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Will Ford be next? « Previous | |Next »
July 19, 2012

Ford Australia's recent firing of 440 staff from its manufacturing operations in Melbourne and Geelong primarily comes from its bad corporate governance. It is a failure to adapt to a changing market--rising fuel costs, the shift in consumer preferences for smaller, more fuel efficient cars, and the emergence of electric cars. Unsurprisingly, the Ford Falcon has had poor sales.

Why would you provide protection and subsidies for such a company? The shift noted above has been coming for many years and Ford Australia has been a dumping ground for second-hand technology by Detroit, which has not allowed its local subsidiary to be innovative. So Ford Australia continue to produce large, fuel inefficient motor vehicles, and they sell fewer and fewer vehicles.

Australian governments have compounded the problem because they have refused to introduce emission standards on Australian cars that have been in place for five to ten years in other developed countries. Secondly, the Australian car industry persists only because of industry protection and government subsidies designed to prevent industry collapse.

The Australian market is too small for car manufacturing. Nissan has gone. Followed by Mitsubishi. Is Ford next? Those that remain must innovate and export if Australia is to have a car industry.

The global market shift to low-emitting, fuel-efficient vehicles is going to make it difficult for the local car industry--- which produces predominantly large, high-emitting vehicles – to compete internationally. High emission standards mean Europe and parts of Asia no longer want locally produced cars.

Anna Mortimore rightly says:

Simply throwing money at the local car industry will not necessarily increase sales and save jobs. Funding should not be supported if the local car industry fails to make the necessary technological changes to significantly reduce emissions of its large vehicles to meet the government’s proposed targets. The industry must also introduce new fuel-efficient vehicles that consumers would rather buy.

Australia doesn't need an backward looking industry dependent on corporate welfare to survive. In a global market Australia needs an industry that expands the technology base--eg., ensuring that Australia is not left just with internal combustion production and R&D, but that it is centrally involved in designing and making alternative car power plants.

An editorial in the Australian Financial Review entitled Car industry is not worth the price argues thus:

the problems of the domestic car industry are likely to become worse, with local car plants already operating at below optimal scale. ....Multinational car manufacturers are too accustomed to working the old political economy of Australian protectionism that delivers handouts from the government when they run into trouble, rather than becoming efficient enough to stand on their own two feet.....A fully fledged car industry capable of designing and producing a new model from concept through to on-road testing confers prestige, and has an innate appeal.....But that prestige is unlikely to be worth the annual price tag, estimated by the Productivity Commission at $1.6 billion a year in industry subsidies.

It concludes by saying that in the midst of a mining boom that is generating severe skill shortages, those funds would be better directed to pursuing our comparative advantage in resources and mining-related services, rather than throwing subsidies at an industry that is not market focused and does not deliver on promises it makes.

| Posted by Gary Sauer-Thompson at 3:50 PM | | Comments (5)


"In a global market Australia needs an industry that expands the technology base ..."

And we can and could do just that all by ourselves without foreign ownership and control.
We have all the necessary requirements - knowledge of and availability of hi-tech [and, incidentally the NBN will be a help in this regard -and others[, skilled work force, ample capital just begging to be put to productive use, a screaming need for the manufacture of relatively low carbon using machinery and products, and not just in the automotive field, the physical infrastructure is already present, but underutilised.
So what is stopping us?
Intellectual and political inertia and unthinking subservience to the demands of overseas corporations who care give a .... about Australia.
Just like we copped out of the renewable solar boom and allowed our potential to escape overseas,we have adopted the same short sighted masochistic and inferiority complex attitude to manufacturing in general and the auto industry in particular.

I'll give a simple practical example to illustrate my comment above [as yet invisible - its in the ether pipeline].
I buy my cars from Government auctions and bought my current car a few weeks ago.
Of the 120 plus cars on auction that week [there are 51 auctions a year by this mob alone with similar numbers, you could probably multiply that by at least 10, probably a fair bit more, for the rest of Australia] about 40 of them were Holden/Ford sedans in the 3.6 - 6.0 litre petrol engine range.
Thats right, 6.0 L.
Yank tanks. Overpowered, heavy, fuel inefficient town cars that rarely go above 60 kph [legally anyway], spend a lot of time gurgling away stationary at stop lights with typically only a few passengers of the middle to upper management class aboard.
Waste - for the sake of status and prestige.
I've driven and ridden in lots of such "G cars' in my working life. Nice, flash, comfy but wasteful and unnecessary.
My present car, of which there were 8 on offer that week, is a 2.0 L turbo-diesel infinitely [exaggerating a tad] more fuel efficent and with equal comfort for 5-7 passengers, the same or more than the tanks.

So why the hell is my government buying 1000s of these things [the tanks, not the turbo diesel 5-7 seaters]every year [as they are still currently doing], probably tens of thousands by governments all over Australia, dog knows what drives around Canberra, when there are far better alternatives available ... and needed?

PS Several of these gas guzzlers were not sold, most bids on them were below reserve price, overall the prices were very low for these cars, dirt cheap.
The public don't want them.

fred says:
"PS Several of these gas guzzlers were not sold, most bids on them were below reserve price, overall the prices were very low for these cars, dirt cheap.The public don't want them."

There's the issue. Many overseas carmakers are adapting to consumers' wants much more rapidly than their Australian counterparts.

In Australian laggards in the new car order Nam Nguyen sayts:

Right now over 90 per cent of the passenger car market is petrol/gas powered. In 2030, this percentage is expected to be less than 40. As more hybrid cars hit the streets and impact less on consumers' hip pocket, carmakers need to improve fuel efficiencies in order to keep up.

That means becoming innovative and making cars that consumers want. Ford Australia will exit the industry if it doesn't.

The auto manufacturers in the West are phasing out, but they know they have a sure market with older people who still dislike Asian or European cars and as Fred observes, resent the the side effects of neolib globalisation.
It is all to do with the final sunset of the post ww2 era.
For a time still, places like oz will nostalgically cling to the old style autos and open spaces and big back yards.
There are, I think, strong pol economic and cultural reasons why they haven't been completely phased out yet. People still believe in the industry as a way to anchor technology here as well as civil society. They think that keeping manufacturing alive enables a counter-balance to the new dominance of resources on one hand and new technologies that the new generations will be more familiar with.