Ford Australia Chief Outlines Challenges of Globalization

Globalization has changed the ground rules forever by linking individual nations’ auto industries into one big and inter-linked entity, Ford Australia President and CEO Robert Graziano says.

Ford Australia President and CEO Robert Graziano.

“There is now no such thing as an Australian auto industry, a U.S. auto industry or a Thai auto industry,” he tells the annual conference of the Federation of Automotive Products Manufacturers.

“We are players on a global stage.”

Graziano says this means Australia must be a global player or risk becoming uncompetitive.

“We should be aware of our challenges, and the new global business paradigm that confronts us,” he says in a transcript of his speech. “In understanding our challenges, it is imperative we appreciate that we are now part of a huge global industry.”

Auto industry management must seek long-term business sustainability, both economic and environmental.

“Sustainability inherently means we must be...business leaders who are instinctively and intuitively prepared to be global and to structure and operate our business accordingly,” Graziano says.

“I need to appreciate that Australian motorists are prepared to, and do, buy cars from any country in the world. You need to appreciate that components and technologies can be sourced from any country in the world.”

Graziano acknowledges recent months have been tough on suppliers.

“I know it is very hard to efficiently run a business when there is the regular interruption of production down-days across the industry,” he says.

“The decision to down-balance wasn’t easy, but it was the correct one – correct for Ford Australia, correct for our employees and correct for your business. It is also consistent with our strategy of aligning production with market demand.”

Graziano says it is an extraordinary time for the Australian automotive industry.

“There are milestones clearly worthy of pride and celebration. New models, new technology, new skills and new markets.”

The industry, however, also must respond to potential shifts in public policy, he says.

“One, in particular, is also very global – climate change. And the way it is addressed could represent one of the biggest challenges to confront us in our business careers.”

“It’s big, and it’s our industry, in particular, that stands to be impacted. It will impact the way we use energy in our factories, it will impact the cost of our input materials and it will impact the way people perceive, purchase and use our motor vehicles.”

Australia Prime Minister Julia Gillard proposes fighting climate change by levying a ($22.12/ton ($23/t) tax on greenhouse-gas emissions starting next July. Experts warn the tax will cost the domestic auto industry between $31.6 million-$89 million (A$30 million-A$84 million) a year.

Graziano says the climate-change issue is front and center of the political stage.

“I fear that, perhaps, it may not yet be front and center of your stage,” he tells the conference.

The so-called carbon tax will affect the cost of energy-intensive commodities including metals, glass, plastics and fuels. “Any price change will have an impact at one or more points along the supply chain,” Graziano says.

By positively responding to climate-change policies, parts makers will make their businesses more sustainable while “sending a very clear signal that you are very serious about being a longer-term player in our industry,” he says.