Exports evaporate with Ford Focus cut

FORD Australia is facing a 50,000 annual production shortfall in 2011 after cancelling its plan to build the Focus small car locally.

Apart from the loss of production of Focus for the local market, the company will miss out on a predicted annual export volume of 15,000 cars, while 300 jobs it said would be created by the small-car plan will not materialise.

The collapse of the Focus production plan means Ford Australia’s fate will continue to be dependent on its Falcon large car, Territory SUV and regional engineering work, with exports expected to remain minimal.

Ford sources are confident the decision to introduce a four-cylinder Falcon and diesel Territory will lead to an increase of local production volumes that would counter the Focus loss and that the company will remain viable without making it here.

Ford Australia announced the death of the local Focus at the same time it revealed plans to produce a four-cylinder Falcon and diesel Territory, a calculated approach to team good news with bad and limit the negativity of media coverage.

Left: Ford Australia president Marin Burela. Below: Federal industry minister Kim Carr.

The $300 million Focus project was announced in July 2007, with plans to the next generation small car in Campbellfield using panels stamped in Geelong. Initial annual production was put at 40,000 based on a calculation of 2000 Australian sales a month and around 15,000 exports a year.

A few months later, then Ford Australia president Tom Gorman told GoAuto that the company would probably make more, given the potential for strong local sales.

“If we go to 3000 a month that is 36,000 (units a year) and add the 15,000 (export) units to that and you’re a little over 50,000, so I think the right number for us is between 40,000 and 50,000,” he said.

At the Campbellfield press conference last Friday, Ford Australia president Marin Burela afforded the Focus production cancellation a few short sentences, while federal industry minister Kim Carr did not mention the loss at all in his speech that followed.

Mr Burela put the decision to not produce the Focus in Australia down to changing economic conditions and the competiveness of the small car market which meant the business case no longer stacked up.

“Although this was a very difficult decision it is the right decision for Ford Australia,” Mr Burela said.

“After assessing the market requirements, the cost of producing the car in Australia in these extreme changed conditions (sic), we concluded we could not profitably manufacture the car here.”

Mr Burela said the decision to cancel the locally made Focus was made just two weeks ago.

Ford Australia is understood to have been against the local Focus plan, but Ford Motor Company leaders in Detroit helped determine the decision.

Focus production for Australia, much of Asia and South Africa will now come from a low-cost production country in Asia, most likely Ford in Thailand, which will soon begin producing the Fiesta.

The decision came down to Ford Australia not being able to match the cut-price production cost of the Asian location. From an importer’s perspective, Thailand production has the added attraction of a free-trade agreement with Australia.

Ford sources say that given most of the rivals for the Focus come from relatively low-cost locations within Asia, except for the Japanese Toyota Corolla, the small Ford would have either been too expensive to compete or would have lost money.

This calculation contradicts the GM Holden plan to build a small car in Australia from next year, despite the fact that it already imports the Cruze produced by GM Daewoo in South Korea.

While GM Holden was pledged support of $149 million from the Rudd government (and a further $30 million from the South Australian state government), the Focus production plan was only allocated a total of $20 million of federal funding by the Howard government and Victorian state government in 2007.

Ford sources have told GoAuto that the Focus production cancellation was not related to this disparity in funding and that a large amount of government investment would not have saved the project.

Ford Australia has confirmed it had not yet collected any of the $20 million funding that was on offer from the governments for the Focus project.

GoAuto asked Senator Carr if the government was disappointed by the loss of the Ford small car production.

“Of course we are disappointed,” he said. “The fact is that we don’t ask companies to undertake decisions that are not economically viable. The company has made the decision.”

Australian Manufacturing Workers Union vehicle division nation secretary Ian Jones backed Ford Australia’s decision to cancel its small-car production plan, stating the union always doubted it would have been successful.

“We said this to Marin both when he first came here and to his predecessor (Bill Osborne) that whilst it was good to have the announcement in terms of the employment that it was going to generate even at its maximum it was really at the fringe,” he said.

The AMWU publicly supported the Focus plan at the time it was announced, but expressed concern that much of the car would be imported.

Mr Jones said Ford Australia should stick to building large cars, something it did best.

“That is a much better strategy than pinning your hopes on a small car that we were always trepidatious about.”

While Ford is largely limiting itself to domestic sales of large cars, a segment that has been shedding market share consistently for the last decade, Mr Burela said there were still enough sales to justify a local manufacturing operation.

“115,000 DE cars were sold in Australia last year. Quite frankly, there are three competitors – Holden, Ford and Toyota – not a bad segment to be in,” he said.

“When you go back and look at that and think if we can deliver on the promises and commitments that we have made today then I think we have a secure future moving forward.”