Ford plans slowdown

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Ford plans slowdown as large cars fall out of favour with consumers

By Ian Porter
February 23, 2006

THE car industry took another body blow yesterday when Ford Australia announced plans to cut production by 13 per cent in the face of continued weak demand for large cars.

Ford became the third of the four local makers to trim back output in the past three months, with Toyota the only assembler to maintain output, thanks, in part, to its thriving export trade.

Ford will cut its production rate from 75 to 65 an hour, or from 520 to 450 a day, president Tom Gorman said.

Mr Gorman said the decision to cut production was made late last year but the announcement came less than three weeks after Vfacts registration figures showed that large car sales had continued to fall in January, both as a percentage of the market and, more worryingly, in absolute numbers. In addition, sales of Ford's industry leading Territory wagon also fell away in January after an outstanding 18 months.

Late last year GM Holden eliminated the third shift at its Elizabeth, South Australia, assembly plant, cutting output from more than 800 to about 620 cars a day.

More recently, Mitsubishi wound back its production target for 2006 from 32,000 to 27,000 380s after the new car got off to a slow start. Mitsubishi has also arranged to halt production for three weeks in March to bring inventories back into line.

Mr Gorman said he was confident large car sales would rebound to some degree and that Ford would continue to make them. "We do see the large car segment coming down in percentage terms, but we're seeing 140,000 to 150,000 total large vehicles being consumed by Australians in 2006.

"If we get our fair share, I think we still have a business equation."

Mr Gorman said large car sales had been adversely affected by several factors, principally the strong Australian dollar, which made imports more competitive.

Also, companies like Honda were sourcing cars from Thailand under the free trade agreement, so they were getting the benefit of no tariffs and the benefit of the strong dollar.

"That allows them to convert that into very aggressive pricing strategies here."

Fuel prices were also an issue, although Mr Gorman said that large cars never appealed to drivers whose sole concern was fuel costs. But he said large cars still offered a great "value story", with plenty of room, strong performance and many safety features.