Australia should prepare for the end of its car assembly industry

The recent loss of 500 jobs at Ford Australia is the beginning of the end for car assembly in Australia, says a leading car industry expert.

Clive Matthew-Wilson, editor of the car buyers’ Dog & Lemon Guide, predicts that both Ford and General Motors are highly likely to go bankrupt within the next year. Matthew-Wilson’s view is shared by the international credit ratings agency, Standard & Poors.

“Both Ford & General Motors are currently on life-support in America. Together they lost US$24.1 billion in the last financial quarter. Ford hasn't made a full-year profit since 2005, while General Motors last posted an annual profit in 2004.”

“The U.S. government will rescue Ford & General Motors because it has no choice. However, as part of their rescue package the U.S. government will almost certainly force Ford & General Motors to dispose of their unprofitable overseas assembly plants. The Australian Ford & General Motors plants will be near the top of the list for closure.”

“At this point the Australian state and federal governments will undoubtedly rush in with their own rescue packages, but these rescue packages will merely postpone the inevitable. The sad fact is, car manufacturing in Australia was only marginally profitable even in good times, and the good times are long since over.”

Overall sales of large cars in Australia were down 15% in the year to September. The Holden Commodore is still Australia's top selling car, with 57,307 sold last year, but these were mostly fleet sales to the federal government at low profit.

Sales of the Ford Falcon have fallen more than 50% in the past five years. Ford Territory sales are down by more than a quarter from a year ago.

Ford plans to assemble the smaller Focus model locally by 2011, but Matthew-Wilson adds:

“Don’t hold your breath.”

A closure by Ford and Holden would see Toyota as the sole volume manufacturer in Australia. Toyota is the most successful car manufacturer in the world and can afford to wait out the recession. However, Matthew-Wilson added:

“Car companies exist to make money. If Toyota can make more money assembling cars in Thailand than Australia, then that’s what they’ll do. Their only loyalty is to their profits.”

Matthew-Wilson added:

“Please don’t shoot the messenger. I’m well aware of how many Australians rely on the car assembly industry for their jobs and I would love to be wrong, but I don’t think I am.”

“The bottom line is this: Asia produces many millions of cars a year and pays its workers as little as $1 per hour.  Australia produces a few hundred thousand cars a year and pays its workers twenty or thirty times as much as its Chinese competitors. There’s simply no way Australia’s car plants can survive against that sort of competition.”