With the impending closure of the Toyota Australia plant in Altona, Victoria, in October 2017, the company has decided to relocate the plant manager to the Toyota Motor Corporation’s factory in USA. Despite being a sister plant run by the same company, there will be some marked differences between the two work locations.
This report lists and discusses the background issues that the employee will need to understand and assess before the relocation. The issues addressed in this report include:
The above mentioned issues are discussed in detail keeping in mind the current work place and political conditions prevailing in USA.
Australian car manufacturing industry is rolling up its operation in 2017, with all the car manufacturers ceasing operation by the end of this year (Galloway & Zervos 2017). Here, there are various reasons for cessation of the Australian automobile industry, rising wages, rising value of the Australian dollar, relatively smaller size of the Australian market and minimization of import tariffs under the bilateral free trade agreements to name a few (Valadkhani 2016).
After manufacturing cars in Australia for over 50 years, Toyota Australia, a wholly owned subordinate of Toyota Motor Corporation, has decided to shut its operations down. This is in line with the prevailing industry trend in Australia and the increasing cost of Australian production. As a result, the company will downsize from the current 3900 employees to around 1300 (Toyota Australia 2017). Toyota Australia has established a DRIVE program (Dedicated, Ready, Individual, Vocation, Energised) to assist its workers affected by the closure of the plant to obtain the necessary skills and training for future employment opportunities (What’s Next 2017).
Moreover, some employees are being given the opportunity to relocate to the sister Toyota Motor Corporation’s manufacturing plants in other countries. These employees will be assisted with their relocation to foreign countries. This particular report has been prepared for the plant manager at Toyota Australia’s Altona plant who has been reassigned to the Toyota Motor’s plant in USA. The background issues associated with this move has been discussed in detail in the report, which will assist the plant manager in a smooth transition from an Australian work environment to an American one.
The termination of Australian car manufacturing is in sight with all the three major automotive producers, Ford, General Motors Holden (GM Holden) and Toyota having declared that they will terminate their industrial operations in Australia by end of 2017. Declining profit performance and exponential increase in imports made it increasingly hard for these global car companies to justify their Australian operations (Clibborn, Lansbury & Wright 2016). Government’s decision to abandon the protectionist policies combined with the appreciating rate of Australian dollar increased the cost of vehicle production in Australia and in turn eroded the effectiveness of local industrialists in domestic as well as export market.
Riding on its strong demand in the domestic market and exports to the Middle East, Toyota Motors Corporation was observed as the credible corporation to continue with its Australian production, but a prolonged dispute with the Australian Manufacturing Workers Union (AMWU) and declining export led to the eventual announcement of plant closure. In February 2014, the CEO of Toyota Motor Corporation, Akio Toyoda visited Australia to announce the end of production in 2017, after five decades. Appreciating dollar, the increasing production cost, free trade agreements and fragmented automotive market were the causes that lead to the company’s closure (Hopkins 2017).
The company has come up with DRIVE, a framework for a transition program. It was described as a complete program that supports end-to-end career management – and not just outplacement (Riley, P 2017, pers.comm., 3 March). The main focus of the program is making the outgoing employees future proof by assisting them in acquiring new skill sets, or adapt existing ones.
3. Employment Relations
Employment relations involves individual labor contract and collective industrial relations with extensive sub-concepts (Bamber et al. 2016). The International Labour Organization (2017) describes it as the legal link between the employer and its employees and as the crucial point of allusion for deciding the environment and degree of employers' legal rights as well as duties towards their employees. The labour laws and therefore the employment relationships in Australia and the United States of America are quite different. As a plant manager who has been working at the Australian plant, these differences need to be understood thoroughly before commencing work at the American plant.
Employment relations in the United States of America have a distinct three-tier structure, namely economy, sectoral and establishment bargaining. Until the early 21st century, when the Australian federal labour laws were rewritten, selection of Australian workforces in concern to their employment terms and conditions be set by a government organization bestowing obligatory notice negotiation was mainly extraneous (McCallum 2011). However with the globalizing economy, the laws had to be changed to be more in tune with the current times, and with the passing of the Fair Work Act (2009) the workers got the choice to implement their true intentions to involve in cooperative negotiating with their managers, similar to what is prevalent in the United States of America under the U.S. National Labor Relations Act (NLRA).
3.1 Collective Bargaining
Having said that, there are still differences between how the two governing labour laws work, and the role labour union plays. Unlike Australia, where, Australian workers have negotiating power as workforces, whether or not they are characterized by trade union, in America only the union can represent the workers (McCallum 2011), which otherwise is known as collective bargaining. The United Sates Department of Labor (2017) defines collective bargaining as a manufacturing association’s tool in which the union constantly has a shared curiosity from the time when discussions are for the value of numerous workers.
The US system demands that before bargaining commences, a union has to win the exclusive mandate to represent the employees in a given bargaining unit (Business Council of Australia 2010). This makes employment relations at the American plant of Toyota Motors bit trickier compared to the employment relations at the Altona Plant in Australia, as bargaining with a group represented by a union is quite different from bargaining with individual workers.
3.2 Trade Unions.
Sidney and Beatrice Webb (1897) define trade union as an association of wage earners for the determination of maintaining the betterment of the working environment. Years after years the role of trade unions has changed significantly (Wright 2011). Overall, trade unions have five principal functions, namely, service, representation, regulatory, governance and public administration function (Ewing 2004). However in the context of the American automotive industry, trade unions are sometimes blamed for the economic failure of Detroit, the automotive capital of America.
The United States automotive industry however, has got a new life in recent years through innovative management practices, a commitment to quality, and constructive employment relationship (Cuthcer-Gurshenfeld, Brooks & Mulloy 2015). This resurgence would not have been possible without the support of automotive trade unions, which are now more about enabling productive work rather than threatening to withhold labour. In the face of increasing global competition and with the NAFTA in place, the American automotive unions today are more cooperative and flexible in their demands.
3.3 Toyota Production System and Trade Unions
Toyota Production System, the vehicle production system used by Toyota Motors, follows the attitude of ‘the complete elimination of all waste imbuing all aspects of production in pursuit of the most efficient methods’ (Toyota Global 2017). Sometimes, also referred to as the lean manufacturing system. Lean manufacturing system can be described as a synthesis of standardized mass production and flexible craft production, in which the benefits of both are combined (Womack, Jones & Roos 1990)
Toyota Motor Corporation’s American operations are union free, with the company shutting down its last union factory in the U.S. back in 2009 (Bunkley 2009). “Respect and trust between labor and management is a basic code of Toyota’s employee relations, as stated in the Guiding Principles at Toyota” (2017). Toyota motors benefits from employee engagement. It motivates the employees to put in the extra effort when need be, invokes passion for their work and makes them more loyal towards their employer. Toyota Motors American operations see ‘higher employee engagements on an average compared to their counterparts’ (Bhatia 2008, p. 241) and this ensures union free operations.
4. Human Resource Management
As is the case by maximum administration observations, human resource management (HRM) practices are essentially grounded on ethnic principles and replicate the elementary conventions of standards of the host countrywide culture (Myloni, Harzing & Mirza 2004). Though similar in essence, the HRM practices in the United States differ in certain areas from the HRM practices in Australia. The HRM practices used in America are basically the gold standard and are also referred to as strategic human resource management (SHRM).
SHRM was developed in the US keeping in mind the free market economy, in which there was very little legislative control over the labour market (Kramar and Parry 2014). An important and central aspect of SHRM model practiced in America is its intent to improve the company’s performance by subsidizing to the ‘attainment of administrative plan, client and stakeholder results’ (Becker et al. 1997). Plant managers and line managers are expected to work in tandem with the HR personnel, as employees work under their direct supervision and it has been demonstrated that they are essential for executing the HRM policies (Purcell and Hutchinson 2006).
Having said that, Toyota motor’s American plants just like their Australian counterpart, are run according to Toyota’s systematically organized method known as the Toyota Way in Human Resources Department. The objective of the Toyota Way is understanding of administration that respects people and that allows all personnel to revise their cognitive capabilities, be innovative, and exploit their skills for extreme result by ‘providing them with prospects to accomplish social involvement and self-actualization through their work’ (Toyota 2017). The plant manager having worked at Toyota’s Australian plant should be familiar with the Toyota’s HRM model and should continue to employ it at the American plant.
The Toyota Way model is a all-inclusive administration background. Unremitting development and admiration for individuals are its two foremost objectives (Gao & Low 2015). According to Toyota, the base for modest power is to make sure that each and every worker comprehends and receives the Toyota Way, and that it is essential to disburse much exertion concerning this end (Saruta 2006). To implement this Toyota already recognized a broad internal arrangement of training and preparation, which covers every aspect of labor supervision relations and HRM across its global operations and the plant manager should already be aware of it.
Employment associations, and precisely the connection amongst the employee, the union, and the manager, differ intensely from nation to another and have an massive influence on HRM rehearses (Dessler, Chhinzer & Cole 2013). The following are some of the international differences:
4.1 Cultural Factors
Cultural differences in various countries demand corresponding differences in HRM practices. For instance, the Far Eastern cultural norms and the importance there of the patriarchal system affects the way an East Asian worker views his relationship with the employer as well as influences how that person works. Similarly, the work ethics in America might be different from what the manager is used to at the Australian unit. American workplace on an average have less downtime compared to Australia and the number of leaves is also lesser. Furthermore, American work place is more invidualist, compared to the Australian workplace where people tend to look out for each other more. Given that both Australia and America are western democracies gender differences in the work force and work place should be negligible.
4.2 Economic Factors
Depending on the kind of economy a company is functioning in, the HRM practices can vary drastically. For example, in the case of a free market economy, like that of Australia and the USA, the HRM is driven by profitability, cost reduction productivity and efficiency. On the other hand in the case of socialist economies HR practices are dictated by issues such as job security, loss of jobs and its effects on the society. However, as mentioned earlier, with both the Australian and the American economy being free, no such differences should be there in this present case.
5. US Politics and American Automotive Industry
The 2008 global financial crisis forced a reassessment of the manufacturing structure of the American car manufacturing industry. The American industry was found structurally weak and inherently lacking in contrast to German and Japanese accompaniments, and recession wreaked havoc on the American car industry (Nieuwenhuis & Wells 2015). The so-called Detroit Three carmakers, Chrysler, Ford and GM were severely hit, with drastic drop in sales and production which in turn led to a steep decline in employment. Domestic transactions for Ford General Motors and Chrysler dropped from 8.41million in April 2007 to 6.47 million in April 2008 with almost halved in 2009 to 4.63 million. Their joint market share dropped from 52.36 % in 2007 to 48.17% and 44.33% in the following years (Klier and Rubenstein 2013).
Post the crisis impact, the monetary circumstance of two major car manufacturers Chrysler and GM became abysmal, to the point that by November 2008, the companies might not protect the recognition they were in need for to cover their everyday operational costs (Cooney et al. 2009). With approximately 7.25 Million jobs, the automotive industry in the US is one of the biggest private sector employers. US federal government had no other choice, by to step in and bail out the ailing companies and today with the push from the government the industry has bounced back posting its highest ever sales (Auto Alliance 2017).
The US government has always been supportive of the US automotive industry, and this has continued with the new Trump administration, with increased focus on US manufacturing. Trump was elected on the policy plank of bringing the US manufacturing jobs back, and his administration has been working towards it, to achieve this goal. There are significant management’s rules and supervisory improvement, tax restructuring, and trade policies in the offing and these will help return significant manufacturing jobs back to America, as well as create new ones (Hirschfeld 2017).
Under the new administration, The US industrial sector is expected to see moderate growth over the next few years, as President Donald Trump shifts away from the previous administration’s trade policies towards policies oriented at boosting local manufacturing (Frost & Sullivan, 2017). These new policies and frameworks are being formed keeping in mind the decline in US manufacturing employment and establishments as well as loss of manufacturing export market to developing parsimonies like China and India. The Trump administration is on board with the car manufacturers for a lower Corporate Average Fuel Economy (CAFE) standard, which is expected to increase substantially for the automakers selling vehicles in the US by 2025. CAFE is the combined fleet wide fuel economy companies need to accomplish on regular for every cars and HGV fleets, minor and huge, to please officials (U.S. Department of Transportation 2017). With a Republican majority in both the White House and Congress, car manufactures are expected to push back against any such increase in standards which will in turn decrease the pressure on the car manufacturers and boost their production, thereby bringing more jobs in the car manufacturing industry.
Toyota Motor Corporation like the other major manufacturers was also affected by the economic downturn, and in 2008 the company saw its first loss ever in over 70 years of operation (Woodruff 2008). However, Toyota Motors was better placed than its counterparts and was back in the greens in the very next year. As part of its restructuring policy, post the global financial crisis, Toyota Motor Corporation integrating and consolidating all its distant operations in U.S with solitary property in Plano, Texas, with a directed date in the late 2017 (Rechtin 2014). This decision was made in 2014, after the company realized that maintaining three separate hubs in three different corners of the country became cumbersome and counterproductive. Under its relocation plans, Toyota has offered all permanent employees and their partners an all-expenses-paid site appointment to Plano, as well as a good amount for relocation if they confirmed on relocation (Rechtin 2014). All the international transfers will be assigned to the new consolidated Toyota facility in Plano, Texas.
6. Tax Considerations
Deportees are issue to intercontinental assessment laws, and frequently end up paying double taxes, for both the countries. Therefore, equalizing tax policies has to be formulated to safeguard no tax-incentive or hindrance linked with specific intercontinental task (Dowling, Festing & Engle 2008). Generally, work performed overseas can be divided into ﬁve main categories, namely, business visits overseas, short term assignments overseas, long term assignments, commuter assignments and permanent transfer (KPMG 2015). Since in this case, the plant in Australia is being shut permanently, this particular case will be treated as a permanent transfer and the plant manager will not be considered an Australian resident for tax purposes and will therefore only have to pay the taxes in America. In either case Australia has a tax treaty with the USA in place.
7. Relocation and Orientation
Relocation and orientation encompasses pre withdrawal preparation and counseling as well as providing immigration and travel details. An H1B (work visa) will be organized for the employee and his/her family by the company. All the necessary paperwork and documents will be organized by the HR team in America in coordination with the employee. The associated costs will be borne by the company. The HR team will assist with the relocation and provide help with housing, schooling, medical and other relocation services. Any extra compensation or relocation allowance will be finalized before the departure (Durai 2010).
The objective of this report was to inform the plant manager about the underlying differences in the personnel management or human resource administration approaches and differences in employment relations in the Australian and American context. The labour laws and employment relations in both the countries were discussed under the light of the respective governing acts, the Fair Work Act (2009) Australia, and the U.S. National Labor Relations Act (NLRA). The similarities and dissimilarities between the two systems have been highlighted and explained for the smooth transitioning and transfer of the employee from the Toyota Australia plant to the Toyota Motors Corporation’s American plant.
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