New Car Manufacturing in Australia: Is the ship sinking?

[Struggo]

New Car Manufacturing in Australia: Is the ship sinking?
By John Cadogan | June 25th, 2011 42 Comments


The Australian new car manufacturing industry is on its knees. If we were discussing a horse race, the likelihood of the industry surviving the next decade – in particular the survival of two of the three players – would be, to put it mildly, a long shot. If the Australian new car manufacturing industry were a patient in a hospital, sooner or later a rational discussion about maintaining ongoing life support, and having the priest on speed-dial, would need to be had.

Let’s have that discussion now.

Just over a year ago, John Wormald, the principal of respected international automotive think tank and government advisor, Autopolis, declared that Ford Australia would be “the next Mitsubishi”, a reference to Mitsubishi Motors Australia Limited’s withdrawal from local manufacturing a few years earlier. Mr Wormald said this would occur because Ford Australia, among the three local manufacturers, was the most isolated from its parent company’s operations.

Since Mr Wormald’s assessment, things have gotten a lot worse at Ford Australia. Fast forward to the end of 2010, and annual Falcon sales slumped to their lowest level in more than a decade. Just 29,516 Falcons were sold that year, a reduction of a staggering 60 per cent since 2003 when 73,220 Falcons rolled off showroom floors. This year, in January, Falcon sales experienced their worst month in at least 15 years. In May, a fairly typical month for car sales in Australia, Falcon sales were 1331 units – a 59 per cent drop, compared with May 2010. This is a massive drop on the back of a sustained massive drop in sales – the double-whammy of exactly how you don’t want your sales chart to look if you’re in business. Hundreds of unsold Falcons crowded the grass surrounding the Broadmeadows factory, and working hours at the plant were cut back.

When you’re a factory, production has to equal sales. Otherwise: massive problem. Death by oversupply.

http://www.caradvice.com.au/124635/n...-ship-sinking/

Here is our problem in a nut shell,

Australia is one of only 13 countries in the developed world with the skill and ability to engineer and build a car from the ground up. We also have the lowest tariff barriers.

[GTENVY]

I cant say I for one have helped, I am not in a position to purchase a new Falcon. So I am not going to whinge why arent people buying because I havent brought so I have no right to.

All I know is there is a reason people arent buying Falcon and are buying alternatives instead. Are Ford looking at it or doing anything about it? Its hard to say whats going on behind closed doors. I do know there is a perception out there about Ford from people who dont car about cars, want A to B cars and some people who do care about cars, how Ford change that is the challenge.

[Resurrection]

Mate, the ship hit an iceberg several years ago and is slowly sinking. The author of this article is like many who were too busy listening to the band playing while the disaster unfolded around them and only now that the water is at their feet do they understand the gravity of the situation.

[2011G6E]

Fair enough I suppose.
We're a small market...tiny by world standards...and it's a miracle they bother making cars here at all instead of just importing them. Only our pretty-much unique regulations saying you can't freely drive brand new left hand drive cars on our roads is what keeps the big makers from just importing straight from thier factories overseas instead of, as now, building just-for-Australia models in other places.

No one saw Mistubishi collapsing like it did...the last Magnas and the 380 (depite the stupid name) were good cars...the 380's I have driven were great cars, well equipped, handled well, smooth, quiet, comfy, looked pretty good, but bam, fell on it's ****. No real reason Ford and Holden won't go the same way one day I suppose.

[new2ford]

Lack of export seems to mark out Australia from a lot of other car-manufacturing countries. Presumably that's due to the US and Japanese parent companies not wanting the Australian output competing with their home country outputs.

http://en.wikipedia.org/wiki/List_of...cle_production

However Australia is not alone in its decline as the above table shows. Also declines in US (huge), Japan (slight), France, UK, Belgium, Sweden, Italy, Austria, Finland, Spain. Some are static like Germany and Netherlands.

I don't know where they get their "13 developed" countries from - the majority of the countries on that list are pretty developed and I'm sure more than 13 of them can develop a car from ground up.

The really big growth is in China and India with other big growth in South Korea, Thailand, Iran, Turkey and some other smaller ones. The European growth nowadays is driven mainly by Czech Republic and Slovakia (where many German, French, Japanese and Korean models are also built), with Poland, Romania and Slovenia playing smaller roles. Volkswagen and Skoda are also being smart gunning for assembly in China, India and other Asian countries.

A lot of those countries have governments that actively insist on local industrial capability, even if only assembly, unlike Australia that gives up easily. A lot also have trade barriers in contravention of the spirit of international agreements whereas Australia is open season no matter what the cost. So the whole car manufacturing scene is changing around the world.

Governments aside though, the thing that gets me most about Australians is that they will go out and buy an imported car, which costs local jobs, which cumulatively and ultimately impacts on their own job and well-being.

[Polyal]

Its just simply the globalized world catching up.

Unless you are a niche player then working with small numbers doesnt work. Consumers demand more, and a localized product cannot compete in the overall scheme of things unless they have a major competitive advantage. But even then, Porsche would not exist if it only sold in Germany.

Its like the local milk bar VS woolies...its very rare the little guy wins.

Gov wont have the balls to change tariffs, so its "easier" to prop them up now and then. But you can only do that for so long.

I think both GMH and FoA know unless they come up with a plan that creates a wider scope then the local cars wont last forever.

FoA have been smart and picked up alot of R&D work, which I assume is making the balance sheet look better?

They have LiLPG, TDI, EB4 coming about so if thats not enough to make inroads then its a bigger problem then first thought.

That and peoples tastes/needs change. I mean who the heck would have guess that Hilux/Navara/Ranger et al would be selling in the numbers they do.

People want multipurpose because in most cases they are down sizing aswell. So would you buy a Falcon for a Territory for the family car? The Tezz has the Falcon covered on all bases. It was suffering from a bad name with fuel consumption, that is pretty much sorted with TDi so hopefully its all up from here.

Just my take on it.

[new2ford]

Originally Posted by Polyal

Porsche would not exist if it only sold in Germany.

It probably wouldn't exist if it was only made in Germany too! The Porsche Cayenne at least is made in Slovakia - cheaper to build and better quality.

[Polyal]

Originally Posted by new2ford

It probably wouldn't exist if it was only made in Germany too! The Porsche Cayenne at least is made in Slovakia - cheaper to build and better quality.

Yeah thats what I mean, you get my drift.

Everyone is happy to get all the good things from globalisation, but situations like whats happening to the falcon is also a direct result..goes both ways.

[DanielXR8]

Falcon needs a global market and Ford Australia need to realise quality in everything you do is a culture, not a bullet point rushed past at the last meeting.

[max_torq]

The exchange rate, relative wages, chinese manafacturing are very strong factors that threaten any local manafacturing industry, not just cars. The only response is to reduce risk, cut production, look for competitive imports. An opportunity now, though, is to buy technology. Engineers can be lured with Australian pay rates and new machinery acquired. The time now is to be rationalising old methods, and putting in place products that consumers will want as the local buyers return to the market.

[2011G6E]

Originally Posted by DanielXR8

Falcon needs a global market and Ford Australia need to realise quality in everything you do is a culture, not a bullet point rushed past at the last meeting.

I'm surprised that Ford doesn't try to sell the Falcon overseas. Lots of places enjoy large rear wheel drive sedans, the Commodore did well as the G8 for Pontiac in America until they all fell over during the economic collapse in the US.

Of course, once you start selling on the world stage, people will demand a lot better. You couldn't sell a Commodore or a Falcon in European countries where, for the same money (because of lack of protectionist import tariffs), they can buy a BMW or Mercedes sedan, which in those countries are seen as just normal family vehicles. In America you might have a chance, a even in the form we get them now, the Falcon and Commodore are better screwed together than most Yank cars. Of course you then run into the wall of selling a right hand drive car...they'd have to be redone as lefties, not for legal reasons, but to "fit in" with the rest of the cars on sale new. In Europe that isn't a real problem, as they are used to having a variety of cars, left and right hand drive, all for sale from various places.

Unless America could be targetted, there's not much hope for exports. Unless it could be priced very sharply for the standard they are built at now, then even though it could be left in right hand drive, Europe would be out as well.

[Reaper8]

i think it that cars are getting imported a lot cheaper now, wages oversea's are lower than ours, building cost lower. look at most of the new cars on the road there not built here, we even import a lot of food because its cheaper than buying from here.

[Polyal]

2011G6E...there has not been an aussie export that you could classify as a success...ever...the reasons dont matter at the end of the day. Having great product is only half the battle.

[Polyal]

Originally Posted by Reaper8

i think it that cars are getting imported a lot cheaper now, wages oversea's are lower than ours, building cost lower. look at most of the new cars on the road there not built here, we even import a lot of food because its cheaper than buying from here.

Yes it is a crazy world we live in when its cheaper to get fruit from fricken Canada in our supermarkets so it undercuts the locals...work that out.

[new2ford]

Originally Posted by Polyal

there has not been an aussie export that you could classify as a success...ever...

Kylie Minogue?

[Polyal]

Naughty bums dont count...LOL

[vztrt]

Originally Posted by new2ford

Kylie Minogue?

She's not big in the US so no.

ACDC on the other hand.

[bigdude1011]

Originally Posted by Polyal

there has not been an aussie export that you could classify as a success...ever

The Melbourne-built Camry is one of the most popular cars in the Middle East. In Dubai, every second taxi was a Camry, the others were Chevrolet Caprices (Holden Statesman).

At the beginning, the Mitsubishi Diamante (Verada sold in Japan and USA) was somewhat popular.

However, since they're Japanese, rather than US owned makes, people don't really count them as Australian.

[ray38l]

Holden were going in the right direction when they released the crewmen, adventra and monaro models. Had they have stuck with that plan it would have revived the large car segment in the long term. People expect alot from there cars these days even if there not going to use it for what it is made for ( all wheel drive soft roaders are the best example).
A large rwd 5 seater is not considered good enough anymore by the masses.

[vztrt]

Originally Posted by ray38l

Holden were going in the right direction when they released the crewmen, adventra and monaro models.

Beside the Monaro that had a little bit of success all three models didn't do well and were discontinued due to this.

The Adventera failed so hard (I remember the 24 units a month) it would have hurt Holden quite badly.

[EDManual]

no chance of exports with our dollar where it is, they didnt export it when the dollar had half its value, so I doubt they would bother now sadly...

[Hally]

Polyal,

A couple of points in your posts have made me realise that the large car segment is not dead, it is only the large sedan segment that is going through a slow death.

As driving enthusiasts, I think we forget that the driving dynamics of a car are less important to an avergae punter who places functionality ahead of ultimate road holding and performance.

The last 10 years has seen a dramatic improvement in the quality of SUV's, 4x4 dual cabs etc, and in reality, they are easy and car like to drive. It will be interesting to see if over the next few months if the Territory outsells the Falcon. I have a strong feeling that it might, especially if Ford get the manufacturing balance right or are able to change it if demand dictates. It never seems that Tezza's are sitting in the grass at Broadmeadows.

2011G6E - Whilst in Europe you can drive LHD or RHD in most countries, it jsut doesn't happen that a mainstream or volume selling model is sold in the opposite configuration to what is normal in that country. Having driven LHD cars in Australia, I can tell you it gets very tiresome, very quickly (you always need to take a passenger to the Maccas drive-thru!)

Cheers,

Andrew

[ray38l]

Originally Posted by vztrt

Beside the Monaro that had a little bit of success all three models didn't do well and were discontinued due to this.

The Adventera failed so hard (I remember the 24 units a month) it would have hurt Holden quite badly.

i admit it didn't work out at the time. Holden could have made the adventra and crewmen better but i still think that those type of models are what's going to save Australian manufacturing. Just look at smaller cars they have sedan, wagon, hatchback and coupe models. People want more practical cars.

[vztrt]

Originally Posted by ray38l

i admit it didn't work out at the time. Holden could have made the adventra and crewmen better but i still think that those type of models are what's going to save Australian manufacturing. Just look at smaller cars they have sedan, wagon, hatchback and coupe models. People want more practical cars.

Hence why people have moved away and bought SUV's, lifted utes, and small cars.

Coupes aren't practical and people that buy them are small in numbers. The crewman failed because a navara, hilux & ranger are more practical.

The Adventera was just dumb and was Holden's poor attempt to go up against the Terri.

[Transit Truck]

Instead of the government giving them handouts, they should scrap all tax on local manufactured cars. All stamp duty and LCT.

They need to sell more cars, not receive handouts.

The government will still get it's share once profits are posted.

[Polyal]

Originally Posted by Hally

Polyal,

A couple of points in your posts have made me realise that the large car segment is not dead, it is only the large sedan segment that is going through a slow death.

As driving enthusiasts, I think we forget that the driving dynamics of a car are less important to an avergae punter who places functionality ahead of ultimate road holding and performance.

The last 10 years has seen a dramatic improvement in the quality of SUV's, 4x4 dual cabs etc, and in reality, they are easy and car like to drive. It will be interesting to see if over the next few months if the Territory outsells the Falcon. I have a strong feeling that it might, especially if Ford get the manufacturing balance right or are able to change it if demand dictates. It never seems that Tezza's are sitting in the grass at Broadmeadows.

2011G6E - Whilst in Europe you can drive LHD or RHD in most countries, it jsut doesn't happen that a mainstream or volume selling model is sold in the opposite configuration to what is normal in that country. Having driven LHD cars in Australia, I can tell you it gets very tiresome, very quickly (you always need to take a passenger to the Maccas drive-thru!)

Cheers,

Andrew

This is the exact reason why I made a thread discussing that IMO if the falcon continues it should be based off a GRWD platform and head a similar way than that off the 300C (in concept). Bold styling, luxury version, and a sporty version for the XRs. IMO these are the areas the Falcon can do ok.

FPV can work off the XR version, do their thing, and stop offering so many models, let people option what they want within the catalog of parts they have.

For your bread and butter vehicle the Tezza kills the falcon. I dont know many people that would buy the XT falcon over say a TX Tezz..or even a XR6 over a Tezz..it just offers so much more.

The focus', mondeos etc are what people are getting if they want a sedan or hatch, and you cant blame them for the kit they get. What the euro's cant do is a performance RWD sedan, the G series needs a kick up the bum with technology which I think we will see come FG2. These are the two cars I would carry forward past FG if it happens. The more they make the Falcon like the rest the quicker it will die IMO.

Who knows...and thats the problem, Ford have not said a single thing and I think its killing consumer confidence.

[new2ford]

Originally Posted by Hally

2011G6E - Whilst in Europe you can drive LHD or RHD in most countries, it jsut doesn't happen that a mainstream or volume selling model is sold in the opposite configuration to what is normal in that country. Having driven LHD cars in Australia, I can tell you it gets very tiresome, very quickly (you always need to take a passenger to the Maccas drive-thru!)

I don't think the sale of opposite drive cars is encouraged in any European country. Having driven a (UK) RHD car around Europe I can tell you it's no joke, especially overtaking (trucks in particular) where you have to place half the car on the opposite side of the road in order to see ahead. Quite a safety issue actually.

Ford AUS would have to gear up to do LHD in its production and then get clearance from Ford US to sell it around the world. I'm sure there are many places the Falcon and Territory would sell well but the tune is called from the US where they seem to have an egotistical view that what they do is better. I give credit to GM for recognising the quality of Australian designs and taking them into the US market. I guess Ford accepts their European products though, so they're only half stupid.

[Gobes32]

Originally Posted by Reaper8

i think it that cars are getting imported a lot cheaper now, wages oversea's are lower than ours, building cost lower. look at most of the new cars on the road there not built here, we even import a lot of food because its cheaper than buying from here.

One of the biggest problems is not the wages it's the other "costs" such as heightened safety and environmental obligations. Not to mention workcover, payroll tax and other taxes Ford, Holden and Toyota pay in Australia.

[Dr Smith]

Originally Posted by bigdude1011

The Melbourne-built Camry is one of the most popular cars in the Middle East. In Dubai, every second taxi was a Camry, the others were Chevrolet Caprices (Holden Statesman).

At the beginning, the Mitsubishi Diamante (Verada sold in Japan and USA) was somewhat popular.

However, since they're Japanese, rather than US owned makes, people don't really count them as Australian.

However the inter company pricing issue has been finally resloved leading in a tax bill to Toyota. It might lead to maintaining production volumes however it dosen't make much money.

IIRC, in building a car there is a 10% labour cost so it's not the biggest factor in building a car no matter which country. Robotics as part of manufacturing wouldn't be such a big variable if putting some in a plant in China or Campbellfield. Expertise in R&D would be a big labour cost however the fact Ford Australia competes with other divisions and won work shows that it's competitive so that isn't seen as a negative to work being done here. The real issue is the size of our market and the capacity of our plants. One chinese glass factory puts out more product then all of Australia's glass man. plants combined. The plant is state-of the art and not based on massive, cheap labour workforce. It's totally hi-tech with massive output so it works on high volume/low profit per unit model. Then again the Chinese market means it can operate that way and ROI's are more then OK. A population of 22million cannot compete as the ROI dictates we need to make a higher unit profit due to the lower volume of sales. Plus until recently companies like Toyota were happy to cross subsidise between international divisions moreso then GM or Ford.

There's some big decisions coming up for FoMoCo Aust and even Holden is sounding out some war drums.

Had someone propse a way out idea..."as stupid as it may sound, maybe a joint manufacturing plant building seperate brand vehicles might be an option. A 200,000+ output and enough economy of scales to make it viable."

[BroadyFord]

There was a grim article in today's Financial Review where Holden's CEO said that the future of Holden in Australia is now uncertain because of the government's scrapping of the Green Car Innovation Fund. The argument was basically that the government had betrayed the car companies and withdrew promised funding that was to be used for future projects. Now that the money for those projects is gone, he said there is really no point in continuing to manufacture here - the same was said about Toyota and Ford.

Interestingly, Ford missed the deadline to apply for funding for the next gen Falcon post 2016, finally confirming the likelihood of the closure of Broadmeadows after the FG.