, Mitsubishi Motors Corporation, which was then 37% owned by Daimler Chrysler, announced a loss of nearly US$900 million in 2003. This forced Mitsubishi to restructure and consolidate its global production, with Daimler Chrysler announcing that it would sell off its stake in the firm; its withdrawal was completed by 2005.

The loss of employment from MMAL in 2004 can be seen as part of the longer-term restructuring of the automobile industry, and manufacturing more generally, in Australia (House of Representatives 2006). Where once car-making plants could be found in all state capitals except Perth, by 2000 motor vehicle production had consolidated into a few locations, with Toyota and Ford assembling vehicles in Melbourne, and Mitsubishi and General Motors Holden building cars in Adelaide. With MMAL's closure, in 2008 that list becomes even shorter.

Acknowledgements

The authors would like to thank Mark Evans for the opportunity to compile this special issue. They are especially grateful to referees who gave freely of their time and who provided much constructive comment on the papers in this volume.

Reference

House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation, 2006. Shifting gears: employments in the automotive components manufacturing industry. Canberra: AGPS.

Supply chains and locational adjustment in the global automotive industry

Ho-Yeon Kim and Philip McCann

Introduction to the global automobile industry

The global automobile and truck industry has been transformed over the last three decades by three major phenomena. The first phenomenon is that of global restructuring amongst the major competitors mediated via a series of mergers, acquisitions and rationalizations. This process of restructuring amongst the US and European automobile industry was primarily in response to the rise of Asian manufacturers. The outcome of this industry restructuring is that the influence of nationally-oriented manufacturing firms has almost entirely waned, while the production of final outputs (Automotive News Europe 2006, 2007, Automotive World 2004, JAMA 2006a,b, PWC 2006a,b) as well as intermediate input supplies (Automotive News Eur...