Aussies get Ford notice of goodbye

Production exit tied to high costs

New cars sit on a Ford dealership lot in Sydney. Ford said Thursday that it will stop making cars in Australia, closing two assembly plants.
New cars sit on a Ford dealership lot in Sydney. Ford said Thursday that it will stop making cars in Australia, closing two assembly plants.

SYDNEY - Ford Motor Co. said Thursday that it will stop making cars in Australia, nine decades after founder Henry Ford first began building the Model T in the country, as a surge in the currency undermines the local industry’s ability to compete with imports.

Ford Australia faces costs double those in Europe and four times those of its Asian divisions, local President Bob Graziano told reporters Thursday. He announced the loss of 1,200 jobs starting in October 2016 at two plants in Melbourne and Geelong.

Australia’s three car makers have struggled as a 27 percent rise in the local dollar against the yen over the past year stoked sales of cheaper imported vehicles and cut exports. The closure of one threatens the viability of the whole industry and is a blow to Prime Minister Julia Gillard, whose Labor Party is trailing in polls ahead of a Sept. 14 election.

“Australian manufacturing can’t keep its head above water,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “High labor costs mean we can’t compete long-term against lower-cost countries, especially in Asia. The strong exchange rate is exacerbating Australia’s lack of competitiveness.”

Ford, which began assembling Model T’s at Geelong, west of Melbourne, in 1925, is the smallest of the nation’s three manufacturers after units of Toyota and General Motors.

The removal of one could spark a “domino effect” as the industry as a whole becomes too small to support its own supply chain, Jac Nasser, chairman of the world’s largest miner, BHP Billiton, and former chief executive of Ford globally, said at an event in Melbourne last month.

“Manufacturing is not viable for Ford in Australia for the longer term,” he said. “Our locally made products continue to be unprofitable, while our imported products continue to be profitable.”

There were few signs of workers Thursday afternoon at Ford’s Broadmeadows complex, a collection of plants and buildings in Melbourne’s northern suburbs. Adrian Dodd, a spokesman for the Australian Manufacturing Workers Union, said the majority of staff had left soon after hearing about the job losses and many were not expected back at work until next week.

“It’s time the politicians in this country had a reality check about the factors that are impacting on our industry,” union national secretary Paul Bastian said after attending talks at the plant. “We also fear for the knock-on effect to the rest of the industry.”

The car sector directly employs more than 45,000 people across the country, according to industry group the Federation of Automotive Products Manufacturers. A further 250,000 jobs are derived from related activities.

Ford’s closure is a further sign of Australia’s weakening labor market amid sustained strength in the currency that makes trade-exposed industries uncompetitive. The Treasury, in its budget released last week, projected unemployment would rise to 5.75 percent next fiscal year, the highest since 2009.

The currency was one of a “number of different factors” that contributed to Ford Australia’s high costs, Graziano said.

GM and Toyota will continue manufacturing cars in Australia, the two companies said Thursday in separate statements.

Information for this article was contributed by Michael Heath, Jason Scott, Chua Kong Ho and Craig Trudell of Bloomberg News.

Business, Pages 27 on 05/24/2013

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