Ford says it will close all auto plants in Australia

Labor costs, surge in currency hurt industry

5/24/2013
BLOOMBERG NEWS

SYDNEY — Ford Motor Co. will stop making cars in Australia, nine decades after founder Henry Ford first began building Model Ts 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 that the company's two plants in Melbourne and Geelong will close in 2016, eliminating 1,200 jobs.

Australia’s three car makers have struggled as a 27 percent rise in the local dollar against the yen over the last 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.

“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.”

Ford, which began assembling Model Ts at Geelong in 1925, is the smallest of the nation’s three manufacturers, behind Toyota and General Motors.

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.

Australia’s hourly compensation cost in manufacturing was $46.29 in 2011, compared with $47.38 in Germany, $35.71 in Japan, $35.53 in the United States, and $11.65 in Brazil, according to a survey of 33 countries by the U.S. Department of Labor.

Ford Australia lost $136 million during its 2012 financial year, bringing total losses over the last five years to $579 million, Mr. Graziano said.