Friday, May 24, 2013

Jump in my car. Why Ford was heading south

Ford was always going to fold. Management expert Roy Green served on the prime minister’s manufacturing taskforce and her manufacturing leaders advisory group. He says it was the “weak link” in the Australian manufacturing chain - the only firm with plainly dismal prospects.

Professor Green believes in targeted government support to help Australian industry, but he believes that of all the car industry, Ford was the worst possible candidate for support.

“The dollar was climbing, buyers were demanding more options, and Ford stuck to business as usual,” he said.

Toyota is fully integrated with its overseas parent. At times more than half of its Australian production is exported. When the dollar is low Toyota makes more cars in Australia, when it is high it makes more cars offshore.

Holden is nimble. Its parent, General Motors allows it to export. It sends rugged cars to South Africa, it makes police cars for the United States.

But Ford Australia has hardly ever sent anything offshore. Its most spectacular failure is the stuff of legend. With no experience of such things it won the contract to make the Ford Capri sports car for the United States in 1989. It leaked. Production stopped after just 67,000 cars and its foreign parent has looked askance at it ever since. All of Ford’s factories worldwide use the same set of global car platforms. Except for Australia’s. It’s as if the foreign parent has been cutting it adrift.

Its orphan status mightn’t have mattered if it was selling decent numbers in Australia. In 2012 it sold just 14,036 Falcons and 5733 Falcon utes. A decade earlier in 2002 it shifted 54,629 Falcons and 17,883 utes...

It has faced the same problems as its two competitors. For the quarter of a century to January 2010 the Australian dollar averaged 72 US cents. For the last two years it’s been mostly above 100 US cents. That means that a foreign car that would have once cost $40,000 to import now costs less than $30,000. And the tariffs are lower. They collapsed from 10 per cent to 5 per cent in January 2010. And the fleet market changed. Employers once ordered Fords and Holdens in bulk. They’ve been shifting to so-called “user chooser” leases where the person who drives the car gets to chose it. With so much on offer from overseas, users haven’t been choosing Ford.

With one exception Ford has sat tight. The exception is the Ford Territory, Australia's only locally-made four wheel drive or SUV, a stretched upwards version of the Falcon. It has taken off as SUV sales have taken off, although it accounted for only 15,000 of the 300,000 SUVs sold last year.

The other car makers look like better bets. They might well survive the decade. Some of Australia’s component makers are the best in the world. They might survive even if car manufacturing folds.

The best thing the government can do now for Ford is to cut off the drip - to use that part of the latest $32 million package it hasn’t handed over to encourage perhaps an Indian or a Chinese car maker to take it over. The idea is being promoted by economist Nicholas Gruen who worked on the Hawke Labor government’s Button Car plan. He says they might have the drive to make something work.

In today's Sydney Morning Herald and Age

Ford by numbers - The Crunch, Fairfax data blog

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