Ford Australia’s Days Numbered, Industry-Watchers Say

Australian auto-industry-watchers are openly speculating Ford Australia will discontinue local production in 2016 when the current edition of the iconic Australian Falcon large car reaches the end of its lifespan.

The Australian Financial Review says parts suppliers are starting to factor Ford’s exit into business plans that increasingly are focused on only two domestic producers, GM Holden and Toyota.

Ford is cutting production to about 33,000 cars a year and will lay off 440 workers in November.

A partner with insolvency specialists PPB Advisory, Stephen Longley, who has acted as receiver to a number of auto-parts suppliers, tells the newspaper components makers should be working with Ford on a new model for 2016, but this is not occurring.

Ford is finished as a local manufacturer, Longley asserts. “It’s the elephant in the room; it is just not talked about openly. The components industry is saying it is a foregone conclusion.”

James Kaias, group director of automotive and defense manufacturer Abcor Group, says his colleagues in the components sector believe Ford will close plants as Falcon production ceases.

“They are going to be closing within two to three years,” Kaias tells the newspaper. “That is the consensus. I think it is pretty obvious.”

If it happens, Ford will be following a well-worn exit path. Nissan ended Australian production in 1992 and Mitsubishi did the same in 2008 as sales of its locally built vehicles slipped into a slow spiral.

Ford sold fewer than 19,000 Falcons in 2011, and first-half sales this year were down almost 25% compared with prior-year.

The auto maker stopped issuing routine news releases on its monthly sales results many years ago as the data became bleaker.

Ford Australia earlier this year received A$34 million ($35.7 million) from the federal government and an undisclosed amount of cash from the Victoria state government to subsidize continued Falcon and Territory SUV production.

However, the newspaper says sales have plunged to such a low level that few believe Ford can justify new investment, even with government help.

Neither Ford nor the Australian government are commenting on the newspaper report, both saying they do not respond to “speculation.”

Axion Precision Engineers Managing Director Jim Grose, who supplies parts to both Ford and Ford Performance Vehicles, says more suppliers will go to the wall if the auto maker shuts down.

“A lot of companies don’t know how they are going to survive,” Grose tells the newspaper. “Things are going to get tighter and tighter. You need a certain level of turnover to make your company viable.”

Ford Australia was founded in 1925 in Geelong, Victoria, as a subsidiary of Ford Canada. Its first products were complete-knocked-down Model Ts from Canada. The Falcon originally was a U.S. model introduced in Australia in 1960 and quickly was adopted by Australians as their own.

For years, the Falcon vied with GM Holden’s Commodore for the title of most-popular vehicle in the country.

Economist Nicholas Gruen, who helped write the Australian government’s original automotive plan, says Ford Australia now is following the same path as Mitsubishi Australia. “Their global parents are not really thinking of their Australian operations as any important part of their global strategy.”