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Ford Oz cuts production

Slowdown: Blue Oval's Broadmeadows assembly plant will slow in November.

Ford will slash Falcon and Territory production by one-fifth from next month

Ford logo19 Oct 2006

AS TOYOTA was launching its Australian-built Aurion large car this week, Ford Australia was holding a press conference to reveal that it would slash production of its Falcon large car and Territory SUV by 20 per cent from next month.

From November 20 the company will "realign" down production at its Broadmeadows plant. The build rate for Falcon and Territory will fall from 65 cars an hour to 52 an hour, which reduces its daily build rate from about 450 to 360 vehicles a day.

The company is also looking at a range of options to cut further costs and is negotiating with its 5500 workers over possible redundancies.

Ford Australia president Tom Gorman said the company was "reacting to the clear trends that have been happening for some time".

In 1997 large cars made up 28 per cent of the total market but since 2003 that segment has lost nine percentage points because of increasing market segmentation and a swing away from six-cylinder large cars.

"Nine percentage points on an industry of our size now is between 87,000 and 90,000 cars a year," Mr Gorman said. "I don’t think anybody anticipated that level of change."Mr Gorman said he did not think large cars would ever return to a 20 per cent market share.

"I think if it's in the neighbourhood of 13.5 per cent to 15.5 per cent you have a marketplace where you can make something of it and then you add on top of that exports and all of a sudden you have yourself a business," he said. "I do believe that there is still a viable place for us here, both locally and as an exporter."He remained upbeat that the large-car market could bounce back.

"I still think it's still too early to say that it's not going to bounce back," he said. "I don't know if it's still a residual effect of people's concern with what's happening with petrol prices."Because the Falcon sedan, ute and Territory are built on the same production line, the company has flexibility in allowing production of individual vehicles to be aligned with demand. "Also, in terms of LPG we have taken our mix of LPG up substantially," Mr Gorman said. "Not too long ago we were at only 65 LPGs – we’re now well above 100 and heading towards 120."

 center imageLeft: Ford Australia president Tom Gorman and BF Falcon MkII.

Ford is the second car-maker to reduce production as a result of slow sales, joining Mitsubishi which has struggled with its 380 range. In its first month on sale, Holden’s new VE Commodore has also struggled to recapture big-six interest, selling 4155 VEs.

To September, Falcon sales have declined 18.6 per cent – 33,235 versus 40,837 over the same period last year.

The Territory has suffered, too, with sales volumes falling from 17,609 YTD last year to 14,449 this year, an 18 per cent drop.

Mr Gorman said Falcon inventories were quite low but the company had to be realistic "and you have to cut the cloth to fit the suit".

"Producing cars at the line rate we're at today and not selling them … you only have a couple of choices … you can either put them against the fence but that's not good for quality, not good for our total cost base, it's not good for anything in the long run," he said.

"Or you can step up to it and say: I'm going to produce what the market is looking for in the near term and I'm going to be as efficient as I can at that level of production. But clearly it has an adverse impact."Mr Gorman said many things had contributed to buyers moving away from large cars.

"There has been a large move in the Australian dollar," he said.

"When we launched the BA Falcon the Australian dollar was trading at 56 cents to the US dollar and today it trades in the neighbourhood of 75 cents.

"Imports have become far more attractive to consumers as all of the importers have been in the position to drive their prices down.

"Domestic manufacturers – Mitsubishi, Holden, Toyota and us – have a slightly different situation in front of us.

"You've also seen, as the market has expanded from that time point, an unbelievable list of new vehicles launched in the market in every segment."

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