Killing the Industry Softly - The 1985 Button Car Plan
In the 1970s, the Australian new car market was dominated by the Big Three. Ford, Holden and Chrysler. They weren't the only ones building cars in Australia there was also Leyland, Toyota, Volkswagen, Renault and Nissan. Large tariff walls had forced anyone who wanted to sell large volumes in Australia to build cars locally.
By the middle of the decade, Chrysler was operating at a significant loss despite high sales volumes, and Nissan and Toyota were seeking to step up from minor to major manufacturers.
Chrysler ended up selling to Mitsubishi in 1978. Volkswagen and Leyland and finally Renault had shut up shop.
In the 1980s, five major manufacturers, Holden, Ford, Mitsubishi, Toyota and Nissan were building relatively small volumes of several different models, protected by a 57.5 percent import tariff.
The Australian car industry was building Commodores, Falcons, Coronas, Corollas, Sigmas, Colts, Camiras, Telstars, Lasers, Geminis, Bluebirds and Pulsars in a country of 15 million and exporting very few of them. The economy of scale didn't exist. He wanted to reduce the number of models being produced, and improve quality and export appeal so that manufacturers could more easily turn a profit.
Industry minister Senator John Button believed this was unsustainable. He established the Car Industry Council and began consultation with carmakers in 1983, with the aim of making the industry more efficient. The plan involved reducing the number of Australian made car models from 13 to six, produced by three groups.
He travelled to Japan to assist manufacturers looking to participate in the program. The Japanese manufacturers saw it as an opportunity to expand their market share in Australia and would end up supplying most of the badge engineered models.
Officially known as the Motor Industry Development Plan, it was officially implemented in 1985.
It didn't take long for the number of model in production to be rationalised. The carmakers started model sharing and a variety of badge engineered cars emerged. The first was the 1984 Holden Astra, a rebadged Nissan Pulsar. Holden and Nissan’s partnership gave Nissan access to a larger dealer network, and Holden cheaper supply of small cars. When Holden elected to source small and medium cars from Toyota, and six cylinder Commodore engines from Buick, Nissan were desperate to find a new partner to make up for lost volumes. They found one in Ford.
Ford was producing three model lines at the time, Laser, Telstar and Falcon. To get that down to two, the Telstar, a locally built Mazda 626, was replaced by the Corsair, a badge-engineered Nissan Pintara. At the same time Ford began producing the Laser-based Capri, which was exported to America as a Mercury.
Ford also received the Maverick, a rebadged Patrol. It was the best product to come from the badge engineering era. It made the Patrol available in more remote areas that had Ford but not Nissan dealers. In return the Falcon ute became the Nissan The Ute. A completely pointless exercise. They didn't even bother to change the oval badge mount on the grille.
The worst offender came from Holden and Toyota’s United Australian Automotive industries venture. Under UAAI, the Toyota Corolla and Camry became the Holden Nova and Apollo. The Nova had a Holden engine, buy Apollo was virtually identical to a Camry. Holden had two things to offer in return. The first was a large number of surplus import credits earned from engine exports to Europe and Korea. Under UAAI, Toyota could use them to import Land Cruisers, Hiluxes and Cressidas duty free. The other was the Commodore. From 1988 to 97, it was sold as a Toyota Lexcen. This thinly disguised version of Australia’s equal best selling car (it swapped places with the Ford Falcon throughout the 1990s) fooled no one. The television ads exclaimed that Lexcen families were a little bit different. A very little bit indeed. The name Lexcen was highly appropriate. It was named after yacht designer Ben Lexcen, who was born Robert Clyde Miller, but changed it to avoid confusion when he left his namesake sail business to join Alan Bond's America's Cup campaign.
In 1996, the plan was deemed to be working. The number of manufacturers had been reduced to four with the closure of Nissan, and the number of models had reduced to five. The Falcon, Commodore, Magna, Camry and Corolla. Ford and Mitsubishi were building their most profitable models in Australia and importing everything else, and Holden and Toyota were still sharing.
Then things started to unravel. Customers had seen right through badge engineering. The Corolla and Camry outsold the Nova and Apollo seven to one. By 1996, the badge engineering experiment was largely over. Ford dropped the Corsair and revived the Telstar, Holden replaced the Nova with an Astra imported from Opel in Germany and an Australian Vectra, the opposite of what the plan was supposed to achieve. The last badge engineered Australian car, the Lexcen, was killed off. A VT Commodore-based Lexcen was believed to be in planning, but never made production. Toyota filled the void with the Camry V6 and Vienta, before purchasing the tooling for the 1994 Avalon from the US.
By 2004, the Button Plan was looking like a failure. The industry had been rationalised but not in the way that was intended. We had four large cars (Falcon, Commodore, Magna, Avalon), one mid size (Camry) and one SUV (Territory). There were also large car derivatives: Monaro, Falcon and Commodore utes, Statesman and Fairlane. Manufacturing had been rationalised, but so that the range of choices. A buying public that at the time preferred large sedans and wouldn't go in for badge engineering, as well as higher margins on large cars and an inability to import or export large cars prevented the plan from succeeding. In the late 1990s, Australians were looking for sporty 5 Series/E Class sized sedans on a Ford/Holden budget. Without high tariff protections, Australian manufacturers couldn't justify building smaller cars, and when buyer preferences changed, they found themselves stuck.
The Button Plan had boxed Australian manufacturers in to building cars that nobody else really wanted. It would have been fine if buyer tastes never changed, and to be fair they hadn't changed since the first Holden in 1948. Ford Australia were lucky enough to to notice the shift towards SUVs in 1997 to bankroll Territory development using profits from the E series Falcon.
What Button had forgotten was that the Australian car industry was entirely foreign owned. They were owned by companies who hadn't yet learned how to think globally. The Ford Falcon had been more than a match for the Taurus and Scorpio. Ford could have, if they wanted to, sold the Falcon in America or Europe. Holden did manage to get the Monaro to the US, but only after an internal struggle lead by Bob Lutz to overcome rampant American nationalism. The same nationalism couldn't be overcome at Ford. The Australian government offered to fund the R&D costs for a left hand drive Falcon police car, but Dearborn rejected in favour of the Taurus Police Interceptor to keep American factories going. We essentially opened the door to foreign manufacturers in the hope that other countries would reciprocate.
Australian manufacturers couldn't go the other way either. Building different cars proved to be a very difficult case to make. The Ford Territory and Holden Cruze are the only ones that made production. Ford Australia wanted to build the Focus, Ranger and Everest at Broadmeadows but couldn't,citing the free trade agreement with Thailand. Toyota Australia tried to get an Australian made Kluger (Highlander), but was repeatedly rejected. Australia gets its Klugers from the US, another country Australia has a free trade agreement with. There was no need to build a Focus in Australia when they were already being built elsewhere.
While the Button Plan did technically work in the 1990s, signs that it had stopped working were clear in the early 2000s. Successive federal politicians on both sides failed to deliver a solution. Mitsubishi shut down in 2008, Ford in 2016. The last Holden Commodore will be built in September.