Australia is seeing the beginning of the end for vehicle production with the recent loss of 500 jobs atMotor Co. of Australia Ltd., acerbic New Zealander Clive Matthew-Wilson, editor of the authoritative car buyers’ “Dog & Lemon Guide,” predicts.
“The bottom line is this: Asia produces many millions of cars a year and pays its workers as little as $1 per hour,” Matthew-Wilson says in a news release.
“Australia produces a few hundred thousand cars a year and pays its workers twenty or thirty times as much as its Chinese competitors. There’s simply no way Australia’s car plants can survive against that sort of competition.
“I would love to be wrong, but I don’t think I am,” he says.
Matthew-Wilson predictsMotor Co. and Corp. are highly likely to go bankrupt within the next year, a view shared by Standard & Poor’s.
“Both Ford and GM are currently on life-support in America,” he says. “Together, they lost $24.1 billion in the last financial quarter.”
Ford hasn’t made a full-year profit since 2005, he notes, while GM last posted an annual profit in 2004. “The U.S. government will rescue Ford and GM because it has no choice.
“However, as part of their rescue package, the U.S. government will almost certainly force (them) to dispose of their unprofitable overseas assembly plants. The Australian Ford and GM plants will be near the top of the list for closure.
“At this point, the Australian state and federal governments will undoubtedly rush in with their own rescue packages, but these rescue packages will merely postpone the inevitable. The sad fact is car manufacturing in Australia was only marginally profitable even in good times, and the good times are long since over.”
Matthew-Wilson says sales of the Ford Falcon have fallen more than 50% in the last five years and Ford Territory deliveries are down by more than a quarter from a year ago.
And while GM Holden Ltd.’s Commodore still is Australia’s top-selling car, with 57,307 sold last year, these mostly were fleet sales to the federal government at low profit.
Matthew-Wilson is doubtful of Ford’s plan to assemble the smaller Focus model in Australia by 2011. “Don’t hold your breath,” he says.
A closure by Ford and Holden would seeMotor Corp. Australia Ltd. as the sole volume manufacturer in Australia, but Matthew-Wilson is not sure about the Japanese auto maker’s continued manufacturing presence.
“Car companies exist to make money,” he says. “Ifcan make more money assembling cars in Thailand (rather) than Australia, then that’s what they’ll do. Their only loyalty is to their profits.”
Matthew-Wilson also predicts a third of car dealers in neighboring New Zealand could go out of business in the next 18 months.
“Sales of new cars for private use were down more than 16%, (compared with year-ago August), while new commercial-vehicle sales were down almost 23%,” he says. “Used-car registrations were down 39% compared to a year ago.
“In addition to the recent collapse of many key local finance companies, we have a meltdown of the world’s financial markets. The surviving finance companies are increasingly cautious about who they loan money to.”
If cars dealers can’t offer purchase financing, they can’t sell cars. If they can’t sell cars, they go out of business, says Matthew-Wilson, adding banks also are squeezing car dealers.
“Dealers at the top and bottom of the market are the most vulnerable,” he says. “Luxury cars and European cars tend to be purchased during boom times. In times of uncertainty, customers tend to go for affordable and reliable cars, rather than exotic ones.
“Dealers who target the poor and gullible will also go to the wall, because their customers generally can’t get (loans) anymore.”
Matthew-Wilson says it’s hard to pick the exact percentage of dealers who will be put out of business. “It will probably be 20%,” he says. “It may be 30%.”
Meanwhile, a weakening global market will force the major auto makers into a price war.
“The one piece of good news is there will be bargains galore for those consumers with money,” Mathew-Wilson says. “Everybody else is just going to have to tighten their belts.”