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Ford Australia under the FoMoCo microscope

Official duties: Ford Australia CEO, Tom Gorman and Victorian Premier, Steve Bracks with Bill Ford and Industry Minister, Ian Macfarlane.

Ford Australia starts to feel some heat from head office

Ford logo31 Oct 2006

BILL Ford may have backed Blue Oval manufacturing Down Under, but that does not mean Ford's Australian subsidiary will get a free ride.

Ford Australia president Tom Gorman has admitted Broadmeadows' performance will be examined even more closely in the wake of the Ford Motor Company's record third-quarter loss.

"It’s been a pretty challenging last couple of quarters out of the US for us and I think it just puts more focus on us to get our jobs done," Mr Gorman said.

"Given the challenges facing us in North America what's critically important for my team and all of us in Australia is to make sure we deliver on our commitments whether it is quality, profitability, consumer satisfaction.

"All of those top-line metrics become that much more important for us because, frankly, the margin for error has been diminished significantly."Asked at Thursday’s Sydney motor show opening whether the struggling global car-maker’s poor US sales had put more pressure on Ford Australia to increase profits, Mr Gorman said:"Yes. There's always pressure on anybody in this business. The car business is not an easy business - it's a challenging business - and for Ford at the moment I think it has just racheted up a notch or two. (But) We have a great team here and our guys are used to delivering on our commitments, so the pressure isn't new for us."Mr Gorman said FoMoCo's examination of Ford Australia's business proposals for new homegrown and imported models has already become more thorough as a result of the company's financial crisis.

"Our development budgets are really dependent on the business opportunities we come up with and to a certain degree our ability to run our business successfully," he said.

"So the first step for us is to continue to deliver on our commitments and I think we have as much access to go back to the corporation with new business ideas as we've ever had.

"But clearly the scrutiny and the review of those opportunities are getting a closer look."Mr Gorman defended Ford Australia's decision to cut Falcon and Territory production by 20 per cent from November as a direct result of Australia's shrinking SUV and large car segments, which was announced less than three weeks after the company revealed a $148.2 million profit for calendar year 2005 (down from $192.3 in 2004).

"It’s only a bad time to cut production if we have more demand. What we're doing is getting our production in line with where consumer demand is.

"That has nothing to do with North America at all.

"What it has to do with is the changing dynamics of the Australian marketplace - and for us to continue to produce vehicles at a level that the market is unwilling to consume is irresponsible management and we’re not going to do that."Mr Gorman said that while it attracted more than 150,000 buyers annually, or about 15 per cent of Australia's total new-car market, its large car segment would remain "viable".

 center imageLeft: Bill Ford, chairman and CEO.

"I've said all along that what we need is somewhere around a 15 per cent segment, which would give you an industry of around 150,000 large cars. If we have that size of segment it is still a viable segment that gives us a legitimate business opportunity."Last year Ford sold 53,080 Falcon and 23,454 Territory vehicles (more Australian-made vehicles than both Holden and Toyota) for a 33 per cent share of the large car and medium SUV segments respectively. Overall, its market share was 12.7 per cent – down from 14.2 per cent in 2004.

"We have three very strong competitors so what you'll see next year is an uptick in the size of the segment with all the new products. (Falcon) BF MkII is a great offering, VE will continue to take traction and clearly the Aurion will have some impact in terms of expanding that segment. So our view is that the segment will grow in 2007," he said.

"Our share of the large car segment is up significantly this year – the problem is the segment itself is down about three per centage points from last year.

"So even though we are performing well in that segment, the consumers are at this time choosing to buy in other segments, which is why Fiesta and Focus volume is up significantly year over year.

"But as people, at the moment anyway, are moving away from large family sedans we have to get our production in line with that."Mr Gorman said he was excited about the prospect of Ford executive chairman Bill Ford sampling Ford's Australian wares the following weekend. Asked if was nervous, Mr Gorman said:"No, not at all – I'm legitimately excited. Bill's going to drive a whole series of cars over the weekend. It's a great opportunity for us.

"Bill's never been to Australia before. He happens to be out in Asia and this is sort of on the way home if you will. It's a great opportunity for us to showcase what Ford Australia is capable of.

"These are difficult times for Ford Motor Co and it's against a backdrop of backing off our own production, but that's just one side of the equation.

"The other side of the equation is all this great local product we're capable of designing, building and developing here. We're really excited about showcasing our team and our capability, so no I don't get nervous about that stuff."Mr Gorman said Mr Ford would drive at least two versions of both its current Falcon and Territory models, as well as view Ford Australia's entire line-up.

The Ford chief will also be given a sneak preview of the next-generation Falcon, codenamed Orion and due on sale in early 2008, as well as the T6 engineering program, in which Ford Australia will engineer an all-new global commercial vehicle for the brand.

"We’re at a certain stage of Orion development so he'll be taken through that in great detail - he'll see it but we do not have an Orion to drive. If we did we'll sell them. We have various levels of prototypes and he'll get exposure to that but the car's not done.

"We'll take him through a static review of the complete showroom – every vehicle that we retail in Australia - and then essentially he's going to drive every domestic product that we make.

"Part of us showing him our capability will be also going through the T6 program as well, because it's important that he understands that aspect of our business.

"Whenever someone like Bill moves around everyone's looking for the motivation for the trip, but it's quite simple.

"Bill has wanted to come down here for some time, but when he had the dual roles of chairman and CEO with the challenges it was very hard to get out of the US.

"He was kind enough to make himself available on the weekend and we have quite a busy weekend planned.

"I've worked with Bill before and I know him somewhat, but it's a great opportunity for Ford Australia to really showcase its capability and I know the entire management team is excited to show him what we can do."

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