Ford invests in Falcon

FORD has announced a $103 million investment in Australia’s Falcon and Territory that will guarantee the production of both models until “at least the end of” 2016, but refuses to discuss the future of its Victorian manufacturing operations beyond that.

Revealed jointly by Ford executives and federal manufacturing minister Kim Carr at the Detroit motor show opening overnight, the co-investment includes $34 million from the federal government and an unspecified contribution from the Victorian state government.

The unexpected Falcon/Territory upgrade – revealed simultaneously to Ford workers in Geelong this morning – will provide direct employment for around 300 people during the design and engineering stages of the project, which will see the Falcon’s CO2 emissions reduce by up to 5.3 per cent from 2014.

The investment is in addition to the $232 million sustainability investment Ford Australia announced in 2009, including last year’s facelifted Territory diesel and LPG-fuelled Falcon LPI, and the new turbo-four Falcon EcoBoost due on sale in April.

It will not make either model compatible with the tighter new Euro 5 emissions standard due to come into effect locally in 2016.

Instead, it will bring a 7.5 per cent improvement in aerodynamic efficiency – via a series of engineering and design updates that are likely to be part of a 2014 facelift – along with a lighter, smoother, quicker-shifting and more efficient six-speed automatic transmission and the fitment of new tyres with 10 per cent lower rolling resistance.

From top: Senator Kim Carr with Bob Graziano, Joe Hinrichs and Alan Mulally, Ford Falcon and Territory.

Ford said the 2014 Falcon and Territory upgrade will also include new safety, technology and design upgrades that “will complement the vehicles’ existing five-star ANCAP rating and deliver customers a world-class vehicle package”, but said further details would not be revealed until closer to launch in two years.

“Today we want to talk about a new investment in Falcon and Territory of $103 million for clean technologies that will be introduced on this vehicle in 2014, taking us out to 2016,” said Ford Australia president and CEO Bob Graziano.

“I think you know the record Ford has with respect to quality, sustainability, safety and smart technologies. We want to continue to improve the fuel efficiency, thereby improving the competitiveness and appeal of both the Falcon and Territory.

“The initiatives that Ford will undertake with this investment will improve CO2 by a little over five per cent, which is in addition to the improvements we had with the sustainability initiatives we had as part of the $232m investment.

“If you look at our total portfolio, we have sustainable technologies right across every vehicle segment in which we participate in Australia, so this is a truly exciting time for us.” Senator Carr, who also met with senior General Motors executives in Detroit in a bid to secure ongoing local production by GM Holden, said Ford’s announcement was the culmination of discussions that began at Ford’s Asia-Pacific regional office in Shanghai last August.

“We had very, very productive conversations today with the senior executives of the Ford Motor Company at the very top … and the announcement you see today is a reflection of that level of engagement with the company that we have had over a few months,” he said.

“We’ve been able to deal with issues in a very direct and positive way.

“We know there has been a period of great difficulty for the Australian automotive industry throughout last year and this investment is a reflection of the confidence that we have in the future relationship between the Ford Motor Company in Australia and of course the ongoing commitment that the Australian government has to the Australian automotive industry.

“The $103 million investment effectively involves the direct employment of over 300 people during the design and engineering stages of this project and the significant flow-on effects for investment and for jobs across the supply chain.

“This means an extension of the Falcon and the Territory through to 2016 and this I believe is the first time that we’ve seen a period of discussion of engagement out to those levels of time.” The president and CEO of Ford’s Asia Pacific and Africa operations, Joe Hinrichs, said today’s “extraordinary future product announcement” was aimed at restoring the confidence of Ford customers and employees.

“One of the things that frustrates us … is that we continue to invest in the Falcon and Territory – with diesel in the Territory last year and LPI in the Falcon last year and EcoBoost coming in the Falcon this year – yet the overhang of the speculation about the future impacts employee morale and customers unfortunately.

“So this is an unprecedented move for us. We’re actually talking about a product cycle, a manufacturing cycle beyond the next couple of years – that’s not normal for us – to provide some certainty and to remove some of this … speculation around what’s going to happen.

“With this investment and the support we’re receiving from the government, both our product development centre and our manufacturing centre in Broadmeadows will be working on these improvements to the Falcon and Territory and will also through our business planning cycle, which is through to 2016, commit to the local manufacturing and the enhancements to the products.

“We’re continuing to expand our product portfolio in Australia. That’s the plan, to offer customers more choice and to compete in all the major segments of the market, but Falcon and Territory are still very important to our portfolio, to our brand, to our dealers, to our employees and to the government as well.

“So hopefully this is another sign of our commitment to both those products and our business in Australia.” Ford defended its decision not to reveal the future of its Falcon and Territory – and therefore its Australian manufacturing operations – beyond 2016 on the basis that no car-maker reveals products plans five years out.

It reiterated comments made by executives at last week’s Delhi show, where Mr Hinrichs said record low Falcon and Australian large-car sales had delayed Ford’s decision on the company’s next-generation Falcon, one of the longest-running nameplates in Ford history.

“We know the questions won’t stop, but at the same time this gives us a time horizon that is secure and is finite and also gives us time to figure out where the consumers go and where the products go beyond that timeframe,” said Mr Hinrichs in Detroit.

“That’s kind of where we are – that’s actually beyond our planning horizon.” Ford has previously said the current FG-series Falcon, released in 2008, would be the last to be based on a platform that is unique to Australia, and that Ford Australia’s next large car – whether it is produced in Broadmeadows or fully imported – will ride on a global platform like other models within the company’s cost-saving One Ford platform-sharing strategy.

“Five months ago … this wasn’t the plan,” said Mr Hinrichs.

“We have the flexibility in our global platforms and in our corporation now to be able to make decisions, to move quickly and to do the right thing for our customers and our business.

“We always have planning scenarios, there’s no question about that, and I’d be lying to you if we said we didn’t, but we also are always looking for better business cases. We’re always looking for the better plan, as (global Ford CEO) Alan (Mulally) calls it. There’s always a better plan out there and we’re always working to find it.” Mr Graziano would not say whether Ford Australia could produce the Falcon profitably at all-time low annual volumes of a combined 25,000, but said he expected Falcon sales to bounce back in 2012.

“You’ve got to look at the total throughput at the plant,” he said.

“We’ve got three different vehicles. When you do a year-over-year comparison, you also look at what we have in the plant that we didn’t have in the prior year.

“We didn’t have a full year of LPI, as an example, which is an important part of that program, and we now have that for a full year this year. We had a wagon in 2010 and we no longer had that in 2011, and we’ve also transitioned our business into more profitable sub-segments or channels in the Australian market, so 2011 really was a year of transition for us.

“We’re finding our feet, if you will, so we can move forward.

“We don’t talk about (the profitability of) individual model lines, we talk about the overall business.

“You know what our profits were over the last two years. Last year we had to take a down-balance to remain as efficient as we possibly could to match production to demand – that’s all we can continue to do.

“If you look at the confidence that’s been restored in the Territory and the Falcon over the last 12 months in terms of the interest we’re seeing in LPI as that vehicle’s coming to market, I’m very bullish about where we’re headed in 2012.” Mr Hinrichs acknowledged Ford Australia’s total production of just 45,000 vehicles was well under capacity, but suggested it could continue to operate profitably at that level.

“You wouldn’t build a new one (plant) to do that (build 45,000 vehicles),” he said, “but it’s a different dynamic when you have an existing portfolio of tooling, equipment and assets and when you have a workforce and a government that’s willing to open dialogues and find different business cases.

“We’re not in the business of losing money, so does that mean there’s a 20-year plan? No. It gives us several years together to work out what the alternatives are. You wouldn’t design a system to do 40,000 units, but you also wouldn’t cut it off if it’s profitable.

“At the end of the day, there are a lot of options. The most important thing is that we’re growing our portfolio in Australia and we’re continuing to invest in Falcon and Territory.

That’s the message and there’s no way to make this story bad.” Mr Carr said Ford could not be expected to telegraph its next-generation product or manufacturing plans five years early, and suggested the withdrawal of Ford as a local car-maker would be too detrimental on Australia’s overall automotive industry for his government to allow.

“It’s very unusual for Ford to discuss their program at this length of time so it’s very unreasonable of you to actually seek assurances about what’s happening beyond the next product cycle – no other company does that,” he said.

“I’ve got no doubt that the executives here have a very good idea of where the company’s going. We are in the process of discussing that and we will continue to discuss those questions, as we do with all companies in Australia.

“Our job is to maintain the capability of the Australian automotive industry across the board. We have a firm commitment.

“I have never ever conceded anywhere that we could run the Australian automotive industry on the basis of a reduced number of OEMs – never have I done it and I’m not about to start now.”