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May 23, 2013

Ford closure is overdue and irrelevant to Australian manufacturing

The closure of Ford in Australia, announced today, is overdue and says little other than that a protected company lost touch with consumers. The eventual cessation of taxpayer bribes to Ford to maintain an uncompetitive production line is welcome news.


Is Ford’s closure of its Australian operations, announced in Melbourne today, a disaster? Are its employees, plus the component manufacturers that depend on Ford, victims of the strong dollar and economic rationalist ideology? Does this demonstrate the decline and fall of Aussie manufacturing?

No, no and no.

Due to the Ford closure around 1200 people directly will lose their jobs, plus more in the automotive components sector. It comes after over 400 workers were retrenched last year. Thousands of families will be disrupted and many workers may struggle to find jobs without significant retraining. But unemployment is still relatively low, and there’s more than three years until the final Ford closure. Without downplaying the impact on affected workers, ABS labour mobility data suggests that around 7000 workers change jobs every day in Australia. So, the Ford closure won’t even add the equivalent of one day’s worth of mobility, even though the losses will be confined to a much smaller area.

And while the strong dollar and lower tariffs for imported vehicles since 2010 haven’t helped, the key reason for Ford closing is because Australians, despite buying new cars like never before, don’t like Fords. In 2012, Ford’s best selling model, the Focus, barely scraped into the top 10 selling models despite a big lift in sales. Its second-best selling model, the Ranger, is a ute. Its flagship family sedan, the Falcon, was 21st, suffering a 25% slump in sales. And that came after a 37% slump in sales in 2011 (Ford says it will “retire” the nameplate in 2016; the question is whether it will make it to 2016). In the year to March, Ford suffered a nearly 14% dip in total sales.

“In truth, Ford’s closure should have happened well before now.”

These aren’t the numbers of a company suffering increased competition from a stronger currency, but a company that can’t convince consumers to buy its flagship product any more, a company that has lost touch with consumers, as so often happens with protected industries.

Nor is the closure representative of Australian manufacturing. For all the stories about high-profile manufacturers struggling, in the year to February the total manufacturing workforce fell by just 3000, or a third of 1%, to 954,000 in trend terms — the lowest fall in years.

The Prime Minister, who as recently as April claimed the election of Tony Abbott would see the car industry close in Geelong, this morning announced the federal government would contribute $30 million to a $40 million package to “support the economic development and diversification of the Geelong and northern Melbourne regions”. She dismissed suggestions that automotive manufacturing was unviable in Australia and claimed it was a major strategic industry. The federal government will also be pumping an additional $10 million into the Automotive New Markets Program for component manufacturers.

Why the loss of 1200 jobs in one region attracts $40 million in handouts wasn’t explained by the Prime Minister, although the electoral logic of trying to hang on to the highly marginal electorate of Labor-held Corangamite is clear.

In truth, Ford’s closure should have happened well before now. But the Detroit multinational has kept factories operating because it has been paid to do so by a government deluded that making physical products is somehow a more real economic activity than services, or producing intellectual property — and funded by unions with a vested interest in keeping uncompetitive factories open to employ their members. It was a scam perpetuated at the expense of taxpayers, but one that couldn’t survive changes in consumer preference and the removal of the barriers that hindered consumers from choosing what they wanted.

Unfortunately Holden and Toyota will continue to receive taxpayer bribes to maintain uncompetitive operations because they play a minor role in Australian manufacturing.



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28 thoughts on “Ford closure is overdue and irrelevant to Australian manufacturing

  1. John Somerville

    I don’t know why Australians don’t want to buy Fords. The GR6 is probably the best car ever made in this country, way better than Toyotas product.

  2. John Somerville

    By the way intellectual property (as in internet bloggong and journalism) is pretty worthless these days, I’d expect manufacturing workers in Australia would earn more than most bloggers.

  3. Darryn Lister

    Arrogant ill-informed fool!

  4. Dave Sag

    Bernard there is only one reason that all governments all over the world prop up their car industries, and that’s fear of war. No country wants to suddenly find it lacks large scale mass manufacturing of industrial vehicles, or worse that it’s outsourced those manufacturing skills to their enemies, when a full-on shooting war comes to town. Governments of all stripes will spend a fortune in peace-time to make sure these skills are well honed in case of war. Is war likely? Who knows, but that’s not the point. The point is that all countries pour money into these sorts of engineering and manufacturing industries just in case they are ever needed on a massive scale. That is why we continually bail out the car industry.

  5. Boston the Dog

    Whilst I feel sorry for the employees of Ford and the component manufacturers the plain fact is that both Ford and GMH have relied on producing cars that Australians simply don’t want anymore.

    They have been doing this for at least the last 15 years. Times have changed and the definition of quintessential Australian family car has changed. Ford and GMH didn’t.

    If it wasn’t for fleet sales and the taxi fleets, the Falcon and Commodore would have been vaporized years ago.

    A very sad day for the workers and their families.

  6. Mr Tank

    As long as it is that you have carried a torch for burning down the Australian car making industry you are yet to make a cogent argument refuting its supporters claims of its strategic importance.
    Give it up Bernard!

  7. Mark Errey

    Bernard I don’t agree that the non-viability of car manufacturing in this country is so cut and dried as you would have us believe. I agree at the moment it is a pretty hard row to hoe with the dollar making competing imports relatively cheap. Currencies however don’t stay high forever and a period seems to be ahead where the dollar may more accurately follow the terms of trade. A 20% fall in the dollar and car manufacturing in this country looks a hell of a lot healthier. Let’s not forget where the dollar has been around 70c US for a very long time prior to the late 2000s. While letting the car industry might make sense if you take a very short view, over the longer term it is a different story.

  8. Hugh (Charlie) McColl

    John Somerville, the Falcon is about 25 years old. It weighs nearly two tonnes. It has an ancient engine design and no resale value (I’ve owned them for decades). Ford and Holden should have got out of big cars 10 years ago. But while local, state and federal governments pour taxpayer and ratepayer monies into manufacturers, car parks and the complete dinosaur of V8 Supercars, it is (or was) only a matter of time before both manufacturers folded. Townsville City Council is right in the middle of deciding whether to allocate several more millions to build track and promotion to keep the V8s coming to Town. I say they should stop wasting ratepayers money but others elected them too.
    Speaking of Toyota, if Ford followed the leader and introduced a four cylinder and/or diesel version of the Falcon 10 years ago it might have had a new life. But hey, what would I know. My 2003 ex-gov BA sedan is either a collector’s item or a liability today. No, it’s just an old Falcon worth bugger-all but still reliable – I’ll keep it.

  9. bushby jane

    There are so many supporting manufacturing jobs involved other than the actual car manufacturing that makes this pending closure so devastating. It seems to me that governments should have been adding conditions to support funding, like telling them to make cars that people want to buy! Wouldn’t it be marvelous if we could build an Australian car with decisions being made about manufacture in Australia rather than USA-what would they know or care about us, they couldn’t get it right in their own country! Other than that, another reason to restore tariffs etc.

  10. pelligrene rasmus

    did i hear $1 billion since 2000?

    thats insane, let it di.e already, enough is enough

  11. Malcolm Street

    Re. intellectual property, Ford will retain Australian R&D.

    Mark Errey – my feelings as well. What happens if (when) the A$ drops to US$.70?

    Re. defence considerations – note that naval shipbuilding is to continue in Australia despite a c. 60% cost penalty over foreign builds. Sounds like far more assistance than the car industry.

    Re. Ford’s products. Why on earth didn’t they offer a diesel option on the Falcon when they had it on the Territory? In Europe large cars are overwhelmingly diesels.

  12. Margaret Ludowyk

    Ford will sack 1170 people in 2016. Abbott wants to sack 12,000 people as soon as possible. Some perspective required.

  13. tonyfunnywalker

    They and Holden GMH waste millions of V8 SuperCars racing – paid by State Governments – get taxpayer subsidies which goes to the bottom line in the US – we do not need them- no one buys their product and as a taxpayer – good riddance and take GMH with you and BTW we want our money back.

  14. z craig

    I have worked in manufacturing for many years, and I not only worked for a company that was part of the extensive supply chain feeding the big car manufacturers here, I also designed parts for Toyota. It provides essential manufacturing experience. But what price do we put on the jobs creation, the automotive network partners in the supply chain, and things like trickle down skills like quality systems and manufacturing skills? True innovation is in firms like Tesla, whose share price has increased 2.5 times in two months…perhaps they will open the next manufacturing plant here.

  15. David Hand

    About time this cloistered industry got a breath of fresh air. There is no doubt it is devastating for the city and the people of Geelong. In my view, this is the real job of government, not bribing multinationals to manufacture cars nobody wants to protect union masters and their members, but to help a large community adjust to the changing world of economic activity. $40m is appropriate and more will probably be needed because though job losses are small on a national scale, they are huge for the local community which will need a lot of help right now.

    Who knows, the absence of subsidies might have led to a more appropriate car being made that people want to buy but that would require workplace flexibility.

    Flexibility – that naughty word that so many here think is bad. Tell that to a ford worker today and maybe they would take a different view.

  16. AR

    As a Holden kid in the 50s, I was aghast at them new fangled poofy Falcons (though almost seduced by the Valiant)in the 60s, esp when the 179 was introduced, probably the perfect oz car – tough, simple, powerful enough to tow the obligatory caravan/ski boat and great to beg off the oldies for cruising on Fri/Sat nights.
    My younger brother became a V8 Commodore freak, 2 speed auto ‘fast & faster’, and a boot to rival the P76 (for the same reason. carrying the 44 gallon drum of petrol if going much beyond Campbelltown.
    My current 76 Volvo s/w has been around the clock (1,000,000 kms) and is only its 3rd engine, 2nd clutch and an uncountable number of tyres but I can take it apart and put it back together with fewer than a dozen spanners and no special tools.
    For security reasons I agree Oz should have a car industry, A CAR INDUSTRY, not a bunch of rent seeking, multinational lossmakers producing rebadged euroid models, unsuited to Oz conditions west of the GDR.

  17. wbddrss

    economic rationalists never can explain why Australia continuously has a balance of payments deficit.

    well now we know, without capability in manufacturing, we will always need to manipulate through taxes & govt surplus in canberra to assist oligopolistic banking sector sponge off YANKS. Aussies deserve what we get. GO TO HELL CRIKEY for not supporting local manufacturing.


  18. mattsui

    Some folks are angry. I guess that’s understandable – but no need to shoot the messenger.
    Manufacturing doesn’t have to mean cars. There are plenty of 21st century products and projects that are big and have moving parts. Retool reskill and get on with it!
    Ford have seen the writing on the wall. Now that the Yen is getting back down to its normal levels, Japanes cars are going to be very palatable to aussie drivers (let’s be honest, they’ve been better than ours for 30 years).
    Paying taxes to keep the motor manufacturers afloat might have made sense at one time…. now it seems like socialism.

  19. TheFamousEccles

    I have a 1964 Ford Falcon Deluxe Pillarless Hardtop (to give it it’s correct nomenclature), coolest car ever made in this country, hands down.

    I will be sad(ish), but even a trainspotter-level car nut like me has seen this coming from a loooong way off.

    As others have said above, strategic capacity isn’t really the issue, but it could certainly be part of the problem, rent seeking multi nationals however, are not in our interest.

  20. cnewt27

    I echo other writrs astonished at the dinosaur nature of the falcon/commodore. Do you notie their ads will not specify fuel consumption? No diesel versions? And this is the free market working. What I am waiting for is the free market types at CIS,IPA to discover that subsidising private health insurance (and actually increasing tax if you don’t choose private health insurance and are “rich” enough)is no better than pouring money into car manufacturers.

  21. Ron Acetone

    ” What happens if (when) the A$ drops to US$.70?”

    Petrol will be very expensive making an even smaller market for cars with big engines.

  22. Dogs breakfast

    I feel for the workers, but having been in Human Resources for 30+ years I can assure you that most will fall on their feet.

    Govt assistance to manufacturing, it’s a really complex question, and I recognise that car manufacturing in Australia has substantial component supplier effects.

    But do we have to support locally made car companies that make such an outdated product? I can’t remember a ford I liked the look of, and I think there has been only one Holden in the last decade that I thought was a smart looking car (Cruze? maybe, I’m no car nut)

    But the strength of Ford and Holden, their toughness, is not what the consumer looks for these days, and is hardly necessary. It would be nice to buy a holden where the plastic parts didn’t fall off at a regular rate.

    For reasons of circumstance rather than desire (I got a good deal!) I have now owned 2 Mitsubishi Outlanders over the last 8 years. I can’t believe the build quality or the engineering excellence. The most trouble free motoring I’ve had in my life.

    The Holden station wagon before that was mercifully stolen, not by some high tech car thieves but by school kids with a screwdriver. That’s how far behind the curve Holden and Ford have been.

  23. Damien McBain

    wbddrss, if you think the community should support car manufacturing, maybe we should be supporting a whole bunch of other inefficient manufacturers as well? Which would you choose? Maybe a few hundred million into TCF?
    An investment of more brain power and less emotion into the topic is required, although I understand that’s not how trade unions operate.

  24. Mike Flanagan

    I agree with many of points in the above posts but I also suggest the dynamic movement of mass production facilities around the world does create considerable economic and social destabilisation to nations and communities and needs to be resolved.
    These corporate decisions, built on managerial practices and philosophies taught in MBA courses, not only display a contempt for labour in the capital and labour marrying principals of their so called ‘free market’, but also a focus on the mastery of spin and deflection the of contradictions in managerial practices, rather than attending to the growing number fundamental questions.
    A casual read of past and present Harvard, and others academes, Handbooks portray a course that is both captive and indolent of the PR/Media industry.
    Dr Meyer’s forthright critique, and condemnation, of the results of both our schools and academic institutes is correct, and should be understood, by many, to have wider implications for the nation’s future after reflecting on the contents of some of these proliferating MBA courses offered by our academic institutes.
    So while the MSM focus on the government and taxpayer largesse implications of these decisions, I would suggest that the Dean’s of our academic institutes reflect on what I suspect is their managers influence in developing a nice little cash earner at the expense of their own past reputations for intellectual depth and quality, with clear focus on the quantity and value of many of their MBA courses.

  25. JRAPQQ

    Whilst regretting the future for those who cannot be retrained, after my experience of Ford I would say the company deserves this, and I agree with Bernard. In the last twelve months – one new Ford Territory so bad it was purchased back by the dealer at the price paid for it, and was replaced with a Falcon (horrible). Then another Territory, which in the last three months has spent two months being “repaired” – Ford refuse to agree it has a fault merely a “concern”; that vehicle has now been sold and it is not being replaced with another Ford.

  26. Mike Flanagan

    It was intersting, and intriguing, to listen to Malcolm Turnbull confuse Abbott’s ‘Battle Lines’ with Adolf Hitler’s ‘Mein Kampf’ in response to a question from Julian Morrow at the Sydney Writers Festival, last night.

  27. Howard

    I am disturbed that no-one has felt the need to criticize the Thai government for slapping an 80% tariff on the importation of the Ford Territory to Thailand. This is a country with which we have a free trade agreement and we buy lots of cars made in Thailand. So much for Free Trade!

    Its only free if it suits the other countries it seems.

  28. TheFamousEccles

    Howard, that’s the Australian way! We sign agreements – in this case a free trade agreement – which specify that we hold true to our end of the bargain, whilst the co-signatory can do exactly as they please.


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