End of the line for Ford Australia

UPDATED: 23/05/2013 1:25PMFORD has announced it will shut the doors on its Australian motor vehicle manufacturing operations from October 2016.

Ford Australia president and CEO Bob Graziano this morning informed workers of the decision – said to be taken by its US parent just hours earlier – which will result in 1200 job losses from its vehicle assembly plant at Broadmeadows, north of Melbourne, and at its engine plant in Geelong.

Many more jobs are expected to be lost in the supply chain and related industries.

The company also today posted a $141 million loss for 2012, which follows a $290 million loss in 2011 and brings total losses over the past five years to $600 million.

Ford has been producing cars in Australia since 1925, when it opened its first plant in Geelong. Since 1960, it has produced the iconic Falcon in the outer-Melbourne suburb of Campbellfield – also the home of the Falcon-based Territory SUV since 2004.

Mr Graziano told media today that Australia’s increasingly fragmented new-vehicle market – which has some 365 models from 65 brands competing for 1.1 million sales – made it impossible to get the necessary scale required to make cars here profitably.

He also revealed that its decision to pull out of vehicle manufacturing will see the 53-year-old Falcon badge retired.

There is no decision yet on the future of the Ford Performance Vehicles operation, or on Ford’s involvement in local V8 motor racing.

The facelifted Falcon and Territory models due in the second half of 2014 – for which Ford received state and federal government payments of $43 million in early 2012 – will still launch as planned.

The company has no plans to further downsize its plants before they close, but will react if demand shrinks further.

The job losses – identified as 650 in Melbourne and 510 in Geelong – apply only to manufacturing, with Ford’s You Yangs testing facility, plus its sales and marketing divisions, to remain.

Ford’s 1000-strong Australian design and engineering centre – one of a handful of global “centres of excellence” – will also continue to contribute to global Ford projects.

In total, about 1500 staff will remain beyond 2016.

While Ford will look to redeploy staff where possible, Mr Graziano said that “realistically, we believe those opportunities will be limited”. Full entitlements will be made to all those losing their jobs.

The decision, according to Mr Graziano, was ultimately reached this week as a final resort, and comes only after every other option – including additional government funding and vehicle exports – was considered and costed.

Mr Graziano said the cost of making a car here was double that of Ford’s costs in Europe and nearly four times as high as in Asia. Even after making some aggressive models that factored in higher than likely government funding, the business case to continue “still didn’t box”.

“The decision we announced today was not made lightly, and we understand the impact this will have,” he said. “We came to this conclusion only after thoroughly reviewing our business and reviewing all other alternatives.

“Over the last few years we’ve taken significant steps to restructure our business and to be profitable and sustainable, including reducing production (to 148 units per day) in November last year.

“Despite these efforts, our locally made products continue to be unprofitable, while our imported models are profitable.

“In our search to improve scale and competitiveness, we explored what export opportunities might be available to us but we were still faced with the fact that our cost structure in Australian remained uncompetitive.

“Our costs are double that of Europe, and nearly four times Ford in Asia.

“We also modelled some pretty aggressive assumptions – almost twice what you would normally see – about government support and labour costs, some of which we did not think would be palatable to any government or taxpayer, but we didn’t want to leave any stone unturned.

“Even with these assumptions, the business case simply didn't stack up, leading us to the conclusion that manufacturing is not viable for Ford in Australia in the long term.

Mr Graziano defended Ford’s government funding in recent times – of which last year’s $43m payment was just one – stating that “for every dollar the government has given, Ford has returned six dollars to the economy” through jobs, contracts with suppliers and taxes.

Ford claims that, despite its withdrawal from local manufacturing, its commitment to Australia “remains strong”, with its model range to grow by 30 per cent by 2016.