Aussie Motoring

by Stuart Livesey

Your parent company is bleeding money - $45 million dollars a day last year.

You claim you’re profitable but your cars aren’t selling - the Falcon came in sixth behind Commodore, a whole bunch of Toyota models and the Mazda 3

Your popular SUV is losing its popularity

Your competitor has the new VE - but you won’t have anything new till 2008.

The full story in today’s Courier-Mail makes interesting reading.

You get brand-name tools at the lowest prices.

Get a sweet suspension deal

The new BF Falcon XR6 Cab Chassis MkII is one mean combo of workhorse and sports machine and it comes at a sweet price that, for a limited time, is one hell of a lot sweeter.

Now you get to choose between half-tonne suspension and 17″ alloys or a one-tonne suspension and 16″ alloys at no extra cost.

But it really is only for a limited time.

Three weeks ago while the spotlight was on Mitsubishi and the leaked plan to close their assembly line here in Australia Ford Australia quietly announced that it would be reducing production at its plants in Victoria.

Today it has announced that it wants to reduce its workforce by around 600 before Christmas and has urged workers to accept voluntary redundancies.

Ford blames competition and reduced demand in the large car market for the drop in demand.

600 jobs represents a workforce reduction of around 10% and makes interesting reading in the light of what I said here. It’s also an interesting announcement to make in the middle of the Victorian election campaign.

What will the impact be on Ford in Australia?

When the parent company of Ford Australia posts such a huge loss in just one quarter you have to wonder when the local company will begin to feel the impact. There is no doub that a big negative number was expected in the third quarter because Ford is in the middle of massive job cuts and asset write-downs but no one was expecting a number quite this big.

When all those expected negatives are removed from the equation Ford still took a $US1.2 billion hit to its bottom line thanks to slower than expected truck sales. Over the last year or so Ford has been relying on truck sales to keep the money flowing as American consumers turned their back on Ford cars but this quarter the American market began to drift away from Ford trucks too.

Just to give you some idea of what a major hit Ford has taken all you have to do is compare the loss this time last year - $US191 million - to that $US1.2 billion figure this year.

The new CEO of Ford was stating the obvious when he said: “These business results are clearly unacceptable”.

So the question remains, when will Ford Australia begin to feel the impact?

Ajax Fasteners, the parts manufacturer that supplies specialest screws and clips to all four Australian car manufacturers has managed to stay in business until at least Friday.

Aussie Motoring reported back on August 12 that the company was on the brink of collapse and if it did go the consequences for Ford, Holden, Mitsubishi and Toyota would be dire. (You can read that report here)

Somehow the company managed to trade through Monday and Tuesday but workers on the first shift this morning reported to work with the expectation of being stood down. However overnight the four Australian car makers managed to cobble together a plan that will see Ajax Fasteners last until at least Friday.

It’s hard to believe but that headline is closer to fact than fiction. As reported on August 8 in More Supply Problems for Holden and Ford the industry is in dire trouble as another parts supplier is on the brink of closure.

Ajax Engineering Fasteneters, a company that supplies fasteners and bolts for Holden, Ford, Toyota, Mitsubishi and PBR Australia, is in voluntary administration and now cannot afford to pay it’s workers. Union spokesperson, Bill Shorten, claims the company needs $450,000 by Monday to pay workers and a further $2 million by the end of next week.

Unless the money is forthcoming the Administrator will have no choice but to close the plant. If that happens 200 people will be out of work immediately but that’s just the start. It’s estimated that PBR will run out of stock in less than 24 hours, Holden will be out of stock on Monday and Ford may just last till later in the week.

Re-supply is not just a matter of ducking down to the nearest Bunnings store and picking up a few packets of screws either. While fastemers and bolts may not sound very high tech what we’re talking about here are specialty products designed and produced for particular applications. Finding a new supplier will take months.

Talks aimed at providing a rescue package have been taking place between the Administrator and the stake-holders but one stake-holder has been unable to agree to the terms of a funding package.

You can read more about this looming disaster in the Australian car industry here

The Federal Chamber of Automotive Industries announced today new car sales continue to lag behind sales for the same time last year. 1079 fewer new vehicles were sold during July than for July 2005. That monthly drop now means that 3.1% fewer new cars have been sold so far this year compared to the same period last year.

Toyota sold the most number of new vehicles with 16,977; Holden came second with 11,129 new vehicles sold and Ford could only manage third with 9,627.

The top selling car was the Toyota Corolla with 4711 units sold during July. Holden sold 4022 Commodores and Ford sold 3951 Falcons.

Kia

On a worldwide basis Kia reported a 2.3% decrease in overseas sales despite recording 1.8% increase in US sales. In Europe, where Kia is in the midst of bringing a new plant online, sales were down 1.4% although that drop in sales may turn around when they release their new European built small car code named the ED in December.

The new European built Kia will only be sold in Europe

‘Check back next month’ seems to be the main response when Tom Gorman, Ford Australia’s president was asked what Ford was planning on doing to meet the new competition.

Ford will be releasing an updated Falcon next month but one thing Ford claims it won’t be doing is cutting prices to keep Falcon sales happening.

A trip to Brisbane from Hervey Bay on a Sunday afternoon usually takes around four to five hours and even though a some of the trip is along a multi-lane highway up until recently you could expect the traffic to be heavy and moving very slowly on that multi-lane part of the trip.

Last weekend the trip took less than 3.5 hours and the traffic could not have been described as heavy at all. So has the increased cost of fuel finally hit the Australian motorist? If it has what can we expect to see in the short-term future for the Aussie motoring industry?

Already we’re seeing Mitsubishi going from bad to worse as their great white hope - the 380 sedan - turns into a great white disappointment. In fact the 380 has been such a poor seller that within a few weeks of the release of the car Mitsubishi reduced the numbers rolling off the production line and then began discounting the car to encourage sales.

Now the South Australian government is propping up the company by ordering over 680 of the model for the Government fleet. More than 500 of those will be delivered by the end of June.

And there is no doubt that Mitsubishi is in dire need of help; sales of their vehicles - including imported models - fell by 10% over the period from May 2005 to May 2006.

A 10% fall in sales is far above the industry as a whole. Sales for the industry as a whole are down 2.8% this year compared to last year with Holden and Ford continuing to fall behind Toyota. To the end of May sales of Toyota vehicles had reached 82,227 compared to 60,792 for Holden and 48,496 for Ford.

American Motor Vehicle Sales

Perhaps the Australian motor vehicle industry will be looking to America for some hint of what’s to come where, despite discounting and other incentives, the US manufacturers continue to fall behind the European and Asian manufacturers.

Comparing figures for May 2005 with May 2006 show that Chrysler’s sales are down 14% and Ford is down 1.9%.

Toyota continues to race ahead of the pack continually posting record sales months and May 2006 was no exception. Other companies with increased sales during May were Volkswagen Hyundai, Mitsubishi (yes in the US Mitsubishi recorded increased sales during May mainly thanks to the Galant), Audi, Mercedes, Mazda, Subaru and BMW.

The only foreign cars to buck the positive trend in the US were Volvo and Mini.

The Mitsubishi Galant - popular with the American motoring public.

Ford Australia and the Federal Government announced yesterday that Ford would receive an assistance package worth over $50 million to ensure that Ford continues to build cars in Australia.

$40 million of that package will go towards the development and manufacture of the next Falcon and Territory models. Does this mean that we can expect to see John Howard embossed on the steering wheels of new Fords?

Seriously though, wouldn’t this money be better spent developing smaller and more fuel efficient vehicles?