Slow Death Inevitable For Ford and GM's Aussie Operations?
Ford Australia Secures Government Money, Raises Questions About Industry’s Future In Australia
By Derek Kreindler on January 12, 2012
Ford’s Australia branch is getting $34 million AUD (roughly $35 million U.S. dollars) plus an unspecified contribution from the government of Victoria (an Australian state), to sustain a Ford plant in Melbourne. Total investment is said to be roughly $105 million USD. Holden, GM’s Australian division, is looking for some government funds too, and its raising questions about the viability of Australia’s domestic car industry.
Holden has been negotiating for their own package, would help develop a new Commodore. More significantly is the fact that some money would be earmarked to help develop a next-generation Holden Cruze (nearly identical to our Chevrolet version), currently the sole small, fuel-efficient car produced in Australia.
While Australian cars are generally thought of as being large, V8 powered brutes, consumer tastes have been shifting towards cars like the Cruze, which was Australia’s 5th best-selling car. The Mazda3 also unseated the Commodore as Australia’s best-selling car for the first time in 15 years.
In 2008, Mitsubishi closed up shop after getting government assistance to produce the 380 (similar to our Galant) . Production lasted a mere three years, even though the 380 was supposed to be the begging of a turnaround for Mitsubishi’s Australian operations. The 380′s failure has cast a shadow on Australian vehicle production ever since, and more importantly, advanced a notion among some that continued bailout money merely prolongs the natural death of a financially unsustainable plant or vehicle.
Of course, the deal has strings attached – some of the money must go towards making the Falcon, and the Ford Territory SUV, safer and more fuel efficient. While the Australian government hasn’t exactly told Ford that it needs to “build a 40 mpg car“, we’ve seen shades of this before at home. The Falcon and Territory are under specific threat due to Alan Mulally’s ”One Ford” doctrine which demands global variants of vehicles rather than market-specific product.
One analyst pegs the amount of government money pumped into the local industry at about $500 million per year since 2001, in a program that is supposed to run until 2020. One opposition politician even suggested that the car industry in Australia couldn’t survive without government assistance.
Compared to America, the culture of government assistance seems much more deeply entrenched, and opinion is starting to shift towards the view that a perpetual appetite for taxpayer funds, especially for an industry that produces increasingly irrelevant vehicles (anecdotal evidence suggests that most Commodores, Falcons etc are bought by government and private fleets) and exports little is becoming unsustainable.