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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 comments

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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