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Ford seeks more money beyond Falcon’s death

Designer wheels: Ford Australia projects have included the Ford Ranger/Mazda BT-50 trade ute, a seven-seat spin-off of Ranger, the India-market Figo light car, and the locally made Falcon and Territory due for a significant facelift next year.

Global competition for R&D prompts funding plea from Ford Australia

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Ford logo3 Dec 2013

FORD has hinted that Australian taxpayers will need to dip back into their pockets to keep its new-car research and development arm in Australia beyond the end of local car-making.

The car-maker’s submission to the Productivity Commission, released this week, suggests that the federal government should sweeten tax incentives – and even consider other measures such as grants of free land – to help it keep a foothold here.

Ford’s submission to the commission spells out that the car-maker’s US parent intends to keep its research and development base here beyond the death of the Falcon and the locally made Territory in late 2016, but said it would have to compete with the “highly competitive nature” of automotive investments globally.

The Ford Australia submission even bows to the loss of the Mazda3-rivalling Ford Focus manufacturing program announced for Australia in 2007 and quickly reversed after its US parent announced a last-minute deal brokered by South Africa had usurped Australia’s bid to build the vehicle.

“New-growth countries such as China, India, Thailand and South Africa are examples of where direct and indirect government assistance have been used to promote the relative attractiveness of these nations as manufacturing and engineering locations,” Ford’s submission reads.

“These incentives are additional to traditional tariff-type assistance and include the ready provision of land, utility connections, duty waivers on plant and equipment, income tax holidays or employee training concessions.”

Ford Australia’s submission revealed that its 1500-strong R&D workforce was working on future model rollouts for its US parent.

“The successful delivery of the Ford Ranger program has enabled Ford Australia to win additional product development work,” it reads.

“These programs include a new Ford Ranger derivative, a significant Ford Ranger model upgrade and numerous other projects for regional and global markets in the next few years.”

The submission also provides a small slice of insight behind the car-maker’s decision earlier this year to shutter its Broadmeadows and Geelong production facilities in late 2016, ending more than 50 years of local manufacturing.

“In addition to the fragmentation resulting from the entry of new brands and models to the Australian automotive market, there has been significant change in relation to the types of vehicles being purchased and consequent deterioration in the industry’s traditional domestic ‘niche base’ of large rear-wheel-drive passenger cars,” the submission reads.

“This factor has had a major impact on the viability of domestic manufacture, particularly given the fundamental imperative for sustaining ‘critical mass’ in such a fragmented marketplace.

“The fragmentation has also placed pressure on average model volumes as the Australian market has remained relatively stagnant at just over one million sales over recent years,” it says.

“Average model volumes in many segments are well less than 10,000 units and declining.”

The skewed nature of Ford’s potential export markets also came under fire.

“Even if published tariff rates under negotiated free-trade agreements appear to be reasonable, many non-tariff barriers come into play to effectively reduce the potential for significant or worthwhile export opportunity,” Ford says.

“For example, despite the terms of the trade agreement negotiated with Thailand (TAFTA), Ford Territory diesel vehicles exported to Thailand incur a 40 per cent domestic excise tax (71.4 per cent in actual practice), impacting its relative cost competitiveness and making it a luxury, niche market entrant and limiting its volume potential.

“These ‘beyond the border’ barriers to entry must be comprehensively addressed prior to the conclusion of any free-trade agreement, as the opportunity for redress once negotiations are concluded is severely limited.” Ford added that it still had “significant concerns” over the effect of a FTA currently being brokered with Malaysia, which it said could negatively impact the ability of Australia’s car industry to expand into the Asian nation.

The Productivity Commission is conducting a public hearing in Melbourne today after holding a similar meet-and-greet in Adelaide yesterday.

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