Ford Australia posts back-to-back profits

FORD Australia today announced its second consecutive annual profit, turning in a $24.9 million after-tax result for 2010 – almost double the previous year’s $12.7 million result.

However, company chiefs were coy about forecasts for the current year as they battle overstocking of locally made Falcon that has forced the company to cut production at its plants and axe about 240 workers – about 10 per cent of its workforceInstead, Ford Australia president and CEO Bob Graziano pointed to the just-released facelifted Territory SUV and the refreshed Falcon due later this year which he says will help to drive fresh customer interest in the Australian-made cars as the year progresses.

So far this year, Falcon sales are down 41.5 per cent, while Territory sales are down 18.3 per cent. By contrast, sales of Ford’s main imported models are up, helping to bring the company’s sales volume deficit over last year to just 3.3 per cent to the end of April.

Ford Australia did not rule out further adjustments to production at its factories, but company chief financial officer Frank Lazzaro said the production line ‘balance’ had been set where it needed to be, “not just for the next two or three months but for the reasonable future.

Left: The new Ford Territory. Below: Ford Falcon.



“We can’t ever say never (to further cuts), and we really need to look at what we do when we introduce the new technologies that Bob (Graziano) talked about earlier, and ensure we have got the line balance about right.

“We could reach the stage where we need to put some more back into the plant. It can go both ways right now.”

Australian taxpayers helped to keep the company in the black in 2010, with grants from the federal government Green Car Innovation Fund and other funds contributing a large portion of the $116 million “other income” on the 2010 balance sheet.

Although the profit is modest, the result is a far cry from the disastrous $274 million loss by Ford Australia at the height of the global financial crisis in 2008.

But it also has some way to go to match its record $148 million profit in 2005, and comes up well short of rival GM Holden’s 2010 post-tax return of $112 million reported recently.

Toyota Australia is yet to announce its result for its 2010-11 financial year, but that is expected to show a marked recovery from last year’s $108 million loss that resulted from a huge $280 million tax slug.

Announcing the Ford results, Mr Lazzaro described 2010 as challenging, “especially the latter part”.

He said Ford had made the right business decisions in the past few years, allowing it to “deal with the reality of the market” to get its business structure right and make a profit in a competitive environment.

He said Ford’s vehicle sales were now focused on higher-level models – a “richer mix of vehicles” that are more profitable – helping the company to increase its profit, despite a slight decline in sales last year.

Mr Lazzaro said Ford was taking actions to address excess Falcon inventory, with a five-day production of 209 units a day on a single shift – about half the two-shift capacity of the plant.

The reduced production rate will kick in from July, dropping the line rate from 260 units a day.

In March, Ford also cut production to three days a week to help match stock with sales.

Mr Graziano said Ford was looking at stepping up marking activities around Falcon to help address the situation.

“We are looking at what we do here going forward, and working with our dealers as well to make sure we have the right mix of product at the showroom,” he said.

Ford’s $24.9 million profit was made on improved revenue of $3.3 billion – up from $3.1 billion in 2009 – but slightly fewer retail sales, with Ford volumes falling in 2010 to 98,941 vehicles across Australia and New Zealand – down from 99,941 a year earlier.

The company cut its debt from $525 million in 2009 to $475 million, while also improving is cash position to $232 million (up from $221 million).

The company tipped $307 million into research, development and facilities. Among to projects to benefit from that spending were the new Ford Ranger ute and an SUV built off the same T6 platform that is under development by Ford Australia engineers for international markets.

Apart from the just-released TZ Territory – with a diesel engine for the first time – and refreshed Falcon with the much-hyped EcoBoost four-cylinder engine option later in the year, Ford Australia is set to receive a new Focus small car and the Ranger ute in the second half.

This year, Ford Falcon sales have been hurt by the absence of an LPG variant, as it awaits a new liquid injection LPI version in the facelifted Falcon.

About 20 per cent of Ford Falcon sales were LPG powered until that variant had to be dropped because it was not Euro 4 compliant.

Rival Toyota is working half shifts at its factory at Altona, in Victoria, due to a shortage of parts in the wake of the Japanese earthquake, but expects to resume normal rates next month.

GM Holden is the only company working a full two shifts five days a week as it pumps out its new locally made Cruze small car and ramps up supplies of the Chevrolet Caprice Police Pursuit Vehicle (PPV) for export to North America.