Ford Australia to Close Geelong and Broadmeadows Factories

Ford AustraliaFord will close in the next two years the two factories it owns in Australia, 90 years after the first “Model T” was produced in the country under the supervision of Henry Ford. The company complained about high costs and cheap imports.

Ford Australia has costs double than those in Europe and four times higher than the Asian divisions, according to the president of Ford’s Australian division, Bob Graziano. 1,200 employees at the Broadmeadows and Geelong factories will lose their jobs starting October of 2016.

The three companies that manufacture cars in Australia – Toyota, General Motors and Ford – are facing severe problems due to the 28% appreciation of the Australian dollar against the yen in the past 12 months, which caused an increase of imported car figures, which have become cheaper compared with those produced locally. Moreover, currency appreciation caused reduction in export sales.

Ford leaving threatens the viability of the entire automotive industry and is a blow to Australian economy, said Prime Minister Julia Gillard, whose Labour Party lost supremacy in the polls ahead of elections scheduled for September.

Ford began production at Geelong in 1925, the first car assembled was the “Model T”. Ford is not a major car manufacturer in Australia, but the company’s local factory closures could cause a “domino effect” of the automotive industry, which may become too small to support its own network of suppliers, said recently Jac Nasser, Chairman of BHP Billiton, the largest mining group in the world, who was chief executive of Ford globally.

Bob Graziano, head of Ford Australia, said that local production is not viable for Ford in the long term, adding: “Our locally-made products continue to be unprofitable, while our imported products continue to be profitable.”

Automotive industry in Australia provide over 45,000 jobs nationwide, according to local employers’ association, which warns that the withdrawal of Ford from Australia will have serious implications for companies and the network of providers. Other 250,000 jobs depend on the car manufacturing industry.

The closure of Ford factories is another sign of the deteriorating situation on the labor market in Australia, due to currency appreciation in recent years, which caused a decreased competitiveness of industries exposed to international trade.

Australian Treasury estimates that the unemployment rate will rise to 5.75% next year, the highest level since 2009. Australian manufacturing workers receive an average compensation of $46.29 per hour, compared to $47.38 per hour in Germany, Japan – $35.71, U.S. – $35.53, or $11.65 in Brazil, according to a survey conducted by the U.S. Department of Labor in 2011.

The Australian Government operates a support fund for the automotive industry funded with 5.4 billion Australian dollars. Prime Minister Gillard announced Thursday that the government will distribute $51 million to support areas affected by the closure of Ford factories.

Opposition leaders in Australia urged the government to cut taxes and relax regulations to encourage investment.

Australian Division of General Motors announced in April that it will reduce its staff in the country by about 500 jobs, accusing devaluation of currency in competing markets, while local operations costs have become among the highest worldwide.

The general manager of GM’s Australian division said that spending of automakers in Australia have increased by about 60% over the past 10 years. Automobile sales for cars made in Japan rose on the Australian market, reaching a peak in 2012 after the sharp depreciation of the yen as a result of measures to stimulate the economy through aggressive monetary policy adopted by the Japanese government and the central bank.