Ford hedges bets on Victoria

[A-TEK]

Ford hedges bets on Victoria

http://www.bendigoadvertiser.com.au/...a/2413200.aspx

Ford hedges bets on Victoria
BRUCE NEWTON
09 Jan, 2012 03:00 AM

ONE of Ford's most senior global executives has admitted the company's manufacturing base in Australia is not guaranteed beyond the lifespan of the current Falcon and Territory.


Ford's president for Asia Pacific and Africa, Joe Hinrichs, also revealed no decision had been made on what vehicle would replace these locally developed models when they are retired around the middle of the decade and admitted the company was ''grappling'' with both issues.


The news comes as weekend reports suggest that Ford's US parent company will inject $50 million towards the locally produced cars to secure medium-term production.


''The challenge is on the business side,'' Mr Hinrichs said. "Whenever that timeline ends on the current platform, what next? And is there a business case for it to be manufactured in Australia?


''That's the industry challenge, the government challenge and the Ford challenge, all wrapped in one.


''We are grappling with that now because we look out five years in our business planning process and so here we are starting 2012 and we have a scenario where we are starting to do planning on expectations for emission requirements, fuel economy expectations, weight and so on.''


Ford builds the Falcon sedan and ute and Territory SUV at Broadmeadows in Melbourne and 4.0-litre in-line six-cylinder petrol engines in Geelong.


The viability of both plants has been under question because of declining large car sales. Last year Falcon sales plunged 36.5 per cent to just 18,741. The silver lining was the resurgence of the recently revised Territory to the top of the SUV sales ladder.


Holden Commodore sales also fell last year, 11.6 per cent, and the car was knocked from the top of the sales charts for the first time in 15 years.


The new number one is the Mazda3, the first imported car to take the spot in almost 100 years.


New car buyers have progressively shifted to small cars and SUVs, most of which are imported. The high dollar has also proved a double negative for local manufacturers, who have seen export markets dry up and imports increase their competition.


The fall in sales of locally manufactured cars has prompted the Minister for Manufacturing, Senator Kim Carr, and South Australian Premier Jay Weatherill to head to Detroit for meetings with both Ford and Holden parent General Motors.


The federal government's decision to cut the Green Car Innovation Fund in 2011 has dismayed local manufacturers, as has the recent demotion of the widely respected Senator Carr.


Holden chairman Mike Devereux has gone on the record warning the government that reduced support will endanger continued investment by General Motors. But Mr Hinrichs said Ford would not follow a similar course of public lobbying or complaint.


''We wouldn't have that conversation in the public domain if we were to have it,'' he said. ''Our expectation is that if we have something we'll need government support on, we'll find a way to make it work like we do everywhere else in the world.''


The problem is that at today's levels the Broadmeadows plant lacks the economy of scale to be cost-competitive against huge plants such as those in Thailand and India.


When the Falcon and Territory are replaced by global models under the One Ford strategy, the need to build locally may evaporate.


''The most important thing we all can do is maintain a cost-competitiveness,'' Mr Hinrichs said. ''So volume and scale come into play in that regard and that is a challenge for the Australian market.


''Broadmeadows volume has dropped and that is a concern, but that doesn't mean we are predetermined to one outcome … These are complex issues.''


Mr Hinrichs insisted no decision had been made yet on what would replace the Falcon and Territory, rejecting reports they would be replaced by the front/all-wheel-drive Taurus and Explorer SUV built in the US.


''We have not made a decision,'' he said. ''We plan for alternatives because we are in business but we are still investing in the Falcon and the Territory.''

ps; mods feel free to move to appropiate thread.

[Road_Warrior]

If there was a third, volume selling vehicle line at Broady, it wouldn't be an issue and there would be no need for this discussion.

[Brazen]

Originally Posted by Road_Warrior

If there was a third, volume selling vehicle line at Broady, it wouldn't be an issue and there would be no need for this discussion.

30,000 to 40,000 Focus a year?

[Road_Warrior]

Originally Posted by Brazen

30,000 to 40,000 Focus a year?

Nah not Focus. The segment is too competitive and profits too narrow, you can't have volume at the expense of profits.

You know, local production of the Ranger to satisfy the demand from the resources sector would be a gimme.

[FPV GTHO]

I dont think Ranger would work locally, surely there would be too many complications building a separate chassis truck alongside a monocoque car and SUV.

[dimka100]

What if the benefit of purely manufacturing a car in Australia vs Thailand???

Well there isn't one and that's why its not happening ... Engineering is different as you need skilled workers but that not what manufacturing is about.

[pottery beige]

Originally Posted by Road_Warrior

Nah not Focus. The segment is too competitive and profits too narrow, you can't have volume at the expense of profits.

You know, local production of the Ranger to satisfy the demand from the resources sector would be a gimme.

there is no demand for Ranger in the resource sector.. 0.. Zilch......

they like Toyomotos...

[Road_Warrior]

EDIT: Nevermind

[Brazen]

Originally Posted by Road_Warrior

Nah not Focus. The segment is too competitive and profits too narrow, you can't have volume at the expense of profits.

The 90s were two decades ago now, back then I could see the argument but the market has shifted and has been shifting for years. Lots of buyers still are spending big - but on smaller cars.

[blk6t]

Keen to know if Falcon or Territory sales would increase or decrease if they were both engineered in Australia and built in Thailand, then sold here for a slightly cheaper RRP?

Specs current to today but without the I6, just the ecoboost, turbo diesel and the V8 for the performance variants.

[bobthebilda]

Originally Posted by Brazen

The 90s were two decades ago now, back then I could see the argument but the market has shifted and has been shifting for years. Lots of buyers still are spending big - but on smaller cars.

If the top selling car in australia is selling approx. 40,000 cars a year, then the only way a manufacturer is going to remain viable in australia, is to be making the top 3 or 4 cars in australia, and all to be selling 30 to 40,000 a year. Holden have proven that you can get alot of money from the government to make a car, but if its not viable, then within a few years, you end up nagging and screaming at the government for more money. If Holden need more assistance after selling 33,000 cruzes with base model @ $21990, It would be a very brave Ford OZ exec. to try and peddle a business case for adding $19990 Focus's to the assembly line.

I think time will show, that even Holden can still lose money from a $149 million handout.

[Falc'man]

Originally Posted by bobthebilda

If the top selling car in australia is selling approx. 40,000 cars a year, then the only way a manufacturer is going to remain viable in australia, is to be making the top 3 or 4 cars in australia, and all to be selling 30 to 40,000 a year. Holden have proven that you can get alot of money from the government to make a car, but if its not viable, then within a few years, you end up nagging and screaming at the government for more money. If Holden need more assistance after selling 33,000 cruzes with base model @ $21990, It would be a very brave Ford OZ exec. to try and peddle a business case for adding $19990 Focus's to the assembly line.

I think time will show, that even Holden can still lose money from a $149 million handout.

Ouch!!

[Gobes32]

Originally Posted by bobthebilda

If the top selling car in australia is selling approx. 40,000 cars a year, then the only way a manufacturer is going to remain viable in australia, is to be making the top 3 or 4 cars in australia, and all to be selling 30 to 40,000 a year. Holden have proven that you can get alot of money from the government to make a car, but if its not viable, then within a few years, you end up nagging and screaming at the government for more money. If Holden need more assistance after selling 33,000 cruzes with base model @ $21990, It would be a very brave Ford OZ exec. to try and peddle a business case for adding $19990 Focus's to the assembly line.

I think time will show, that even Holden can still lose money from a $149 million handout.

Great post, presented logically and clearly. I wholeheartedly agree. Basic mathematics suggests that for Broadmeadows to be at full production, it needs to sell the top three cars in Oz, it is not going to happen.

[Mr Brooksy]

Originally Posted by FPV GTHO

I dont think Ranger would work locally, surely there would be too many complications building a separate chassis truck alongside a monocoque car and SUV.

Just wondering (excuse me as I'm not in the know of Broadmeadows politics), but if Falcon, Territory and Mustang where built on the same platform as rumored early last year, would this make business sense? I mean, who else around the world manufactures RHD Mustangs to be sold around Europe and other RHD markets? Surely Mustang will remain, so is there no case for this?

Again excuse my comments if its stupid, just thought I'd ask those of you who seem to know more.

[jpd80]

Originally Posted by bobthebilda

If the top selling car in australia is selling approx. 40,000 cars a year, then the only way a manufacturer is going to remain viable in australia, is to be making the top 3 or 4 cars in australia, and all to be selling 30 to 40,000 a year. Holden have proven that you can get alot of money from the government to make a car, but if its not viable, then within a few years, you end up nagging and screaming at the government for more money. If Holden need more assistance after selling 33,000 cruzes with base model @ $21990, It would be a very brave Ford OZ exec. to try and peddle a business case for adding $19990 Focus's to the assembly line.

I think time will show, that even Holden can still lose money from a $149 million handout.

What about Mondeo that sells at +$28,000 per car?
Sure the volume would be less but the return per vehicle is much better...

[Brazen]

Originally Posted by bobthebilda

If the top selling car in australia is selling approx. 40,000 cars a year, then the only way a manufacturer is going to remain viable in australia, is to be making the top 3 or 4 cars in australia, and all to be selling 30 to 40,000 a year. Holden have proven that you can get alot of money from the government to make a car, but if its not viable, then within a few years, you end up nagging and screaming at the government for more money. If Holden need more assistance after selling 33,000 cruzes with base model @ $21990, It would be a very brave Ford OZ exec. to try and peddle a business case for adding $19990 Focus's to the assembly line.

I think time will show, that even Holden can still lose money from a $149 million handout.

A base manual on road price is not a true indication of the transaction prices these cars are selling at. It is not uncommon for people to spending 30 grand upwards on a Cruze.

The Cruze isnt necessarily about making millions per vehicle, it is about adding economy of scale to a plant making $30,000 to $70,000 Commodores.

The problem with a lot of people of this forum is that they think that car companies can be run like a local deli, increase the price of a sausage roll by 50c to make more profit and it wont matter if your volume drops a bit....

Car companies have hundreds of millions in investments tied up in large long-lead time programs with hundreds if not thousands of employees. They are purchasing complex expensive components from all over the planet with engineering and design taking years and upwards of a billion dollars for a single vehicle. Volume is critical to get an efficient economies of scale and to justify ongoing investment. The more cars you build, the more you can spread you costs against, the cheaper each car is to build and the more profit you make.

Just by adding the Cruze to Elizabeth, Holden is now purchasing an extra 150,000 tyres a year, add that to the purchasing of Commodore tyres and you start to get an idea of the level of purchasing power extra volume gives you in a mass-maufacturing environment.

During the Japanses recession in the 90s it was cheaper for some of the Japanese truck manufacturers to keep building trucks and dumping them rather than produce less, as the economies of scale meant that that would lose more money ordering less components and building less trucks. That's the power of scale.

[FPV GTHO]

You dont just simply add the extra volume on top though. If you look at how Broadmeadows is setup, they cant simply build more Territory's to match demand without building more Falcons, of which there is less demand.

[jpd80]

Originally Posted by FPV GTHO

You dont just simply add the extra volume on top though. If you look at how Broadmeadows is setup, they cant simply build more Territory's to match demand without building more Falcons, of which there is less demand.

They just did that recently, increasing Territory build to 1:1 with Falcon....
and if you recall in the past, Territorys were built on Saturdays too..

[SpannerXR8]

Hey I've got an idea.....if Aussie people bought Aussie built cars then all this crap would go away, I am continually amazed at the amount of people who go and sit at V8 Supercar race in all their Ford or Holden hats, jackets and shirts, cheer on their heroes and then as soon as the race is over they go out the car park, fire up the Rice Burner and head home!!!!!
Buy Aussie, problem solved!!!!

[charles_wif_xf]

It's not as simple as that Spanner. The media have played a crucial role in decimating the Australian motor industry. For ages now, it has been unfashionable to buy a locally made car simply because the media said so. Anyone seen in a Falcon or Commode is considered a bogan.

Having said that, Ford haven't exactly done themselves a favour with their "marketing" of the local product to counter the prevailing attitudes. When Uncle Geoff was around, you knew about the BA (and the sales numbers showed that his efforts were making a difference). These days... nothing. I am yet to see a single ad on TV for the new BBQ fueled Falcons.

It isn't too late for Ford to pull the digit out of the collective bum and start marketing the teats off the Falcon as the good thing it is.

[Giant]

Maybe part of the problem is that the falcon is over engineered and doesnt require replacement often enough? Still got plenty of Taxis buying second hand BA falcons and running 1 million KM.

I gone threw 2 holdens 6 dvd players and countless phones and the falcon is still going strong.

[prydey]

or just put the tariffs back up 5% and give the aussie industry a fighting chance.

[charles_wif_xf]

Tariffs are only one part of the solution. Govco needs to do a billion times more than what it is doing to protect Australian manufacturing. But that would imply that they are there to benefit the nation, but I digress...

What Ford Aus needs to do is keep doing the R&D and engineering a la Ranger to pay the bills, make sure the Falcon and Territory are state of the art, promote the product accordingly and last but certainly not least, pull the f..king dealers into line with regards to post sales service!!!

[Polyal]

Originally Posted by charles_wif_xf

pull the f..king dealers into line with regards to post sales service!!!

THIS!

Man if I had the power (whahahaha ) Id be implementing a standardised system or something that made the experience from dealer to dealer is exactly the same.

None of this rubbish about playing dealers for warranty work....what a joke that is.

[charles_wif_xf]

If they were smart, Ford Aus would set up service centres owned by Ford Aus. They would need to provide a first class service experience that would give the Ford brand real value.

[jpd80]

Originally Posted by charles_wif_xf

If they were smart, Ford Aus would set up service centres owned by Ford Aus. They would need to provide a first class service experience that would give the Ford brand real value.

Very dangerous, bordering on predatory behavior, especially when they have sold 250 odd franchises...

[Bossxr8]

Originally Posted by jpd80

Very dangerous, bordering on predatory behavior, especially when they have sold 250 odd franchises...

Didn't they try that with the Retail Joint Venture thing in Sydney about 10 years ago, and it was a failure as the dealers were no longer in competition with each other, which screwed the customers????

[charles_wif_xf]

Originally Posted by jpd80

Very dangerous, bordering on predatory behavior, especially when they have sold 250 odd franchises...

To sell cars maybe. But the service centres are just Authorised Ford Service centres. If FoA did something like that, it would make the dealers pull their socks up.

Originally Posted by Bossxr8

Didn't they try that with the Retail Joint Venture thing in Sydney about 10 years ago, and it was a failure as the dealers were no longer in competition with each other, which screwed the customers????

Weren't those just for selling cars?

[Bossxr8]

Originally Posted by charles_wif_xf

Weren't those just for selling cars?

They were full dealerships weren't they?

[jpd80]

Originally Posted by Bossxr8

Didn't they try that with the Retail Joint Venture thing in Sydney about 10 years ago, and it was a failure as the dealers were no longer in competition with each other, which screwed the customers????

That was different, Ford actually bought back existing franchises, the suggestion above was
to start up in competition against dealers they sold franchises to for sales and service of new Fords.

There's a big difference...