Ford Australia Slashing Production 29%, Laying Off 440

Ford Australia, its sales languishing in a record market, is cutting production 29% and laying off 440 workers.

President and CEO Bob Graziano says the reductions are difficult but necessary to provide the auto maker with more stability and certainty by more closely aligning production with market demand.

“We are committed to the Ford brand and (to) continuing to produce vehicles in Australia,” he says in a statement.

Production will be cut from 209 vehicles a day to 148 in November in response to shifting customer preferences linked to an industry-wide decline in sales of large vehicles.

Ford’s June deliveries fell to 9,140 units, leaving it in fifth place behind Toyota, Holden, Hyundai and Mazda. It also ranked fifth with 43,430 first-half sales.

The auto maker says workers may choose to leave voluntarily, but it will order layoffs if the required reductions aren't reached. Departing employees will receive a redundancy package that includes training and career counseling.

“Implementing this structural change is essential to ensure the longer-term health of the business, which is important for our employees, our suppliers and the communities in which we operate,” Graziano says.

Ford says it will continue producing a more profitable mix of vehicles in an effort to maximize returns in each segment.

The Territory SUV's share of production will rise to almost 50% to help the auto maker capitalize on its continued popularity. By contrast, sales of the Falcon large car tumbled 26.4% in June to 1,431 units. The model’s 6,846 first-half deliveries left it languishing in 20th place.

Falcon passenger-vehicle sales peaked at more than 88,000 in 1995, according to government statistics.

“Customer preferences are continuing to move rapidly towards more fuel-efficient vehicles, which is why we have recently introduced Ford's global EcoBoost technology to (the) Falcon,” Graziano says. “We believe this and other recently introduced technologies such as our EcoLPi system will stabilize sales in this segment.

“We have also recently announced a further A$103 million ($106 million) investment across our locally produced vehicle lines, which will come to market in 2014, (and) demonstrates our ongoing support for the large-car segment in Australia.”

The layoffs will be equally split between Ford's plants in the state of Victoria.

Victoria Premier Ted Baillieu says Ford's announcement again underscores the challenges facing automotive manufacturing both in Australia as well as globally, with a high (Australian) dollar, intense global competition and changing consumer preferences.

Ford received the A$103-million package from the state and federal governments and its U.S. parent company in January. The Australian government's contribution was A$34 million ($35 million) and the Victoria government’s contribution, though never announced, is believed to have been about A$19 million ($19.5 million).

Baillieu says taxpayers' dollars was money well spent despite the auto maker’s retrenchment, and he's confident Ford will meet the conditions tied to the government support.

“I am at least pleased that Ford has indicated that they intend to stay and they will meet their commitments in terms of arrangements entered into in January,” he says in a statement.

Industry Minister Greg Combet says the federal government will not provide Ford with any more funding.

“We have A$5.4 billion ($5.5 billion) committed through to 2020 with the auto industry,” Combet is quoted by The Age newspaper as saying. “'I'm not committing any funds at this point in time to anything additional.”

Federal opposition industry spokeswoman Sophie Mirabella says Prime Minister Julia Gillard had said 300 new jobs would be created at Ford as a result of the January funding agreement.

“The shambolic and ad-hoc funding of the car industry under Labor has led to great uncertainty among Australia’s car companies,” Mirabella says in a statement. “In an already difficult environment, Labor’s chaotic approach to industry policy is making investment decisions ever-more challenging.”

Gillard tells reporters that if the federal and state governments hadn't stepped forward to work with Ford, job losses would have numbered in the thousands.