Ford Australia faces years of financial pain

FORD Australia is not anticipating a return to profitability until after it has completed its transition to a full-line import brand by the end of 2016.

The company today posted a $141 million loss for the 2012 financial year and announced it would pull out of motor vehicle manufacturing in Australia at the end of October 2016, after years of declining large car sales.

The 2012 result follows a loss of $290 million in 2011 – Ford’s largest-ever after-tax loss in Australia – and is being attributed to last year’s cutbacks, which from November reduced vehicle production from 209 cars a day to 148.

Ford says this downsizing of its operations impaired its asset base by $143 million.

It also led to 330 job losses at the company’s facilities at Broadmeadows – where Ford’s locally developed Falcon sedan and ute and the Territory SUV are built – and Geelong, which supplies components and assemblies such as six-cylinder engines, panels and castings.

Another 1200 jobs – some 650 from Broadmeadows and 510 from Geelong – will be lost with the full wind-down of its local manufacturing operations, with many more expected in the supply chain.

Ford’s announcement has come just two weeks after Holden posted a $152.8 million loss for 2012, which included $226 million in one-off charges associated with restructuring its business – mainly revaluing its manufacturing assets to align with reduced demand.

Ford Australia president and CEO Bob Graziano said today that the imported vehicle side of the company’s business was profitable, and that the restructure of the Blue Oval brand to a full-line importer would see the model range increased by 30 per cent over the next three years.

Ford Australia chief financial officer Mark Rearick said the financial results mirror last year’s “realignment”.

“We had a 30 per cent reduction in volume at the end of last year, and our financial results reflect that we had to revalue our asset base by a corresponding amount, accounting for the loss,” he said.

The company said this action was a result of Ford Australia “remaining focused on key aspects of the global ‘One Ford’ plan, including: aggressively restructuring to operate profitably at the current demand and changing model mix accelerating the development of new products that customers want and value financing the plan and improving the balance sheet (and) working together effectively as one team, leveraging Ford’s global assets”.

Ford’s record loss in 2011 included a $30 million worker redundancy bill and a big one-off tax impairment charge of $212 million. Its worst result prior to that was a $274 million loss incurred at the height of the global financial crisis in 2008.

Ford’s result last year would have been worse but for a $112 million co-investment handout from the federal government, mainly under the Automotive Transformation Scheme (ATS), although the company has emphasised that this accounted for just 3.7 per cent of its total revenue for the year.

Ford Australia posted a $25 million profit in 2010 and $12.7 million profit in 2009.

Sales of Ford’s locally built models were down 12.7 per cent in 2012, including a slump of 25.1 per cent for the Falcon sedan. To the end of April this year, new registrations of Ford’s locally built cars are down 12.8 per cent, with Falcon down 27.5 per cent.

In its financial statements released today, Ford said it invested $270 million across research, development and facilities “for a broad range of global and local vehicle development programs”.

It said this brings the company’s total R&D investment in Australia during the past six years to more than $1.9 billion, making it the largest R&D investor of any car-maker in Australia.

Mr Graziano said today there would be no job losses at its research and development centre in Broadmeadows, or at its proving ground at the You Yangs between Melbourne and Geelong.