* Ford to end Australia production in Oct 2016
* Strong Australia dollar, cheaper imports hurt local
* Australian economy at risk as mining boom peaks, other
* Govt previously committed A$5.4 bln to support car
manufacturers to 2020
By Rob Taylor and Lincoln Feast
CANBERRA, May 23 Ford Motor Co will shut
its two Australian auto plants in October 2016, blaming a strong
currency and costs that are hitting manufacturers just as the
country looks for other sectors of its economy to cushion the
end of a mining boom.
Ford Australia will close its engine plant in Geelong and
its vehicle assembly plant in Broadmeadows, both in Victoria
state, with the loss of 1,200 jobs, Ford Australia Chief
Executive Bob Graziano said on Thursday, the latest
election-year blow to the struggling Labor government.
Ford, which built 37,000 vehicles in Australia last year,
has been in the country since 1925 and employs more than 3,000
people. But it has been battling sliding sales, high costs and
an Australian dollar trading above the U.S. currency.
"Our costs are double that of Europe and nearly four times
Ford in Asia," Graziano said. "The business case simply did not
stack up. Manufacturing is not viable for Ford in Australia."
Ford's decision to close its local production highlights the
challenges the country faces as a near decade-long mining boom
begins to fade. Policymakers hope other sectors of the economy
such as manufacturing, construction and retail will start to
pick up the slack, but evidence has been scant so far.
The Australian dollar has traded above parity with
the U.S. dollar for most of the past two years - it fell to
about 97 cents only this week - making it more difficult for
local manufacturers to compete globally.
Graziano said Ford had lost A$600 million ($581 million) in
the last five years in Australia, and A$141 million in the last
fiscal year, as customers turned to smaller imported vehicles
built by Japan's Mazda and South Korea's Hyundai
The country's Performance of Manufacturing index fell to a
four-year low in April, indicating continuing contraction in the
sector despite record low interest rates of 2.75 percent.
"Australia's manufacturing sector continues to under-perform
other parts of the globe," CommSec Economist Savanth Sebastian
said in a research note this month.
"The main difference is the strength of the Aussie dollar,
which clearly is causing businesses to markedly re-assess the
viability of ongoing operations as well as strategic direction,"
General Motors Holden, the local unit of General Motors Co
, said last month it was cutting 500 jobs, or 18 percent
of its workforce. It also cited the damage to its
competitiveness from the strength of the Australian dollar.
Ford's decision is likely to trigger a row over state
assistance to the auto industry ahead of elections in September.
Polls suggest the minority Labor government is heading for a
bruising defeat, due largely to its perceived mismanagement of
Labor has earmarked around A$5.4 billion for car industry
assistance to 2020, pointing to the sector's importance in
maintaining heavy-industry skills and employment.
The Australian automotive industry employs about 55,000
people and supports 200,000 other manufacturing jobs. Ford's
closure is likely to affect the economies of scale at other
local builders, General Motors and Toyota Motor Corp.
Prime Minister Julia Gillard said the government's immediate
priority would be to support workers affected by the closures,
likely to include parts makers already hurt by Mitsubishi Motors
Corp's closure of its Australian plants in 2008.
"The economy that we have today has many sources of
strength, but the high Australian dollar is putting a lot of
pressure on some industries, particularly manufacturing,"
Gillard told reporters.
Australia's Reserve Bank expects the A$1.5 trillion economy
to grow slightly below trend at 2.5 percent this year, returning
to average or trend rates 2014. Unemployment is expected to rise
slightly to 5.75 percent.
Australia has annual sales of approximately 1.1 million new
vehicles, with deliveries up 7.6 percent to 85,117 in April. But
sales of locally manufactured vehicles have fallen to around
221,000 in recent years, from almost 389,000 in 2005.
At home in North America, Ford is faring better and
announced on Wednesday it was adding a week of production at
most of its factories to build an extra 40,000 vehicles.