Was an Exit Ford's Only Option?
Last week marked the end of an era for the automotive industry within Australia. After 91 years, the blue oval badge that many Australians came to love called time on the local manufacturing of its vehicles. The day was a bittersweet moment. On the one hand, the brand, the company and its tireless employees were recognised for their invaluable contributions over the years.
Sadly however, an abundance of job losses as well as the demise of a true Australian icon will leave a void within the nation’s proud history and culture. The manufacturer’s peers are in no better position, with Toyota and Holden also approaching the end of local production in 2017. But was this the only option available? Was it possible for Ford’s local manufacturing operations to be spared a lifeline?
Despite its late efforts to adapt to consumer and industry changes (e.g. economical driving), Ford was always going to be facing an uphill battle. As wage growth peaked in the mid-2000’s, labour costs continually drifted further and further away from those of nearby countries. Throughout Asia in particular, labour costs remained arduously low, incentivising numerous manufacturers to set up their regional operations for the Asian market amongst low-cost producers. To say that our nation’s positioning worked against the company would be an understatement.
Also weighing against the company was the particular requirements befitting right-hand drive vehicles. Although in theory this shouldn’t have impeded the prospects of exporting to neighbouring countries in Asia, said nations were instead able to capitalise on their low-cost positioning. These requirements also prevented Ford from exporting to the likes of the US or other parts of the world. When the local arm of the company sought permission to produce the Ford Falcon in left-hand drive (several times in fact), its parent company in the US was having none of it. The economies of scale were never there to provide efficiency gains.
When the company’s changes did come, they were usually slow-moving or reactive in nature. As the Falcon continued to be pushed heavily by the company, the likes of the Ford Territory (and its successors) and Ford Focus hatch were overlooked for too long while competitors made advancements. In the last 20 years, Australian SUV sales have increased over 20 fold. The corresponding market share has increased from around 8% in 1995, to approximately 37% by the end of 2015 – and these numbers continue to rise. Meanwhile, passenger vehicles have gone from approximately 77% to 43% market share in the same period.
Ford was also largely propped up by government intervention and regulation. Not only were taxation benefits and direct financial aid afforded to the company, but the market had to be ‘artificially’ managed by way of taxes and duties after it had been opened up in the 1980’s to allow motorists greater access to imports. The introduction of a luxury car tax and import tariffs sought to all but direct customers towards our local vehicles but consumers followed their needs.
While the effects of a recently overvalued Australian dollar did not impact Ford as it did with Holden and Toyota, government assistance became a necessity to prop the company upright – across the industry, this is believed to be $12bn over the last 20 years. With each year that passed, the prospect that Ford’s production could remain viable within our market became increasingly dim. And ultimately, all the major parties in this story bear some degree of responsibility for Ford’s sad farewell.
Level 2, 9 Help Street
Paul B says:
All my sympathy to Ford, Holden and Toyota. You didn’t have a chance staying in Australia, whilst having to pay workers on a process line, 90K+/ Year, plus perks. Just for putting screws into a car body. Well to all the workers and Union involved in that rubbish, best of luck finding a future job with a state-of-the-art, quality Manufacturing Company, in Australia, on the same money….Doesn’t exist…and now for a reality check. As to the worker leaving the Ford Dealership to express his disappointment on TV, at Ford’s announcement, ” Oh well, that’s life”… That’s right buddy. But good luck finding a 90k job in future. What a waste, and loss of an important Industry.
October 25th, 2016 at 2:49 pm
Ernest Lohberger says:
I was an importer of Ford cars into PNG. if the import costs were any reflection of the Australian costs, the government and also state government taxes levied were about 120% of the actual cost of the vehicle. this basically more than doubled the cost of the cars. Probably this did not help with costs either and whatever was paid back as assistance was presumaby less than the taxes.
October 25th, 2016 at 3:41 pm
Eddie SMART says:
Perhaps now the BLOODY UNION bosses will realise what they have done. Enough was never enough, the cost of production in the motor car industry could not be sustained in todays real world. RIP
October 25th, 2016 at 4:03 pm
Ron Taylor says:
The writing has been on the wall for a number of years that Ford and Holden were exiting – they were just extending it by trying to gouge even more money from the real workers in AU with further grants and tax breaks.
There has been an increase in overseas models appearing in dealerships (and new branded dealers) soaking up market share for a number of years and obviously you don’t do that to your own business unless it fits with your ultimate strategy.
They have been planning for some time for a seamless transition to imported models – which at the end of the day is most probably a good thing for the consumer.
October 25th, 2016 at 4:07 pm
Bob Heffernan says:
Being a Ford owner for over 55 years it is a sad day ,I bought a new Ford this year to last me out, But the UNIONS killed the motor industry off and will do the same.to a lot more industries and jobs. There is only one cure OUT WITH THE UNIONS.
October 25th, 2016 at 5:50 pm
Stephen Bastian says:
The whole Australian Car Industry could be saved by a stoke of the pen. If the Federal Government only allowed input tax credit on Australian built cars, Australian manufacturers would have an immediate 10% price advantage against imported cars when selling to any business that is registered for GST.
Such a change in legislation would not effect the price of cars sold to private buyers, so everyone would be a winner – The Australian Car Manufacturers and the Federal Government who would keep the GST on imported cars still purchased by business.
October 26th, 2016 at 10:12 am