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Ford expected to end local production

Published: July 30, 2012 | 6:56 am
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There is rampant auto industry speculation that Ford will cease making cars in Australia sometime after 2016.
The car components industry is starting to plan for the day when only Holden and Toyota will make cars locally.
Ford has been on life support for years, under pressure from falling tariffs, more competitive imports and an increasingly cautious consumer.
Earlier this month, it said more than 400 jobs would be axed, with local production slashed to just 33,000 cars a year.
Stephen Longley of the insolvency firm PPB Advisory has become one of the first to go public with the unthinkable.
“My outlook is over the next few years we’ll see an exit of Ford from the Australian manufacturing environment,” he forecast.
“Ford will still be here and it will still be selling cars just like Nissan and Mitsubishi and Mazda are selling cars, but I don’t expect there to be a manufacturing base for Ford.” However, he does not expect the other two companies still making cars in Australia to follow suit and leave.
“I think we’ll be left with two manufacturers, being Toyota and Holden, and the reason why I think we’ll be left with those is because those manufacturers are part of the global manufacturing platform,” he said.
“So the cars they make here are cars that can be sold in Australia and elsewhere in the world.” Stephen Longley is managing the wind-up of several companies that supply parts to the automotive industry.
He says the anticipated exit of Ford already has some suppliers thinking about a future with only two local manufacturers.
“There will be, in my view, a reduction in the number of component suppliers in Australia as they need to compete competitively with global suppliers for that business with Toyota and Holden and obviously the flow-on effects from the reduced demand has resulted in an exit of Ford from the industry,” he said.
Ford recently received $34 million from the Federal Government and more cash from Victoria to keep making the Falcon and Territory in Melbourne.
However, while Stephen Longley argues that support has been important, it is now time for Australians to accept that times have changed.
“Whilst people think well we shouldn’t be throwing money at that, if you look around the world our funding into the automotive industry per capita is significantly lower than a lot of the other countries around the world,” he argued.
“So if we want this sort of industry, which has created a lot of innovation throughout the other parts of the manufacturing space, then also some would argue has helped in the resources sector, which we’re now heavily relying on, then there needs to be some level of funding from government sources.” Mr Longley says times have changed, but the cars Ford produces locally have not changed enough to meet modern demand.
“The old Australian dream of a big family holiday and a big six cylinder, V8 driving from one end of the country to the other has completely changed,” he said.
“Ford do have a good range of vehicles, it’s just that the two that they manufacture in Australia aren’t selling as well as we’d like for the production volumes.
“But the other cars that Ford have – the Focus and the rest of the fleet – are really good cars, fuel efficient cars.
“The Territory is a very fuel efficient car, you know.
It’s a diesel engine so for the size of the Territory, it’s very fuel efficient and they’ve also got a very fuel efficient engine coming into the Falcon.
However, the sales are not allowing them to keep people on the manufacturing floor.” ‘Wasting taxpayers’ money’ ANU-based economist Professor Warwick McKibbin says neither the high Australian dollar nor the carbon tax provide the full story behind Ford’s woes, and he is arguing for major structural reform.
“I think the automotive sector in Australia has needed to transform for some time and it is possible to have a vibrant parts industry, or be part of the global production chain, but the way we were doing things up until the last few weeks in fact, I just don’t think is viable,” he said.
Professor McKibbin says there needs to be more transparency and planning in providing industry assistance.
“I think just handing out big dollops of money is not really the answer because in the end the jobs will go.
What’s needed though is a process, run by the Productivity Commission, so anyone seeking assistance, whether it’s temporary or permanent, it’s transparent exactly how that money is being spent and there is a plan,” he added.
Professor McKibbin thinks industry assistance such as the carbon tax compensation has been frequently misdirected.
“I think what we’re seeing is the typical reaction when you’re in a minority government situation – that is that every vote is valuable,” he said.
“We’re seeing piecemeal assistance in industries such as aluminium and steel at the same time as you have a policy under the carbon tax which is designed to scale these industries back.
That inconsistency is really just wasting taxpayers’ money and is damaging a lot of livelihoods of workers in these industries.” Dave Smith of the Australian Manufacturing Workers Union says the Federal Government, and Australians, could help by buying Fords.
He says the speculation about Ford’s future is troubling for workers who stand to lose their jobs.
“It’s tough on our members.
At the moment, you know, there is going to be redundancies at Ford.
At this point in time we don’t think that there’ll be sufficient volunteers and you know, obviously if they’ve got to go a compulsory situation that makes it very tough on people that don’t want to leave the company,” Mr Smith said.
Ford agrees the company has challenges to deal with over the next four years, but says it will use that time to develop the future of its Australian business.


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