Ford to pull out of Australia in 2016

FORD is to end car-making in Australia due to the strong ­Australian dollar, ending an ­association dating from 1925.
Ford is to end an association with Australia stretching back to 1925. Picture: GettyFord is to end an association with Australia stretching back to 1925. Picture: Getty
Ford is to end an association with Australia stretching back to 1925. Picture: Getty

The Detroit-based Ford Motor Company was part of the fabric of Australian car-making. It is known for producing iconic cars such as the big, brash Ford Falcon which starred, alongside Mel Gibson, in the original Mad Max film. Australian star Eric Bana even made a documentary, Love The Beast, about his obsession with a 1974 XB Ford Falcon.

Ford Australia will close its engine plant in Geelong and vehicle assembly plant in Broadmeadows, Victoria, in October 2016, said chief executive Bob Graziano. The announcement is the latest blow to the struggling Labour government of prime minister Julia Gillard.

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The loss of 1,200 jobs will transform the company into an import-only brand in Australia. Ford is the third largest carmaker in the country. Ford built 37,000 vehicles in Australia last year and employs more than 3,000 people. But it has been battling sliding sales, high costs and an Australian dollar trading to parity with its American cousin.

“Our costs are double that of Europe and nearly four times Ford in Asia,” Mr Graziano said. “The business case simply did not stack up. Manufacturing is not viable for Ford in Australia.”

Speaking about its best-known product, he added: “The Falcon name is inextricably linked to Australia and being produced here. We will retire that name when we retire that vehicle in 2016.”

Ford’s decision to close local production highlights the challenges Australia faces as a near decade-long mining boom fades. Policymakers hope other sectors such as manufacturing, construction and retail will start to pick up the slack, but evidence has been scant so far.

The Australian dollar has traded above parity with the US dollar for most of the past two years – it fell to about 97 cents this week – making it more difficult for local manufacturers to compete globally.

Mr Graziano said Ford lost A$600 million in the last five years in Australia, and A$141m in the last fiscal year, as customers turned to smaller imported vehicles built by Japan’s Mazda and South Korea’s Hyundai

Holden, the local unit of General Motors, said last month it was cutting 500 jobs, or 18 per cent of its workforce. It also cited the damage to its competitiveness from the exchange rate.

Ford’s decision is likely to trigger a row over state assistance to the car industry ahead of elections in September. Polls suggest the minority government is heading for defeat, due to its perceived mismanagement of the economy.

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Labour has earmarked around A$5.4 billion for car industry assistance to 2020, pointing to the sector’s importance in keeping heavy-industry skills and jobs.

The Australian car industry employs about 55,000 people and supports 200,000 other jobs. Ford’s closure is likely to affect economies of scale at General Motors and Toyota locally.

Ms Gillard said the government’s immediate priority would be to support workers affected by the closures. “The economy has many sources of strength, but the high Australian dollar is putting a lot of pressure on some industries, particularly manufacturing,” she said.

Australia has annual sales of around 1.1 million new vehicles, with deliveries up 7.6 per cent to 85,117 in April. But sales of locally manufactured vehicles have fallen to around 221,000 in recent years, from almost 389,000 in 2005.

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