Ford’s departure a wake-up call for the government and industry

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Ford has announced that it would be closing its Geelong and Broadmeadows units by 2016, releasing about 1200 people off their employment contracts. SOURCE: FILE


By Mehroz Siraj

Ford’s announcement of ending its Australian production of commercial vehicles has come down as a major shocker for many ordinary Australians over the last one week.

In a broad-based announcement, the company’s chief manager in Australia, Bob Graziano, announced that the decision had been taken in the light of the strong dollar and the increasing costs of doing business in the country.

Graziano said that Ford incurred running losses of over $600million in five years.

Graziano’s statements are a damning indictment of the state of the manufacturing industry in Australia and the economic policies of the federal government.

The high Australian dollar which has been trading at parity versus the American greenback has made imported cars cheaper by over 50 per cent, as against their locally manufactured rivals.

The high energy costs, which are a direct result of the government withdrawing the subsidies that it should have provided to the manufacturing industry, have also led to a sharp increase in overhead costs in the manufacturing industry.

Australia’s artificially high wages and inflated costs of living too have contributed to the demise of the car industry, as it is financially infeasible for car manufacturers to be paying their employees in excess of $20 an hour.

Labour costs in the car manufacturing industries in Japan and Europe are only a fraction of what they are in Australia.

In America, labour costs in the manufacturing industry are hovering around $12 per hour for casual and contract workers.

The results of these lower labour costs in the US are clearly visible.

According to details on Ford’s US website, the new 2013 Ford Focus hatch-back is on sale for US$16,200 there, whereas the Australian version of the same vehicle is being sold at prices between AU$24000 and AU$27000 at car dealerships across Melbourne.

The federal government should be rightfully taken to task for not doing enough to bring down the manufacturing costs for some of Australia’s largest employers.

Japan and the United States have both been through worse economic times lately.

After the Japanese earthquake, the country’s two largest manufacturers, Toyota and Nissan lobbied in favour of currency devaluation and as a result, won a hard fought victory two years ago when the Japanese government decided to print more money.

As a result, the yen has shed 25 per cent of its value against the American greenback.

This has led to a surge in the export volumes and profits of Japanese made cars.

Similarly, in America, during the Global Financial Crisis (GFC), upon the instructions of the Bush and Obama administrations, the US Federal Reserve resorted to printing billions of dollars in new currency notes.

This led to the devaluation of the dollar against other international currencies and hence made it cheaper and more profitable for American car manufacturers, including Ford and General Motors to manufacture cars in Detroit.

The US automobile manufacturers have been able to attract renewed subsidies and grants from the Obama administration.

This financial assistance has enabled them to invest more resources in new research and development, particularly in the growing area of producing more fuel-efficient cars.

Subsidies and other forms of active government involvement in the automobile industries in those countries have ensured that jobs within the industry’s subcontractors remain strong as well.

It has also enabled the industry to provide training and employment opportunities for the many engineers and technicians graduating from American universities and training schools.

Nothing of this sort has happened in Australia and the state and federal governments are to blame for this. The $12billion given to the car industry in bail out money is just about $18 per capita spending on the industry.

This pales in comparison to the per capita spending of US$260 in the USA and US$330 in Sweden, where governments are investing money with the car industry in the research and development of high quality products.

The automobile industry in Australia has repeatedly called for such measures to be taken, however, a federal government that is fixated with the mining boom has not found it necessary to tackle the issues of this vital industry that employs over 50,000 Australians.

The total job losses would not only the 1200 announced by the company on Thursday.

The jobs being provided to the community by the businesses who were Ford’s suppliers and contractors, would also be affected and slashed.

Similarly, with Ford’s exit, hundreds, if not thousands of engineering students studying at Australian universities and technical training schools would now be deprived of training and employment opportunities.

The overall knock-on effect of the announced job cuts would be felt far and wide and would likely lead to further reduction in tax receipts for the Victorian and Federal governments.

Ford’s decision was writing visible on the wall for many months, but the concerned authorities failed to heed any of the warning signs.

As a result the federal and Victorian governments would now have to deal with the completely avoidable situation of feeding and providing for all those employees who lost their jobs and their families.

The future fund, which would oversee the government assistance provided to the sacked workers, would cost an estimated $37billion over a year.

This cost could have been avoided and profitability could have been achieved if the federal and Victorian government’s would have taken the issues of Ford and the automobile industry seriously.

The Writer is Editor and founder of Australian Affairs.

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