On Ford Closing its Australian Operations

We had some really sad automotive news here yesterday. Ford will close its Australian manufacturing operations in three years time, after around 90 years of manufacturing in this country.

The Fords built in Australia between now and October 2016 will be the last Fords ever built here. Ford will close its engine building plant in Geelong and it’s vehicle assembly plant in Broadmeadows. It’s estimated that 1200 direct jobs will be lost, with the flow-on effect being up to several thousand more. Ford will still retain a vehicle development division here in Australia to work on global Ford vehicles.

A few random dot points about this news.

  • There are a lot of people here in Australia angry about this, especially in light of the substantial financial assistance given to all three manufacturers still present in Australia. Ford, GM and Toyota have all received financial help to prop up their Australian manufacturing operations.
  • Ford Australia CEO Bob Graziano stated yesterday that it costs them twice as much to manufacture in Australia compared to manufacturing in Europe. That’s staggering. Asian manufacturing is only a quarter of the cost of Australia.
  • Ford-Falcon-sedan-2013-inpa

  • Much of that cost problem has to do with our high dollar. A lot of it is to do with a lack of scale. Ford builds two vehicles here – the Falcon and the Territory SUV. Neither of them are exported and both are large vehicles where the buyers are buying smaller sedans/hatches or compact SUV’s. Sales of the Territory have been OK, though they’re falling. Sales of the Falcon have been in the toilet for some time now, despite them releasing a 4-cylinder turbo version that’s reported to be quite good.
  • There are two significant knock-on effect from this announcement, aside from the hardship it’ll cause those immediately involved. The first is the question mark this announcement puts on the Australian vehicle manufacturing industry as a whole. Holden and Toyota have both committed to continued manufacturing in Australia for around another 10 years. This announcement means their local component suppliers are going to lose one of just three customers, however. That’s going to put quite severe pressure on those suppliers and could make life quite difficult for the wider vehicle manufacturing sector.
  • V8 Supercars Pre Season Test Day

  • The second knock-on effect is on racing here in Australia. The most popular racing series here is the V8 Supercars, which for years was a series comprising just two manufacturers – Holden and Ford. Nissan joined this year as well as a privateer team running some AMG Benzes. Holden and Ford remain the backbone of the competition, however, and removing one of those is going to make things very interesting (hopefully in a good way).
  • While this is bad news, credit to Ford for announcing it well in advance of the actual closure. Workers, government and Ford itself have three years and five months to sort out what happens next. It’s not good, but getting Ford to commit to three more years of losses is probably as good as it can be under the circumstances.

——

I ended up owning Holdens when I got my licence, but I grew up in a Ford house. Dad had an old Falcon wagon. Mum had a couple of Cortinas and a Laser. My uncle still has the XC Falcon sedan that he bought new in 1977 and his son, my cousin, has worked for Ford since…… forever. I’m sure he will be affected by the closures announced yesterday.

How did I ever end up in a Holden? Rebellion? Peer pressure? A bit of both?

None of that matters (as if it ever did).

I got a chance to spend a week in a Ford Focus earlier this year and I was very impressed with the chassis, though not so much with the engine. It was my first time behind the wheel of a Ford in a long time and I could see why the Focus gets the respect that it does.

My last experience with the Falcon was some time ago. We had a Falcon here at my workplace for a few years and personally, I quite liked it. The decision wasn’t mine when it came to replace it, however, and we’ve had a succession of Subarus since.

I feel bad about the loss of Ford manufacturing here in Australia. I wish they’d responded to the market better than what they did because it’s their workforce that’s going to pay for it.

We’ve lost part of the motoring fabric of this country, too. That’s another sad thing.

The Ford Falcon was as Australian icon but Ford were either unwilling or too slow to adapt it to changing market tastes. Ford don’t plan to use the Falcon name on another vehicle brought into this country, so one of Australia’s past favourites will be gone forever once this decision is implemented.

I’ll take an XP Coupe, thanks. White on red would be just fine.

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20 Comments

  1. I heard some figures the other week in a meeting with a government/industry liaison. He explained that Australians effectively pay $17 per year through payouts to the auto companies, Americans pay $140 and Germans pay $220. I don’t know how these figures are derived so I can’t back them up but this man had reason to know his stuff. There is a public price for auto manufacturing in any country.

    Racing will be fine, there are two importers currently in the series and there’s no reason why Ford can’t run the Taurus (which will replace the Falcon).

    It is a tragedy and I’ve been a bit down about it. I did buy a brand new factory-order V8 ute 10 years ago (albeit with a Ford supplier discount). It was pretty awesome but best fuel economy was 11.5l/100km and worst in the 20s : )

    When I was about to become a responsible father, it had to go and something much more clever in it’s place, thus our first 9-3 Combi.

    That said, some of the biggest whingers about the closure have never owned an Australian made Ford and have plenty of excuses as to why.

  2. I have a little different take on this announcement, but first, a bit of fact checking:

    – Double the cost of Europe. Sounds dire, and certainly Australia is an expensive place to manufacture for the reasons you’ve cited. But DOUBLE? Hmmm…. I think this has more to do with appearances than reality. I’d love to see the numbers.

    – Can anyone think of a plant closure in the last 10-15 years that came with a three-year advance notice? I can’t. Goodness gracious, GM closed down Saturn and Hummer in a flash and would have closed Saab quickly, too. Hmmm…..

    – Ford has certainly been the boldest among the big three in cutting unprofitable operations, and thus the prospect of permanent closure is a very real threat.

    My take? This is a ploy to get concessions from the Australian auto unions on wages and gifts from the government for retooling those plants for smaller, more profitable vehicles. Cynical? Yes. Same old song, different beat? Absolutely.

    1. No re-tooling here. They’ve announced closure. There wouldn’t be an appetite in the electorate for giving them any further concessions – and it’s a hard-fought election year here.

      1. You’re closer than I am, obviously. However, I think that one man’s closure announcement is another man’s shot across the bow.

        I’ll stick with my opinion until I see something other than talk.

  3. How about Labor unions? Are they like they are in the USA? You know totally unreasonable and very expensive.

  4. Australian Fords were always doomed under Alan Mulally and One Ford. Once they finally sorted the major world cars, Focus, Mondeo etc they moved on to SUVs (The new Kuga) and now finally they are looking at Australia. A single market car will not survive within Ford today.

    In terms of retooling for smaller cars, not likely to happen. Firstly due to the exchange rate. Exchange rates are key – here in Northern Ireland we lost work to our sister plants due to exchange rates. Secondly transport costs. Europe has huge over capacity and it makes no economic sense to ship Fiestas and Focuses to Europe from Australia.

    Building small cars is costly with little profit again making Australia an unattractive place to build them. Watch out to see how Hyundai responds.

    1. Solid thinking.

      My take is that the exchange rates will equalize over time, and the gap will narrow. There is a strong possibility that I’m wrong there given the strength of ‘resource’ economies like Australia and Canada.

      Once (if) that happens then it will make much more sense to contract the capacity in Europe and assemble in Australia once again to save shipping costs. Of course, the fly in that ointment is that the Korean and Chinese competitive labor rates and relative proximity.

      If Australia wants to save the auto business there, it will be expensive. That’s for sure.

      1. Its difficult to build a business case on what rates might do, eventually you will be on the wrong side of the exchange rate. Hence the current mess in Europe. People forget the real driver for economic union was to shield business from exchange differences.

        Is truck manufacture a possibility? I wonder if the F150 would sell (maybe it does already) assembled in CKD form.

  5. I think this was inevitable, but frankly the policies of the Ford Motor Company & Ford Australia, as well as GM & Holden, baffle me completely.

    If you go to a Ford shop here, you can buy either the Falcon sedan or ute, or a Territory, which are designed and built in Australia by Ford Australia, or you can buy a Focus, Fiesta, Mondeo or Ranger that come over from other Ford divisions overseas. So the Ford Motor Company competes with Ford Australia, side by side on the same forecourt. Perhaps they had to do this, because the way that sales of the Falcon plunged would have seen almost no Fords in Australia by now.

    If you go to a Holden shop, you can buy various Holden badged vehicles. Only, to my knowledge, the Commodore is designed and built here in Australia. The others are rebadged overseas designs from elsewhere in the GM group. Less direct competition for Holden on the forecourt. However, GM in their infinite wisdom, and I am sure there is much that will be thought about that on this site, have allowed Opel, one of their other brands, to set up a dealer network and market in Australia, i.e. in direct competition. Holden are in a similarly precarious position to Ford, so the last thing they need is a direct competitor from within their stable, pitting the Opel Astra (Vauxhall to UK readers) against the Holden Cruze.

    Ford Australia’s problem was that they just assumed people would go on buying Falcons as they always had for years, when the reality was that the Falcon is a dog of a car. I made the mistake of ‘going native’ when I moved here and buying a 2008 Falcon Wagon as I wanted a large estate car for the family. This is joint first, with a Nissan Terrano, for the worst car I have ever driven award. The Falcon wagon was so far behind contemporary car design one would be forgiven for thinking Henry himself designed it, perhaps on a Friday afternoon after a pub lunch, and that the drawings lay undiscovered until sometime in the 1950s when they were brushed off and the monster was brought to life. A leaf sprung chassis and poor, unrefined engine were two things that stood out. Its aesthetic appearance was pretty bad too. The front was just passable as a modern car, but the back looked like a 1980s Volvo designer’s rough draft. It took Ford until 2010 or 11 to fit a diesel to the Territory SUV and the Falcon has never received one.

    Contrast the Falcon wagon, which was discontinued a couple of years ago, with the Ford Mondeo, which offers as much space, but does so in a modern, refined fashion and is a superb car by all accounts and one wonders, when the Ford Motor Company was capable of producing cars of this standard, how Ford Australia could go so far wrong for so long. Holden is not out of the woods, and this announcement will affect them via component suppliers and pricing more than likely, but at least their Commodore wagon is closer to a Mondeo type experience than a Falcon. I would consider one myself, except that I am loath to get the LPG version given that only Ford and Holden manufacturer LPG cars in Australia and private conversions have fallen to such a level that it is hard to see how long the infrastructure will remain for gas. The last thing I want is to buy a car that I cannot get the fuel for. The petrol engine in the Commodore is hardly contemporary and far bigger than it needs to be, at 3.6 litres and in common with the Falcon, there are no diesel versions.

    It is good, on the one hand, that the employees have notice and an opportunity to try and prepare for the future, but similarly one wonders if Ford will make it to 2016, because those who can get new jobs will be jumping as soon as they can, and who can blame them. I feel for those who have given their lives to the company and the factory, only to be failed by what can only be described as shockingly incompetent management both here and in the parent HQ overseas.

    1. The Opel/Vauxhall Astra has to compete with the cheaper Chevrolet Cruze in many markets. In Australia it’s the other way around!

      1. BTW, I didn’t mean that the Astra is cheaper in Oz. The Astra is a bit more expensive and probably a better car than it’s Daewoo derived sister. It certainly looks better.

      2. That’s a good point Markac. I think the difference in Australia is perhaps that there is just not enough market for this kind of competition to make sense. In Europe, which in comparison is a huge market, VW sell Seat, Skoda, VW and Audi versions of the same car and can get away with it due to the number of potential customers at different price points.

  6. End of an era. Even for those of us who have yet to visit Australia, the Ford Falcon is such an icon. But DRM’s comment is very interesting and makes it easy to see why the Falcon has no future in today’s world. I have owned a Focus and would certainly consider a Mondeo, which started out as a dull and dowdy car in the 90s but in post-Casino Royale guise is now very smart and apparently excellent to drive and own.

  7. The only good thing I can say about Ford abandoning local manufacture is that it has given at least 3 years notice of it’s intentions. Mitsubishi in South Australia only gave a couple of months notice when it stopped manufacturing here in 2008.

    It must be said though that the writing was on the wall for both of them for some time.
    I think Falcon sales have now dropped almost to the level of Mitsubishi 380 sales when Mitsubishi decided to pull the plug. Unfortunately the flow on effect with component manufacturers will be significant and likely increase costs to both Toyota and Holden. Someone at Holden told me the other day that Ford is roughly 25% of the market for component suppliers. Loosing 25% of the market could well spell the end for some of those manufacturers.

    GM has promised Holden local manufacture will continue here in Adelaide until at least 2022, but with Commodore and even Cruze sales declining, is this realistic? Anyway I have little faith in GM promises after it’s treatment of Saab.

    1. You are naive if you think that any company, automotive or not, is any better than GM about keeping promises to continue operations. You’ve just said that Mitsubishi did worse, for example. Most big companies these days are thinking quarter to quarter. That’s it.

      1. I’m not sure that I trust Ford any more than GM or Mitsubishi for that matter. However I think Ford will continue until October as it says and the final model Falcon will have a 3 year model run.

        Incidentally GM has now said that it will review it’s decision to continue Australian manufacture after the next Federal election, due in September.

  8. Hey Steve,

    Have to say that’s a bit of a shocker and it was discussed over the dinner table here at the family home in Ireland. We used to go to Australia quite often and almost moved there in ~1992. I was carted around in many Falcons and Fairlanes. Anyway, something similar happened in Ireland about 30 years ago. Few would know so, but we used to assemble Fords in Cork ever since the Model T days. After decades, the factory was shut down, the equipment moved and the workforce made redundant. It kills me that today all that knowledge and expertise was lost here. If Australia isn’t careful, they could face the same thing – and all because a particular government isn’t interested in making cars. Sound familiar?

    So, our conclusion at the dinner table was that the Australian government should put a compulsory purchase order on the factories and equipment and either build the existing cars under license from Ford or make enough changes and build a Chinese-like clone. I’m pretty sure the Australian people would respond to the cause and ‘buy Australian.’

    Any chance of another Swade-like save-something campaign?

    Geoff

    1. Geoff, I think the problem is that if the Australian government were to buy the factory and build the existing cars under licence, they would still be in a fix because the cars they produce (Ford Falcon in different variants and the Ford Territory) are not what the market here wants, as demonstrated by plummeting sales of the Falcon.

      The Australian public have had the opportunity to ‘buy Australian’, and can still via Holden, but they have voted with their feet for numerous factors and having experienced Falcon ownership, I fully understand them doing so.

  9. No more Australian Fords? wow.
    Ford and Holden seemed so ingrained in Australia’s culture – not just its motoring culture.
    I lived in Australia for a year and as you have already noted the top 10 car sales here in the UK market follows a very different pattern to other parts of the world. The surprise of Australia was how many Ford, Holden, Toyota and Mitsubishis were on the roads and how many of them followed the same form – very large saloons/sedans or ‘utes’ based on very large saloons.
    What was even more surprising was how affordable they seemed to be compared to European makes in Australia and when compared to similar, large engined, large saloons in the UK market.
    It seemed that for young Australians, on passing their driving test, there was a direct pathway to large, V8 ownership!
    The ‘home-grown’ compacts from Ford and Holden, that resembled European models and indeed shared many components, were very unappealing and their designs seemed quite antiquated, almost Asian, by comparison.
    I borrowed a friends VW Golf manual in Melbourne and it reminded me of the characteristics of what we associate with a European type of car – relatively compact, sprightly and always manual gearbox. It was a joy to whizz round the cities traffic in a sprightly compact manual after driving large automatics.
    At the end of the day I suspect one of the main issues for Ford’s demise in Australia was not addressing the same problems it has faced in the US market – fuel economy. Over ten years ago Australians were complaining about price hikes on fuel, though they were much, much lower than UK prices at the time, and the problem many drivers were facing were poor consumption returns on the large saloons they owned. In the UK and Europe Ford have enjoyed much greater success in producing economical cars but this has been driven by EU legislation on emissions and engine design demands and traditionally European cars have been more frugal on fuel as many cars were designed to be more affordable to buy and own by a wide group of people – the thinking behind the Beetle, 2CV and the Mini bred cars for the people and the V8 was very much the preserve of the bosses.

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