The strength of the Australian dollar in the aftermath of the GFC has been the ultimate mixed blessing. Imported goods cost less, but the steroidal dollar has thrown a real spanner into the works for exporters — primary, secondary and even tertiary.
Not only do the finished products manufactured locally by car companies and parts suppliers cost more when exported to foreign markets, so does the cost of labour undertaken by designers and engineers located in Australia.
With many in the industry — and quite a few outside the industry too — concerned about the future for the local industry, the unveiling of the new EcoSport model for the Asia/Pacific and Africa region seemed like a timely event to ask Ford's leadership team for their views.
First up was Ford president and CEO, Alan Mulally, who feels the relatively higher cost of developing vehicles in Australia thanks to the dollar has been offset to some degree by global efficiencies the company has achieved through One Ford. With the 'labour' of producing a new model shared across time zones and markets there's some geographical dollar-cost averaging taking place.
"Well, the real efficiency in PD [Product Development] is using one global product development system, which we are doing," says Mulally. "Because remember, it wasn't very long ago — six years ago — where we had different PD [teams] designing different cars.
"Right now I think Australia is very competitive," he said, but also pointed out that the Aussie mob will never be a stand-alone PD team again. "I just think of it as one global product development system."
President of Ford's Asia/Pacific and Africa region, Joe Hinrichs, elaborated on how the value of the work done by the locals compensates for the escalating cost to the company globally.
"Land and also facility investment is significant and that experience base in Australia — although getting more expensive, because of the appreciation of the Australian dollar — is very valuable to us. Our PD system is running full bore, globally; there's so much new product coming in. We're leveraging that experience and also its facilities, which are critical to us, because we have a lot of facilities, both in Melbourne and also the test centres in Geelong.
"However, you're also seeing significant growth in our engineering capabilities in China. China's an eighteen and a half million-unit market. It obviously can support its own product development centre — in conjunction with working with the rest of the world. But don't underestimate how important those facilities and the test track are to our overall Ford portfolio product development..."
No one can foresee how long the Australian dollar will remain at such historically high levels, but analysts forecast an eventual return to a figure of around 70 cents US, but the timing for that seems dependent more on the global economy than anything happening on our shores. Sustained strength of the Australian dollar in the longer term may leave product development in this country wounded but walking. Manufacturing may not be so fortunate.
"The real breakthrough in efficiency [for manufacturing] is that you have the same bill of material for the vehicles..." said Mulally, speaking hypothetically, but in the context of One Ford.
"The most important thing is, as we move forward with these new platforms... that we have the same bill of material and the same assembly sequence — and that's where the value is. We're not going to be shipping a lot of parts around the world.
"Henry Ford's original vision... Henry wanted to operate in every country, in every major market in which he sold vehicles, but his thought was that it was great value being part of the economy, offering great jobs and great careers... so that's kind of our guiding principles wherever we have big markets — we want to operate there also."
But it's also a two-way street, Mulally explains. Just as Ford wants to be a good corporate citizen in the countries where the company builds cars and sells them, there's an expectation that the company will be welcomed by the locals — including government. It's a story not unlike that told by Toyota and Holden in the not too distant past.
"Now that we're having this conversation, the real headline, in essence... is 'The entire world wants to participate in engineering and manufacturing'. This is the fundamental economic development, right? 70 per cent of all research and development hours in the world are associated with manufacturing.
"Everybody around the world is trying to create an environment where businesses can flourish, where engineering and manufacturing can be competitive. The key to businesses around the world is that every year, every business can improve their quality and their productivity; this is one competitive industry.
"So, in Ford's case, everything we've been talking about — no matter where we have our footprint, how we become more efficient on the vehicles, how we become more efficient on production — everything's about competitiveness..."
Does Ford adhere to the intra-company competition that Toyota Australia's David Buttner has frequently cited in the past? According to Buttner, the strongest competition the locally-built Camry faces comes from Camry plants in other parts of the world, such as Thailand with its low labour cost and free trade agreement with Australia.
"That is the way it is," Mulally responded to the question from motoring.com.au. "There are a lot of factors to go into the value of not having to move parts all around the world. It's all about competitiveness..."
According to the Ford boss, "it's to understand where we need to improve where we really are..."
"Our philosophy is to operate in the big markets; to operate where we sell vehicles..."
Mulally says that Ford exports into "emerging markets" until they reach a critical mass capable of supporting a local manufacturing operation.
"This idea of having two or three plants everywhere around the world has never made sense to us; it's not part of our DNA. Our DNA is to operate where we sell the vehicles..."
But while that sounds very worthy, does Australia meet the criteria of 'a big market' or one of the 'majority'?
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