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Ford tariff plea
FoMoCo chiefs take tariff plea to government, and ask for more free trade deals
26 Aug 2008
FORD Motor Co president and CEO Alan Mulally yesterday called on the Australian government to delay its plan to cut tariffs in 2010.
Mr Mulally urged prime minister Kevin Rudd and industry minister Kim Carr to pause tariffs at 10 per cent, describing the existing duty rate as a critical element of the automotive industry’s viability in a “terrible” business environment.
The tariff had been due to drop from 10 per cent to five per cent in 2010, and the Bracks review of the automotive industry released earlier this month recommended no change to this position.
Mr Mulally argued the point that a tariff pause was required because Ford Australia had to not only develop a range of new more fuel-efficient technologies, but do so at a time of economic downturn.
“Over the years Australia has continued to reduce the tariffs so we are down to the place now where we are talking about 10 per cent going to five per cent and our suggestion was that at this critical time when we are retooling the industry and bringing out all these new fuel-efficient vehicles that this is a time that maybe a pause in that tariff reduction would be very appropriate to allow the automobile industry to complete this retooling and get through this slowdown in the economy,” Mr Mulally said.
Asked if the local industry was doomed if the government ignored Ford’s request for a pause and the tariffs dropped as planned, Mr Mulally replied: “Well, it is going to make it harder.
“This is a time when you want to do everything you can to accelerate the development of the industry... so one thing is not going to be make or break but you want every element you can to be contributing.
“The important thing about the pause is that it’s near term, because clearly going through this cycle on the economy as well as bringing in the smaller vehicles it is an important time right now to take this pause.”
He said Ford would be satisfied for tariffs to be reduced down the track.
“Longer-term we are going to continue to improve the competitiveness of ourselves and the industry, but right now I think it is a critical piece. It is very important, not just the tariff itself, but every element of competitiveness for the Australian industry is so important right now.”
Along with Ford Asia Pacific and Africa vice-president John Parker and Ford Australia president Bill Osborne, who were all present at the government meeting, Mr Mulally told the prime minister and industry minister that they also hoped the government would develop fairer free-trade agreements in the Asia Pacific region.
Left: Ford Motor Co president and CEO Alan Mulally.
While there are no export plans for the Falcon in the near future, Ford Australia aims to export its locally-made Focus to the region from 2011.
“We tried to stress with the government when we met them that they have got to work hard on bilateral FTAs (free trade agreements), so as we produce Focus here, which we feel is in the heartland of the size of product that is appropriate for Australia and for Asia, we need a strong export program and we need to be able to export them to Asia Pacific,” said Mr Parker.
“We recognise our competitors have made very good ground in the Gulf area but in all honesty Australia’s connection is to Asia Pacific and those FTAs aren’t working in a balanced manner at this point in time and so we are encouraging them to expand the FTAs and do them in such a way that there is equal treatment of products as they flow to Asia and Australia.”
Mr Parker said a fair free-trade agreement with the ASEAN group of nations was a key part of the Ford Focus export plan.
“We are saying to the government, let’s work on a wider FTA with ASEAN and that will open up wider markets, but we are also asking them to recognise that non-tariff barriers are also issues, so they shouldn’t be so quick to reduce the tariff barriers themselves when they struggle to get products into a lot of those markets even when the tariffs have come down.”
The Ford team said prime minister Rudd indicated some flexibility on the structure of assistance including weighing up the value of credits, cash grants and tariffs.
Mr Mulally described the meeting as a great conversation and said he was impressed with the prime minister’s interest in the industry.
“My take away that he is committed to manufacturing in Australia and that he is committed to creating a viable automobile industry in Australia and he was very open to a partnership to accomplish that,” said Mr Mulally.
“It was a great conversation with all the government officials that we met because it is very gratifying the position of the Australian government about the importance of manufacturing in Australia,” he said.
“We had this conversation with everybody, that there are only 15 countries in the world that have the intellectual and manufacturing capability to create, design and manufacture, support and export vehicles.
“Now when you think about that it is pretty neat and Australia is one of those countries, so I personally am very gratified that the leadership of Australia believes in manufacturing, it believes in a partnership to help create a viable exciting long-term growing automobile industry.”
Mr Mulally, who met with the Rudd government figures just days after Ford Australia announced 350 job cuts at its Victorian plants and a production reduction of 23 per cent, would not rule out further cutbacks.
“We will size our production to demand,” he said.
This is a process that is taking place around the world as harsh economic conditions impact the industry, said Mr Mulally.
“We have to be so focused on matching our production to the real demand, and the demand for our automobiles is slowing,” he said.
“The United States arguably is in a recession, although clearly people decide that years later... we also have a slowing economy in the European countries, China is slowing, Australia is slowing, Thailand is slowing, so we have a contracting of the growth of the economy.”
Given the economic conditions and the quick shift in consumer demand, Ford Australia isn’t doing so badly, said Mr Mulally.
“For where we are in a terrible business environment I think it is doing very well,” he said.
“This is a tough, tough business environment right now worldwide.”
The increased demand in small cars during the last year confirms the decision to make the Focus in Australia was the right one, said Mr Parker.
He said exports of this car would be a key part of Ford Australia’s future.
“When we look at the growth of the worldwide auto industry the Asia Pacific is going to be the largest automobile industry in the world,” he said.
“China is heading to exceed the United States in the terms of its physical size and we are forecasting 2015 and 2017 that Asia Pacific will be 30 million vehicles, largely small vehicles, and that’s why it is absolutely critical that our Australian operations makes the transformation from only building large cars, which have got only one way to go, which is progressively down, to making what are relevant to what the Australian customer wants and what the Asia Pacific customer wants.”
While the Focus is export-bound, there is no such plan for the current-generation Falcon.
Mr Osborne had previously mentioned he backed a plan to have a left-hand drive FG Falcon fast-tracked in order to export to markets such as the Middle East and China from 2010, but yesterday admitted the project had failed.
He said there was no chance of exporting the Falcon within the next business plan period – which covers the next five years.
“Frankly we just couldn’t get it done in time, with the turbulence in the industry, the things that we have all talked about, we couldn’t execute an export program in that short a time frame,” he said.
“We just couldn’t get there in time with the left-hand drive, it was about a three-year turnaround for us to get there,” he said.
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