Ford killed Ford

THE Ford Falcon is limping to its grave. Ford's head office is not going to save it. Without a sudden reversal of taste, Australia's car buyers are not going to save it. And given all that, no future government will save it.

In the first half of 2012, Ford sold just 9083 passenger Falcons and 3304 utes. Passenger sales were down 25 per cent on last year, which in turn was down 65 per cent from 2005. This has been a long death; the buyers slowly turned away.

It used to be different. Once, the Falcon was Australia's top-selling car, a family icon. For decades, manufacturing the Ford Falcon was Melbourne's biggest industry. Even in 2003, the Falcon family sold 105,000 vehicles 97,000 in Australia and 8000 as exports with an Australian design and 80 per cent Australian content.

Then our tastes changed. Oil prices rose. Families shrank. Business became more cost-conscious. And the dollar started its immense rise. The Falcon was a big petrol guzzler, and they went out of fashion. By 2010, Falcon family sales were down to 44,000. This year, they will be barely 25,000.

Some of that went to its cousin, the Territory. But even the Territory has lost ground as the high dollar made its foreign rivals much cheaper and put export markets out of reach.

Ford's US bosses failed to be decisive. They wanted their cars to have global platforms, yet the Falcon's rear-wheel drive was unique to Australia. They would not allow it into the big export markets that underpinned Holden and Toyota. And they kept it as a big powerful guzzler when tastes changed.

So were the federal and state governments wrong to throw Ford a lifeline in January? The Gillard government pledged $34 million, and the Baillieu government a secret amount, so Ford would produce one more model here, and keep manufacturing to the end of 2016.

Arguably, it was a bad call. But that money is earmarked to develop the next Falcon and Territory, not to support the current ones. And there are still 55,000 Australians employed in car manufacturing, 30,000 of them in Victoria.

Holden and Toyota are better placed to survive. They have good export markets. The Commodore and Camry/Aurion are selling better than the Falcon, and Holden's Cruze has been a hit. Hopefully they can sustain the industry.

Unless the dollar falls, unless our tastes change, unless Ford's global strategy changes, the next Falcon will be the last. Its end will send shockwaves through Melbourne, Geelong and the car parts industry but not as badly as it would have a decade ago. This has been a long, slow farewell to our old icon.

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It'd be a brave PM who pulled the plug on Holden

YOU can have a car industry with taxpayer subsidies. Or you can save taxpayers' money and scrap your car industry. There are good arguments for either policy, but you can't have a car industry without subsidies.

That was the choice facing the Gillard government, and its decision was obvious. Holden is an Australian icon. Its Adelaide plant produces two of the four biggest-selling cars in the nation. It would be a very brave Prime Minister who pulled the plug on Holden.

Why do we have to pay to have a car industry? Because the world does. In Germany, Britain and the US, governments subsidise car plants because they bring not only the jobs of their workers, but far more who make their components, or benefit from the flow-on of all that spending through the economy.

Australia has probably the most open, trade-exposed market of any country in which cars are designed and built from scratch. The average tariff on imports is just 3.5 per cent. In a market of a million cars each year, there are twice as many brands competing as in the US and Japan.

The question is: do we want Australian-made cars to be part of this? Yes, the public says whenever the pollsters ask. Yes, John Howard said when he faced the issue in 1997 and 2002. Yes, Kevin Rudd said in 2008, when he set out the $3.4 billion Automotive Transformation Scheme to roll out support to 2020.

No, the economic rationalists say. They argue that if there is no prospect of Australia's car makers being able to survive without government subsidies, we should cut them off now. In effect, the government will pay almost 20 per cent of the cost of Holden's new models: what other industry receives such support?

That depends how you look at it. Former industry minister Kim Carr used to say Australians pay the cost of a footy ticket a year to support the car industry: $17 a head. That is well short of what we pay to support the mining industry: the diesel fuel tax rebate alone now costs us about $2 billion a year, or almost $100 a head, with far less flow-on to the economy.

Gillard had no choice. Manufacturing is being hammered by the high dollar, and Holden would have left town without support. To let go of Holden would be to say goodbye to manufacturing, and send south-east Australia into an economic maelstrom.

The tough choices are what to do about all the other firms whose profits are being torn to shreds by the high dollar. The answers there are less obvious, but even more crucial.

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Car exports slump

AUSTRALIA'S car exports have crashed to their lowest level since 1998, as the high dollar and the loss of foreign export contracts has left car-makers battling to keep a toehold in the global market.
The Bureau of Statistics said exports of built-up cars earned $1.35 billion in 2011, a shuddering 63 per cent fall from the $3.69 billion three years earlier.

Holden has been the biggest victim, after General Motors ended exports of Commodores to the United States to protect jobs at its US plants. From 56,140 cars exported in 2008, Commodore exports shrank to 7811 in 2010.

But last year's victim was Toyota, now the only significant exporter of Australian-made cars. In 2008 it produced record exports of 101,668 Camrys and Aurions, but that dropped to 82,630 in 2010 and then to just under 60,000 last year.

Toyota spokeswoman Vesna Benns said the loss of $A earnings was even bigger, since export contracts are written in $US, and the $US has fallen sharply against the $A in the past year. Toyota's total export earnings, including sales of accessories, slumped from roughly $1.5 billion in 2010 to $1 billion in 2011, she said.

Total exports of Australian-made cars have fallen from a record 162,000 in 2008 to about 70,000 last year.

But total Australian exports grew 10 per cent in 2011 to a record $313 billion, with most of that growth coming from minerals, and the rest from farm exports. Imports grew 9 per cent to $294 billion, and the trade surplus rose from $15 billion to $19 billion.

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