Climate Change, Regime Change, Model Change: Back to the Future for Broady

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Climate change, global warming, carbon taxes and a new US President, not to mention a few ripples at the Wall Street pond end, have seriously disrupted the level playing field on which the dinosaurs of the car industry have been reclining for the past century.

The future for the two carmaking giants and the carmaking giant turned not-so giant -- Chrysler -- looks decidedly grim. Don't look at their share prices. I said, don't look at their share prices!

Talk about plummeting off a precipice. Ford Motor Company's share price is under US$3 and GM's is barely above US$5. GM was around ten times that a year ago.

The question for Australia is what will be the fallout for local carmaking if the situation in Detroit becomes even more untenable? Will a new US administration bail them out? Or let them go to the wall?

Sure the recession is no help, but high petrol prices have finally bitten hard at US consumers' ankles, forcing them to wake up to the ugly reality of their gas-guzzlers.

Whose fault is it things have come to this?

Is it: a) the American consumer's fault for not insisting that GM and Ford and Chrysler deliver high-class, fuel efficient, planet-hugging automobiles at affordable prices; or b) the car companies' faults for not enticing customers with high-class, fuel efficient, planet-hugging automobiles at affordable prices; or c) the US government's fault for not either requiring the car companies to produce high-class, fuel efficient, planet-hugging cars at affordable prices or forcing or incentivising consumers to purchase high-class, fuel efficient, planet-hugging cars at affordable prices... [We're not paying you by the word this week, Otto -- Ed].

During the oil crisis of the 1970s and 1980s, Americans were hit with a blanket speed limit of 55mph. The slower speeds reduced fuel consumption. In fact pick-ups' consumption dipped in the early 1980s but picked right up again in the 1990s. Now, the biggest pick-ups aren't even classified as passenger vehicles –thus their 10 miles per gallon (approx 24L/100km) consumption doesn't sully their smaller brethren's averages.

Now bear in mind that in the past 20 years Japanese transplant factories have been churning out high-class, fuel efficient (and more recently) planet-hugging affordable cars by the hundred thousand, and average fuel consumption has not made any startling improvements, you won't wonder too long who has been building big, fat, fuel-hungry petrol-chomping trucks.

America's taste for four and six-cylinder high-tech Japanese engines has been overshadowed by its obsession with SUVs and full size pick-ups. They don't just drink they gulp, guzzle and slurp it down faster than you can say "didn't we just fill it up?" It is no wonder the US carmakers have not been leading the free world to an oil-free carpark when their leader has tight links to Texas oil?

Because Americans were so focussed on how big their SUVs could get and how many horses could be crammed under the hoods of their full size pick-ups, no one stopped to think about Peak Oil, wars in the Middle East or shock, horror, an internal economic melt down.

The Iranian nuclear program is still (as Otto pens this) intact, US Forces are still 'surging' and holding the line in Iraq and no one has made any significant threats to choke the Straits of Hormuz this week, but that's all it would take to spike oil back above US$100 a barrel to goodness knows where... Then suddenly the recession in the USA, tumbling house prices, and toxic mortgages translates to "See Ya Later Motors" for GM and Ford.

It is simply too late for these behemoths to turn around and tell us now they're going with non-oil based engine systems for the next decade. You might wonder why is there no alternative fuel program for Ford and Holden in Australia, outside LPG?

Can you imagine trying to sell frugal alternative fuel concepts to HQ when they have been one-eyed on bigger and bigger V8 and V10 monsters? Imagine the scene: Boardroom X, Detroit. "So you Aussies want to spend some of our money developing a hybrid? Does it have a V8 attached? And it's for which global platform? Oh, it's not a global platform... Okay, er, next..."

Aussie buyers are no longer the knuckle-dragging blue singlet-wearing goons we used to be. We now stand erect, have sniffed the clean exhaust emissions of superbly crafted multi-valve Japanese and European engined smaller cars, and we have found it good. We recognise world standard build quality when we inhale its plastic fumes and we know that cars can do 200,000km without the diff entertaining us with its merry tunes like a low-flying Humvee on acid.

So we have to ask: Should Ford even have signed off on the petrol and LPG-only FG Falcon? And even: Should Ford have agreed to insert Focus production here from late 2011?

What will Ford do better to avoid the costly mistakes GM made with Adelaide-built export Vectras? (NB: Ask anyone with a locally built Vectra about its legendary build quality -- if you can fit an hour or two's moaning into your schedule.) Or perhaps pop on down to Tonsley Park to ask Mitsubishi about the fun it can be exporting Australian-made cars back to Japan and other first world markets.

Why exactly would an Aussie buyer prefer a Broady-built Focus over one from Belgium, where European quality levels are rigidly enforced? Will it be that much cheaper or better?

So as freshly-minted CEO Marin Burela talks of "right-sizing" and "down-balancing production" at Ford Broadmeadows for the future, the translation from his bewildering transcontinental corporate doublespeak is: "It's death by a thousand cuts, lads."

When announcing the latest 450 job cuts, he did actually acknowledge "preferences are shifting" in the Australian market. Such insight is probably courtesy of Ford of Europe where cars that exist in market segments as small as 11 per cent (ie: Large cars) get very little corporate attention.

Why would Ford want to continue to build the Falcon, treading water and burning cash till Focus comes on stream with Model Year 2012 cars, unless it had absolutely no other choice?

With a weakened parent company locked in limp-home mode, no export potential for FG, and a market that has turned its back on high volume big sixes, Ford should apply the Nitrous Oxide tanks to the Focus program and bring it on stream two years early. And make sure there's a compact or midsize SUV in the mix, and a diesel engine. Or better still a hybrid powerplant.

Easy to say, of course, but the alternative is down-balancing Broadmeadows back to exactly that: broad meadows.

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