News - Ford
Ford Oz slumps back into red
Record $290 million loss rocks Ford Australia with multiple hits on sales and tax
9 May 2012
FORD Australia slipped back into the red last year after two years in profit, posting its largest ever after-tax loss of $290 million in 2011.
The financial slide came as the Blue Oval brand grappled with falling sales of its locally built Falcon large car, a resultant $30 million worker redundancy bill and a big one-off tax hit.
The loss, announced today, was $16 million worse than the previous record loss of $274 million at the height of the global financial crisis in 2008.
But Ford says its after-tax operating loss was $78 million before it decided to clear its books of a $212 million tax impairment charge.
The Ford announcement comes just two days after cross-town rival GM Holden reported a profit of $89.7 million – its second successive positive result.
Like Holden, the Ford result would have been worse but for a $102 million co-investment handout from the federal government, mainly under the Automotive Transformation Scheme (ATS).
The loss by Ford’s local arm follows profits of $25 million in 2010 and $12.7 million in 2009, and was in stark contrast to its global parent, which enjoyed its best annual result in 13 years in 2011.
Ford Australia points to the arrival of its new four-cylinder EcoBoost Falcon, improved supply of its Thai-made Ranger ute and a switch to Thai manufacturing for its Focus small car in the second half of this year as reasons for optimism in company ranks.
However, Ford Australia president and CEO Bob Graziano refused to rule out further restructuring at the company’s Victorian manufacturing operations at Campbellfield and Geelong, saying the Australian motor market remained “challenging”.
Ford sales are down nine per cent in the first four months of this year, in an overall market down 5.1 per cent.
Its one-time top-seller, the Falcon, has suffered a 25.4 per cent slump ahead of the arrival of the EcoBoost variant late last month, but sales of its other local contender, the Territory SUV, are up 57.4 per cent.
From top: Ford Australia president and CEO Bob Graziano, Falcon EcoBoost and Focus hatch.
Last year, Ford vehicle sales slipped 4.2 per cent, contributing to a 15 per cent slump in overall revenue, from $3.3 billion in 2010 to $2.8 billion last year.
Ford said stock shortages of Ranger and Fiesta due to the Thai floods had affected wholesale deliveries, but it also pointed the finger at a drop in Falcon sales, saying: “Changes in customer preferences drove an industry-wide decline in the sale of large vehicles.”
The company said this had led to “aggressive restructuring to operate profitably”.
Awash with unsold Falcon stock in the first quarter last year, Ford shifted to a three-day week and then reduced its assembly line speed to 209 units a day while offering voluntary redundancies to 250 workers.
While question marks still hang over the viability of Ford’s manufacturing business, the research and development operation of Ford Australia is booming as global projects continue to roll in.
The company says that in 2011 it spent $282 million in research, development and facilities for a broad range of global and local vehicle development programs, bringing its R&D spend to $1.7 billion over five years and making it the largest R&D investor of the three local manufacturers.
Announcing the results today, Mr Graziano said the automotive industry remained competitive and challenging.
“However, we continue to invest significantly in our business with an emphasis on more fuel-efficient vehicles and we saw positive share increases for Fiesta, Focus and Mondeo,” he said“In addition to the five new vehicles we introduced in 2011, we started 2012 by announcing a further $103 million investment across Falcon and Territory and have also just introduced the new Falcon EcoBoost, which provides four-cylinder fuel economy with the performance feel of a six-cylinder vehicle.
“We will continue to focus on driving profitable sales growth across our full range of vehicles and improving our business fundamentals as we move through 2012.”
Mr Graziano brushed off questions about Ford’s slide down the sales charts in Australia – slipping from third place last year to fifth place year-to-date in 2012 behind importers Mazda and Hyundai.
“All we can do is continue to market the vehicles we have in our showroom and continue to talk to the consumers in Australia about the great range of products Ford has,” he said, adding that Ford had been working to lift the fuel efficiency of its models in line with customer demands.
Ford Australia CFO Mark Rearick described the tax impairment charge as a “book accounting entry” that cleared up an accumulation of tax issues from previous years.
In 2010, rival Toyota paid a $290 million tax bill, including an “under provision” $246 million payment for an unspecified one-off tax settlement.
Toyota Australia’s 2011-12 financial results for the year ending March 31 will be the next shoe to drop – expected next month – with the potential for some further ugliness after industrial action and forced redundancies at its Altona factory in Melbourne, and major stock shortages due to natural disasters in Japan and Thailand.
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