Ford, Holden, Toyota – Not Drowning, Waving?

Tim O'Brien | Jan 26, 2012

Why history is against our local vehicle manufacturers, and why Government assistance packages are all-but useless.


One of the more interesting stories to emerge from the Whitlam years concerned the demise of the Leyland P76, and, with it, the demise of British Leyland vehicle manufacturing in Australia.

It was October 1974 when the sword fell, and the P76 bit the dust bringing down BLMC in Australia.

The P76 was a terrible car – it may have been brilliant in conception (it won Wheels Car Of The Year for 1973; and they still can’t pick ‘em), but was so shoddily assembled it simply fell apart.

And people, sensibly, stopped buying it.

Its passing, and the departure of its British parent, heralded what would become four decades of challenge to vehicle manufacturing in Australia.

Since then, we’ve seen Renault, Volvo, Volkswagen, Peugeot, Nissan, Hillman, and Chrysler/Mitsubishi cease manufacture or CKD assembly operations in Australia, having lost Rambler, Studebaker, Pontiac and Chevrolet assembly in the previous ten years.

Then, in those tumultuous early seventies, the Australian car industry was staring down the twin barrels of the first global oil shock and a galloping tsunami of Japanese imports.

The parent company, British Leyland, was in trouble everywhere, but most in trouble at home with massive debt and a hopelessly outdated product inventory.

The closure and sale of its Australian manufacturing plant (at Waterloo, ironically) along with a long list of property assets nationwide, was to return much-needed cash to BLMC company coffers.

Do you discern anything familiar in this tale? And we haven’t yet got to the interesting story.

It’s apocryphal (and may not be true), but, so the story goes, when faced with the political disaster of the loss of Leyland, the Minister for Trade and Secondary Industry at the time, the Honorable Jim Cairns, decided to try to drag something salvageable from the ashes of Leyland.

So he offered, apparently, Leyland’s Waterloo manufacturing plant, holus-bolus, to China – every die, every metal press, every jig and every forge. China, then Red China, and nothing like the ordered capitalist economy we see today, knocked the offer back. They weren’t stupid then either.

But it’s an interesting side note.

In fact, the story of the demise of BLMC is especially interesting for illuminating the hopeless inadequacy of Government in trying to divert the boardrooms of global companies from the decisions they make in the interests of survival and profitability.

Fast-forward to today; our remaining vehicle manufacturers - Holden, Ford and Toyota - are in trouble in Australia. But not in crisis, not yet.

The Australian manufacturing operations of each are tiny – barely significant, in fact – in comparison to the scale of the global manufacturing activities of their mega-giant parent companies.

toyota altona 0123

The shedding of 350 jobs by Toyota Australia is unfortunate for the people concerned but, with a workforce at Altona in excess of 3000, it is not the precursor to Toyota picking up its bat and ball and leaving the field.

Quite the contrary. It’s to do with Toyota Australia getting its headcount aligned with current sales volumes – at home and export.

Toyota Australia President and CEO Mr Max Yasuda said that these actions were part of the company’s strategy to transform its Australian operations. “Manufacturing is a vital element of our overall operations in Australia,” he said.

Toyota’s production levels have fallen from 149,000 Camrys and Aurions in 2007, to 94,000 in 2011. But this year Toyota expects production to increase slightly to 95,000 cars.

In point of fact, the Federation of Automotive Products Manufacturers (FAPM) does not expect a negative ‘knock-on’ from this announcement among parts manufactures.

Toyota is also well-advanced on its $300million new engine plant at Altona (with $63million in Federal Government assistance under the now-dumped Green Car Innovation Fund, as well as a significant contribution from the notoriously secretive Brumby Government).

But the current difficulties for Toyota Australia are part of a broad change in the market and do not simply turn, as some would have you believe, on the high Aussie dollar.

Sure, a high currency affects export earnings, but, for Toyota in the Australian market, the slide in the Camry and Aurion’s fortunes is also to do with having two models stuck in the rapidly declining medium car segment – one that is losing ground in sales every month to the compact SUV and small car segments.

It doesn’t matter what level of support the Government gives Toyota, it can’t force people to buy cars they appear to be losing interest in.

Ditto for Ford Australia.

Like Toyota, Ford engineers and builds superior cars in this country. The Falcon and Territory are among Ford’s best products anywhere.

But they’re orphans. And Australians are not buying them with the fervour and loyalty they once did.

In this context, Ford Australia’s parent, the global Ford manufacturing colossus headquartered at Dearborn, Michigan USA, will do whatever it thinks fiscally prudent with its Australian manufacturing operation.

Of course, it will happily accept whatever tens of millions the Australian Government would like to slide into its pockets to assist its operations here; but, from a global operating perspective, it has bigger fish to fry.

Like the billions - in multiples - it is investing in product development under its ‘One Ford’ global product strategy.

And anything that doesn’t fit within that strategy can start counting down its days – no room for sentimentality here, and none of this “but Aussies love their rear-drive family cars” nonsense.

Above: the US-market Ford Taurus.
Above: the US-market Ford Taurus.

The next Falcon may be manufactured here, or it may not. It may be a re-engineered US Taurus, or it may not. But it will be what Ford US decides fits best under its One Ford strategy.

And it will be what will best deliver a profitable return on investment for its global operation.

And where do the wishes of the Australian Government fit into that scenario? They don’t fit. Simple as that.

Ford’s rear-drive indigenous Aussie platform is as good as gone. Despite assurances that region-specific platforms will continue to have a place under the One Ford strategy, it is too easily replaced by similar products from the Ford stable.

Its announcement of a stay of execution for the i6 engine was the first sign – there was thus to be no re-engineering of the Falcon platform for a V6.

The second sign came just last week when Ford US announced that it would accelerate the culling of its global platforms with only nine platforms to remain in its catalogue by 2013.

That doesn’t necessarily mean Ford Australia will stop manufacturing a ‘Falcon’, or a Taurus. But it might.

Ford Australia’s return to profit, a skinny AU$25million for the 2010-2011 financial year, followed four years of very red ink.

It might still be in profit, doubtful certainly, but there is little likelihood it has the development funds to design and re-engineer a new Falcon. That’s why it’s waving to the Government for assistance – not drowning, yet, but it’s getting rougher out there.

Ditto again for Holden.

Despite the $149million it received from the Green Car Innovation Fund to assist it in readying its Adelaide facility for the production of the Cruze; despite the $38.9million it received for the development of a ‘cleaner’ greener Commodore, and despite all the other buckets of money it has received under assistance packages going back to 1948 and the Chifley Government’s anointing of the Holden FX, the 48-215, as “Australia’s own car”, Holden will remain a manufacturer in this market for as long as General Motors US wants it to be.

And not a minute, not a second, not a heartbeat longer.

Despite returning to profit in 2010-2011, in the black to the tune of $112million, for the previous five years from 2005 to 2009, GM Holden had operated at a loss. Cumulatively of nearly $600million.

Holden may still be in the black, but with little good news in prospect for exports, with a declining large car sector, declining fleet sales, and a market now being driven by lifestyle brands and proliferating model choices, the Commodore has some hard yards ahead of it.

2012 holden cruze hatch 01

The Cruze, selling well, and which utilises a high percentage of imported componentry, is likely to be quite a profitable addition to GM Holden’s local manufacturing.

The issue for Holden however, and for its GM parent, will be the development for the replacement for the Commodore. The development of the VE, you’ll remember, cost the better part of $1billion.

GM US, like Ford, is working hard to consolidate its model platforms across its global operations to reduce development, tooling and production costs. Its only consideration with regard to its Australian operation will be a fiscal one.

And it’s very unlikely that any Australian Government has a pocket deep enough to divert the GM Board from the model strategy it outlined in emerging from bankruptcy - in a nutshell: fewer brands, and less models, sharing more platforms and technologies across more markets.

When British Leyland collapsed in Australia, and then across its global operations, the world was changing faster than companies could respond.

Right now, the problem for the Australian Government is that the structure of the economy has changed faster than the Government has been able to respond.

The mining boom has altered the paradigm and fed high wages, a high dollar, and exacerbated a growing skills shortage – all contributing to worsening conditions for a manufacturing sector.

The answer however will not be found in handouts alone. At best, assistance project by project only provides a solution until the end of the project.

What is needed is a more flexible economy and a transformed manufacturing sector. Unfortunately, that’s not something we’re likely to find just around the corner.

For our local car industry, as we’ve commented before, there is a very big red circle around 2016.

Tim O’Brien
- TMR Managing Editor & Industry Analyst

Filed under: Featured, Holden, Toyota, toyota australia, federal government, News, government, ford, ford australia, industry, tim o'brien, editorial, opinion

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  • germanic says,
    3 years ago
    4 likes
    Tragic read however it does look very near the end for some or all oz made inventory. Given the inflexibility of the Labour Gov't and or social theology/ re-engineering towards our labour resource (read employment red tape and penalties/ wage requirements/ entitlements) they have squeezed the manufacturing harder which is ironic as they are the very entity which is handing over the money.
    Seems as though its a train wreck for 2016
  • MattW says,
    3 years ago
    3 likes
    The article is spot on. More people need to realise that in the global terms the car manufacturers work in, Falcon & Commodore are niche products that aren't worth the investment for what they sell.

    Compare the $1 billion spent on the VE was because it was to be exported to the US as well, with the 12 models that Ford will build off the new C platform and sell around the world (Focus, Kuga, C-Max, etc).

    If Ford can chop the Crown Vic in the US that was selling more than Falcon/Territory combined, I think that gives the answer on what will happen come 2016... a shame, because I quite like my FG XR6T, but you have to face reality at some point
  • Poisson says,
    3 years ago
    It raises the obvious question - are government handouts making any difference at all? Because if decisions are taken on a global scale based purely on overall corporation KPIs (and local concerns are irrelevant) then perhaps we would be better off saving our dollars or putting them to better use.
  • 5valvepercylinder
    5 valve per cylinder says,
    3 years ago
    What the government hand-outs really means is "Here take our precious money, please invest in Australia and don't ever leave our shores." But ultimately it's the Headquarters over in the States ( GM & Ford ) and Japan ( Toyota ) who gets to decides what the future holds for auto-manufacturing here. Think there is still hope but of the three, Holden has the best chance with Toyota I think they're on a different playing field as there is no Australian designed and built Toyota vehicle. So for Holden and Ford Oz they really need to push for better ideas and relay the benefits for both the U.S. and Australia in terms of trade.
  • good luck says,
    3 years ago
    1 like
    You lost me in the first paragraph. What has your opinion on Wheels Car of the Year got to do with this story? The P76 example was germane, the editorialising wasn't. For the most part, whether they get the COTY right in ANY year is a matter of opinion, but yours didn't belong in this story. If you want to back up that opinion, why don't you write a story analysing their choices? I/we still might not agree with you, but at least there would be a point to mentioning it.
  • Roger says,
    3 years ago
    1 like
    I loved my XR6T, but with the cost of fuel skyrocketing its time to face the truth. I will be buying a new car in the next 6 months, but it won't be a Falcon or Commodore or Aurion. It could very well be a Ford as I believe they have the best power plants in the cheaper vehicle range with Ecoboost. I might wait for the 2013 Mondeo, or even the Focus ST when it arrives. The advantage with the global platforms is, as they are designed for such volume construction they are usually better constructed. The last thing the manufacturer wants is a lot of problems when you are manufacturing vast quantities of vehicles. Yes...it will be FWD or AWD for my next car.
  • you are a moron says,
    3 years ago
    1 like
    i doubt you have ever had anything to do with a P76 apart from slamming them. They never 'fell apart' they had some build issues similar to any first-gen car built. point to any car that has never had a recall or build quality issue when it first entered the marketplace.

    You have zero credibility.
  • Hal Moloney says,
    3 years ago
    I had a new Aurion, it was the worst car I have ever owned, Toyota deserve to sink.
    I now have a new Falcon XR6 Turbo and love it,
    H
  • Leyland Owner says,
    3 years ago
    1 like
    A few points of order:
    It was Leyland Australia that closed not BLMC.
    The P76 didn't fall apart. Every story regarding this type of myth has been proven incorrect. Why would Leyland offer a 2 year warranty if the cars were so unreliable?
    There is documentation that shows Whitlam/Labor government essentially paid Leyland approximately $25 million to shut down on the condition they not reopen again.
    The Leyland P76 ceased production on October 31 1974 (not February) and the plant closed the following year.
    18007 P76 Sedans were produced, 10 Coupes and 4 Wagons & many prototypes too. Enough spare parts were provided to service P76 vehicles for 10 years. In fact due to the long service life of the cars and parts NOS P76 parts are still available today.
    If China didn't buy any machinery from the Leyland plant how are they currently producing Moke Californians (in P76 colours)? You can buy a brand new one today!
    There are many sources of factual information regarding the Leyland P76, in future, please refer to them and not the recycled rumours that are trotted out and peddled as fact every time this car is mentioned.


    • Tim O'Brien says,
      3 years ago
      Yeah, fair point on the month being wrong - I should have checked.

      I am aware the company here operated as Leyland Australia, but it was British Leyland (BLMC) who was exiting the scene, as they also did from South Africa at around the same time, or not too long after (and the point of this piece is about the activities of parent companies).

      Not a fair point about the car though (not that it matters, it's just a footnote in history now). But it's actually myth that they weren't shabbily put together - perpetuated, I'd reckon, by all those loveable tragics who gaze back at the P76 through rose-coloured glasses.

      The factory simply wasn't up to the kind of assembly nor the kind of volumes the P76 demanded. I knew a number of people who bought them new, including a close friend who bought a lime green V8 as part of the 'sell-off' (the last of them were sold off at huge discounts).

      It went like the clappers, steered far better than the HQ Kingswood, but fell apart... interior trims lifted everywhere, the console was loose, water poured into the footwells, the boot lid didn't align properly (and leaked), and he, like lots of other buyers, couldn't get rid of it quickly enough.

      That's not to say there were no good ones out there, there were, but those owners were the lucky ones.

      It's also not to say that I would not like to have a good one in the garage, I would.

      Even though the boot looked a mess of lines and misaligned creases, the overall shape has stood the test of time pretty well. (And I once had a chance to buy an orange Force 7... it would have been in the early eighties - a dealer in Preston (Vic) had it, but was asking $17k which was a king's ransom back then.)

      But cheers for the info. Also interesting is the info about the Moke... is that ridgy-didge?

      Tim
      • Tim O'Brien says,
        3 years ago
        Got some info on the Moke: bumped into a former Vic Roads inspector, a Moke owner and member of the Moke Owners Association.

        He said that the Chinese Moke is slightly larger, is made from slightly thicker steel (and heavier) and carries other subtle differences to 'our' Moke. It's a copy and not derived from any Leyland factory hardware or production dies.

        He also said that, though they carry the same mounting points to carry original running gear, they can't be registered in Victoria (and would likely strike trouble elsewhere in Australia).

        Thought you might be interested.

        Tim



  • Brad Howell-Smith says,
    3 years ago
    1 like
    The fate of the motor industry depends on the ability for the consumer and businesses alike to be able to afford to buy vehicles. The Global Financial Crisis isn't the main factor that is determining if we can buy a new vehicle. The determining fact is the spiraling costs of living in Australia. Australia is about the fifth most expensive country to live. Why? Simply because Australians love this country and will put up with the high prices, rather than move overseas. I travel a lot, and I have to say, I know we are being ripped off in about every product and service we have to buy and use. In some cases like medicines and groceries, that we pay anything from 25% to 500% higher.

    This fact leaves the Aussie battler either just getting by or creeping further in debt. With no disposable income available to buy a vehicle, it's no wonder the automotive industry is hurting. We need a reduction in our cost of living, then maybe we can afford to buy a new vehicle.
  • Simon says,
    3 years ago
    For all the perceived benefits of mining in this country it ultimately will destroy Australia as a manufacturer. We have all the raw materials we need but exporting them all is simply pushing the dollar through the roof and overall its to the detriment of all Australians. The mining tax could have been used to offset or subsdise manufacturing and keep some of those profits in the country, but instead every Australian subsidises the mining industry. Add to the fact that the auto industry in Australia is owned by foreign companies and it all adds up to no future for the car industry here.
  • Dreamer says,
    3 years ago
    We should keep our minerals and resources that we currently have for internal industries so that making it cheap to build cars here thus: lower price tags, cheaper to run -> thus: more buy new but high standard vehicle Reg + greener = higher build quality -> sell seconds to oversea -> more jobs and $ and more brands coming....more competitions....all equal to strong nation.
  • Dreamer says,
    3 years ago
    To make the point clearer, let take Hyundai case as an example as they build their car by using our minerals.
    What if the Government forced Hyundai to build their car manufacture in our shore if they want to use our minerals? Their operations cost may be higher then so to reduce their taxes but at least Government gaining some better than nothing plus jobs will create and employers do pay taxes.
    If this is true then we may have a better chance to buy their car cheaper also we then have a stronger competition for our industries.
    • MattW says,
      3 years ago
      3 likes
      Dreamer indeed. It may sound good to you the way you have stated it, but change that around to an Australian manufacturer that uses minerals it imports from another country. The Aussie company is going to rightly tell that country's government to jam it and will go and buy their minerals from a different country. So would any company to our government
  • masynee says,
    3 years ago
    1 like
    There seems to be a fundamental problem for local manufacturers due to the size of the local vehicle market.

    If we take Holden as an example. They outlayed the much vaunted $1 billion to develop the VE Commodore and another $300 million I believe from memory, to develop the Sportwagon. For that they received a very useful chassis that builds sedans, HSV sedans, Caprice/Statesman, ute and wagon. That's a good number of variants to be running from a single chassis design.

    The factory in Adelaide is a state of the art layer build factory that builds any needed combination of these vehicles and now it also assembles the Cruze sedan and hatch on the same line. That's a very impressive feat for such a small (in global terms) factory and it's a great use of resources.

    However no matter how cleverly they build cars, Holden needed to recover the costs of development for VE, which means a relatively long product cycle.

    Due to recent losses of Holden and the trouble with GM USA, the VF is behind schedule and upgrades for VE have been minimal - looking at you VE Series 2.

    It's easy to point the finger at Holden for developing a car that is obviously out of tune with what most people are buying in Australia today. However, back when the decision to develop and build the VE was made - around 2002 I believe - Commodore was the best selling car in Australia with sales at least double those of todays 40000 odd Commodores sold. The large car segment was still the biggest segment in total sales, there was the plan to export cars to the US, and it would have been lunacy not to continue to contest sales in that market. (As demonstrated by Commmodore only losing its number 1 mantle last year).

    Today the future seems to be with small cars and SUV vehicles of all kinds. Ford made a similar decision to Holden with the Falcon but diversified somewhat into the SUV arena with the Territory. Luckily Holden have been able to assemble the Cruze locally which covers one market segment. The decisions that result in which locally built cars are on offer in our showrooms today were made a decade ago.

    Importers on the other hand, have the luxury of picking and choosing from a range of parent company offerings from large manufacturers like Toyota, who cover all vehicle niches courtesy of huge global volumes and shorter model lifecycles.

    They are far more flexible in what they can offer the market and this places any local manufacturer (not just an assembler) at a severe disadvantage. No local manufacturer is likely to ever develop a car to build and sell in Australia. Unfortunately, those days are gone and it is a great shame just as it is inevitable.

    However that needn't mean the end of our car industry. Ford and Holden design centres have had major successes with Ford Ranger, revamping the Figo, Cheverolet Camaro, Cheverloet Orlando, Holden Cruze hatch. It's now about adapting global product to suit our market and producing the result locally so that we can still have a manufacturing base and parts industry. LPG technology, ethanol, loal variants of international platforms like Cruze hatch.

    The local industry is sustainable in this form and deserves the support of the government to move forward.
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