Market Insight: Ford operations ‘on the line’

FORD is cutting production and anticipating further sales pressure on its locally built models this year, but holding firm to its plan to continue building cars until 2016 as pressure builds further on Australia’s crumbling car manufacturing industry.

Despite the intentions of all three car-makers now being clear, Toyota’s decision last week to follow Ford and Holden and quit Australia has brought calls for vehicle import tariffs to be immediately lifted and for taxpayer funding over the past five years to be handed back.

Many more in the parts industry are also now looking at closing their operations before the departure dates imposed by the car-makers, adding further pressure to the current situation that is pointing towards an early closure at all three car assembly plants and related operations – potentially around the time of the next federal election.

Ford Australia communications and public affairs director Wes Sherwood has told GoAuto that the company intends to keep building cars – at a newly reduced daily line rate of between 80 and 90 cars from June this year – until October 2016, but that the company will re-evaluate its plans if there were “major disruptions”.

Mr Sherwood defined these “disruptions” as events that could be “market-driven” or related to “something with the operations in our building to produce vehicles”.

Asked if Toyota’s announcement, and the consequences flowing from it, was one of these “major disruptions”, he said: “We are focused on working with our manufacturing teams and our suppliers, but that (Toyota’s withdrawal) is obviously a factor. We certainly weren’t surprised by that.”

The monthly sales volume of Ford’s locally built cars is a key indicator of how things are playing out for the company – and it has had a disastrous start to the year.

Last month, Ford sold just 461 Falcons – another new low-water mark for the large sedan, down 41 per cent on January last year – while just 237 Falcon utes were registered (down 23 per cent) and the Territory SUV, now the highest-volume car at the Broadmeadows factory, attracted only 681 buyers to be likewise down 41 per cent.

That adds up to 1379 sales for the month, marking an overall fall of 39 per cent over January last year and making even the reduced line rate at the assembly plant of 80-90 cars a day look unsustainable.

Of course, January sales are notoriously slow, but when asked whether sales had picked up during February, Mr Sherwood said: “In general, the trend continues, which is the market is shifting to smaller vehicles.”

With private buyer loyalties spread far and wide, business confidence down, and fleet and government sales no longer a sure bet to boost locally built cars – among a host of other limiting factors – Ford is unable to guarantee that it will be able to continue producing cars in Australia until October 2016.

Instead, the company says it “will continue to match production with demand”.

Only 14 months ago, the production rate at Broadmeadows was 209 vehicles a day – far too many for demand in the marketplace, which prompted the company to scale back to the 148-a-day rate (with a related 330 job losses) in mid-November 2012.

This new line rate also proved to be over-optimistic as new registrations of Ford’s locally built cars fell a further 14 per cent last year to a new low of 29,550 units.

Just 10,610 of those were Falcon sedans, down 24 per cent, the ute fell below 5000 units (to 4679, down 18 per cent) and Territory slid 3 per cent to 14,261 sales.

The mainstream large-car segment overall contracted 17 per cent, a figure that would have been deeper had Holden’s new VF Commodore not reached the market.

Locally produced car sales from all three brands were down 15.2 per cent in last year’s record-breaking market, to 118,510 units, while last month Toyota and Holden both recorded positive results for their Australian-built cars – combined Camry/Aurion sales were up 51 per cent (1182 units) while Holden’s stable (Commodore, Caprice, Ute and Cruze) found 4200 buyers to be up 9 per cent for the month.

Commodore was up 43 per cent last month to 2364 units, and Caprice found 106 homes (up 80 per cent), while Cruze continued to struggle, down 15 per cent to 1395 units. The Holden Ute fell 25 per cent to 436.

An upgraded Falcon and Territory are still scheduled for release at the end of this year, but the extent to which both have a positive influence on segment share remains to be seen.

Time is running out for them all, but ‘timing’ has also now become a central issue.

Tins of SPC two-fruits have been flying off supermarket shelves in recent weeks while there is still hope that Coca-Cola Amatil will remain producing in Australia, but there is no such incentive now for consumers when it comes to local car-makers and their (albeit much more expensive) products.