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Ford Pulls Out of Australia

Early last year, Ford made promises to the Australian government, and their employees that it intended to continue production in Australia until 2016, but made no assurances beyond that timeframe. The company has now confirmed that as of 2016, Ford will stop producing cars in Australia, closing two plants and cutting 1,200 jobs. The company produces the Falcon sedan and the Territory SUV at these plants.

Ending 90 years of Australian car production, beginning with production of the Model T in 1925, Ford cited wages in particular, and unsustainably high costs of doing business in that country. The company claims that their Australian costs are double that of Europe, and nearly four times those in Asia. The Australian government has invested heavily in the country's automotive manufacturing sector. While Ford produced 37,000 vehicles in that country last year, it lost the equivalent of $581.1 million (US) over the last five years.

It marks a shift in the manufacturing of cars in traditional markets, to newer, emerging markets such as India and China. For the better part of a century, automakers focused on Japan, the US and Europe for their manufacturing operations, with countries such as Australia filling in as secondary locations. During the last decade though, countries such as Russia and China have opened up, creating opportunities for new sales markets and cheap labour, while Europe and Japan have slowly declined.

China has become the world's largest automotive market (by sales). They sold more than double the combined output of France, Germany and the U.K. in 2012, and surpassing the US by nine million vehicles.

Previously one of Australia's major players, Ford has slipped to the number five position, as Australians are shunning large sedans in increasing numbers. Despite subsidies, the company has continued to lose money for several years, forcing them to close both their assembly site and their mechanical plant.

The decision only applies to Ford's manufacturing operations. They will continue to sell their vehicles in Australia, and to maintain a large presence with it's 1,500 person development centre. Through it, Australian engineers have contributed to the development of the most recent Ford Ranger.

Any of Ford's models that are specific to Australia will disappear. The Falcon and the next-generation of the Taurus, which is expected in 2015 will be replaced by Ford sedans sold globally. The Ford Territory will be dropped, and replaced by the Ford Explorer. Other Ford models from their global markets will expand the line-up.

At the same time, the company is also closing some plants in Europe, a region hit hard by stagnant economies and high costs. Announced last fall, plants in the U.K. and in Belgium are scheduled to close.

Most auto manufacturers, including Ford, are rushing to open new plants in emerging markets. In countries such as China, labour costs are low, and sales are rising quickly as the country continues to prosper. Ford plans to spend $5 billion in that country to build four new plants. Other facilities are planned in India, Russia and in Thailand. General Motors, and Volkswagen are also investing heavily in China, earmarking billions of dollars for new plants there.

Last month GM announced that they would be cutting about 12% of their Australian workforce, 500 jobs. They cited difficulties stemming from the nation's strong currency, driving up costs and making exports less competitive.

Nearly 50,000 people are employed in Australia's automotive manufacturing sector.

By Linda Aylesworth - autoExpert.ca

 

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