Toyota quits: A close look at one Victorian parts-maker

TOYOTA’S local parts suppliers will either shut down, scale back or diversify to survive beyond the Japanese car-maker's decision to close its Australian manufacturing operations by 2017.

Just one of a number of these parts-makers evaluating its future is Ballarat-based small metal component manufacturer OzPress, which counts Toyota as its biggest client and is now looking at a major diversification strategy to ensure its survival.

OzPress director Mark Dwyer told GoAuto today that he expected the family business to press on, despite Toyota's closure, but it would require a shift in focus away from the automotive industry.

“We are confident of OzPress life post-Toyota,” he said. “Will it be as big as today? Obviously not. What will be the size of it and what business it will actually be doing? We are not sure. But we are confident of some survival.”

Like many local manufacturing businesses, OzPress has felt the impact of companies sourcing parts from China and other cheaper countries, with the company losing a contract to supply parts for Victa lawn-mowers to a Chinese maker about two years ago.

Mr Dwyer said it made sense for large companies to source parts from countries such as China or Thailand as the cost of doing business is far cheaper than Australia, thanks in part to lower wage costs.

“We have got the highest wage rates in the world here. This is the dearest place to make anything. We have got a factory in China doing the mining products as a part of our diversification. My wage costs are one sixth of what they are here.”

While the loss the last local automotive manufacturer cannot be blamed on just one factor, Mr Dwyer said the lack of incentives to do business in Australia has had a massive impact on the industry over many years.

“There is no one thing, it's just, in my opinion a lack of vision federally about how we are going to grow our economy and employ our people. That’s really the bottom line. It's nothing new, its been going for 30 years,” he said.

“Most other countries in the world would give anything to attract an automotive industry. Most countries believe that value-adding in their economies is what's needed to create economic wealth. Our government doesn't believe that.

“Since the 1970s, we have been dismantling any sort of incentives to do things in this country. Now how we are all going to be employed long-term, I don't know. We are just not going to have the value-adding in the economy to create economic wealth. We will end up like a Greece,” he said.

Mr Dwyer said that developing countries experiencing a manufacturing boom, including China, Vietnam and Thailand have long-term strategies to boost their economies and he hit out at successive Australian federal governments for their lack of vision.

“Other countries have developed plans and strategies and have a vision for how their economies will grow, especially developing nations like China. We have got no plans, we’ve got no vision for the future. We have just got these rationalistic economic egg heads in treasury that believe in this open free-market selling us down the drain as far as employment goes.”

Some free-trade agreements have also hurt the industry, with Mr Dwyer highlighting the agreement with Thailand.

“When we signed a free-trade agreement with Thailand, we in the component industry thought this was great, we can sell components. Holden started talking about selling Statesmens and various cars into Thailand and as soon as Thailand realised that was an opportunity, they just turned around and whacked an excise of 40 per cent on any component or any vehicle coming from Australia. Where is the free trade?,” he said.

The sheer scale of manufacturing in developing countries makes it even more difficult for Australia to compete globally, with Mr Dwyer highlighting Ford's plant in Chongqing China that can produce up to 350,000 annually and the Rayong, Thailand factory that builds up to 150,000 a year.

In Australia, Toyota produces approximately 100,000 Camrys and Aurions per year at its Altona plant, with about 70,000 of those exported to global markets including the Middle East.

Mr Dwyer said the slide in Toyota's export business was due to rival car-makers pushing into the region and taking sales from the Camry.

“What's hurting us in Australia, more than the domestic scene, is the increased competition in the Gulf states for the market that we sell Camrys into. They have been targetted by the Hyundais and the Hondas of the world to attack that market share which has put real pressure on our ability to sell as many cars as perhaps we could, so there are all these factors impacting on Australia.”

OzPress took a hit in 2012 when Toyota announced it would slow production of its locally built models due to sliding demand, with the company’s profits slipping as a result. Mr Dwyer said current pricing for its parts was not viable and that the company would may have to renegotiate this with the car-maker.

“It took us from being profitable to marginally break-even. Car companies aggressively approach their suppliers for the lowest cost they can get. That's the reality. Now they are slowing again at that slower pace.

“It's not a viable proposition the current pricing. We have to negotiate with them how we can even continue to supply parts to them over the next three years to support them because at the current volume we couldn't.”

Employee numbers at OzPress peaked at 55 staff in the lead-up to the launch of the current-generation Camry in 2011, with the company shipping up to 60,000 pieces a day in that period.

While past economic pressures have previously forced the company to let staff go, but Mr Dwyer says he doesn't expect any immediate impact to the 32 local staff currently employed at the Wendouree factory.

“We have pruned down a little bit here and there as we have improved our efficiencies and the volumes have crept down. There has been some gradual downsizing over that period.

“Everybody is local. We have many highly skilled tool makers and press operators. Very skilled people,” he said.

Despite Toyota's decision to leave Australia and become an import-only operation from 2017, Mr Dwyer said he does not feel any bitterness towards the Japanese giant which has manufactured cars locally since 1963.

“I am thankful for the 40 years of parts supply we have had to them since 1974.

I'm 60. The car industry is all I’ve done.”

OzPress has been manufacturing parts for various industries since the early 1970s and Mr Dwyer has been employed in the automotive sector his whole life, starting on the production line at Ford before moving into the components industry.

The company has endured tough times before the fall of the local automotive manufacturing industry, with the global financial crisis, the 2011 Japanese earthquake and tsunami and the Thai floods all impacting the business.

Despite the doom and gloom in the industry, Mr Dwyer is feeling relatively positive about the future of his company, with a diversification strategy set to change the focus to other areas.

“We are just beginning to produce some mining products although most is happening in China because of cost base. We are building some tools for some mining products here and we just won a small contract with the defence industry so hopefully we can build that.

“We are going to continue to travel globally and seek new opportunities. I am reasonably confident that the OzPress business will survive, but just in a smaller way post-2017.”Parts industry: “It’s a bloody disaster”Toyota quits: Decision was a “close” callToyota quits: Akio Toyoda ‘heartbroken’Toyota quits: Australia to lose car-making in 2017Toyota quits: Decision was a “close” call.Toyota quits: Next-gen Camry was “close”Toyota quits: Devastating day for industry, says unionToyota quits: Axe hangs over tech centreToyota quits: Local industry ‘will never be the same’