Ford to shed jobs in November

Ford has confirmed that the company will retrench up to 15 per cent of its workforce on the vehicle-building production line at Campbellfield, in Melbourne's northern suburbs.

The company arrived at the decision just yesterday and informed the relevant union and government bodies at that time. What Ford calls a 'downbalance' will be enabled through a voluntary redundancy program to take effect from midway through November.

Ford's Manager for Public Affairs, Sinead McAlary, took us through the process when the Carsales Network spoke with her earlier today.

"Basically what we're looking at is a 20 to 25 per cent reduction in our line speed, which means that we don't stop doing any one particular thing, we just slow down the rate at which we do everything. It will come across both Geelong and Broadmeadows, so it's a slowing of everything," she said.

"The personnel implications that are directly tied to that, we're still working through, but we expect it to be in the region of 300 to 350."

Although the announcement comes within days of the submission of the Bracks (ACIS) Review of Australia's Automotive Industry to Senator Kim Carr, the report's recommendation that the import tariff be reduced from 10 to five per cent in 2010 (more here) had no bearing on Ford's decision, says McAlary.

"We're on the record as saying that we believe tariffs should pause in 2010 -- that they shouldn't go down -- but to directly tie these [staff cut-back] actions to that recommendation would be wrong," she said.

"The Bracks report and all its recommendations are for future transition of the industry. What we're dealing with now is immediate actions that we have to take to be competitive today.

"In 2010 we'll have new engines, in 2011 we'll have [the locally-manufactured] Focus, so things will be better then."

For Ford, the next two years are shaping up to be a commercial and economic hurdle -- or a long-jump, while we remain in the spirit of the Olympic Games... hopefully with a soft landing on the other side of the jump.

An upgraded Territory is due sometime next year and is rumoured to be coming with a diesel engine, which should boost the SUV's sales. The imported Cyclone V6 that will, in 2010, displace the current inline six that powers both Falcon and Territory, will deliver cost benefits for the local Ford arm. Ford's Focus small car in its next iteration will move to local manufacture in 2011, so in all, the future is bright for Ford, just not in the immediate near future.

And Ford is not Robinson Crusoe in that respect, either.

"What we're doing now is managing for what is not just a Ford issue, it is an issue that is becoming clearer through the whole industry -- and not just in Australia either," McAlary points out.

"You can see what's happening in the North American new-car market. Signs are that things might be slowing in Europe; signs are that things might be slowing in China!

"The early signs for August were that [Australian] sales were looking to be lower.

In a broader scenario, McAlary points to companies outside the automotive industry that are also battening down the hatches.

"Just look at the statements made by major companies in the last couple of weeks," she says.

"You've got Qantas... Cadbury announced what they were doing yesterday. There are a number of different companies and industries all saying that the signs are that it's going to be a difficult period ahead.

"The problem for [Qantas] is -- I think they've announced 1500 job cuts -- they've got to plan for their future... And [the airline's record-breaking] profit is past. You've got to deal with what you've got to expect today and in the short term. That's where we are."

But overall, the head of Ford's PR remains upbeat about the company's future.

"We're definitely doing the right things, to transition the business," says McAlary. "They just take time, so new product lines, new powertrains -- all those are the right things, but they're just not here today."

"We do believe that we will have to increase the line speed again, once we have other vehicles in line. We firmly believe that, but can I absolutely guarantee it at the moment? I can't. That's what we're planning for and you expect that when you add Focus -- 40,000 of them into the production plant -- you need to increase the line speed.

"There are lots of good things to come, but in the next two years, the signs are that it's going to be quite difficult."

Ford finds itself in a large car conundrum. Sales in the segment continue to decline, but the Falcon remains in the top five-selling cars in the country. It's not a simple matter of walking away from the segment.

"The FG Falcon is continuing to sell well, within the segment," McAlary observes.

"It's increased its market share from 21 per cent to 33 per cent of the large-car segment. Unfortunately, the issue is that the segment has declined, so we're getting a bigger share of a smaller pie.

"The fact of the matter is that Falcon is still in the top five-selling vehicles in Australia. Yes, sales are declining, but it's still in the top five. There are still customers for it and even small cars are having a downturn as well. What do you do?"

According to VFACTS, domestic sales of the Falcon-based derivatives and the Territory SUV combined are 4560 units behind combined sales for Holden's Commodore derivatives for the year to date as of the end of July. But if sales of Ford's large cars are problematical in the here and now, companies selling small cars are about to start experiencing some pain also, says McAlary.

"What we're also seeing is that it's not just large cars. Indicators are showing that there'll be a noticeable softening across the total industry in the second half of the year."

It's not as if SUVs will save the industry either, says McAlary, despite the belief that offroaders have contributed to the decline in large car sales.

"SUV sales for the first number of months for the year were definitely more resilient -- in fact, they were up. They were down though, in July -- quite significantly. But that was the first month they were down, whereas the other segments have been down a number of months.

"Last month was the first month that SUVs were down -- and as Bill [Osborne, Ford President] said, the month of July private share was down something like 15 per cent [across] the total industry. So that's a really good indicator that people are concerned about their interest rates, people are concerned about jobs and economic factors -- superannuation and all that stuff. They're potentially holding off making what to some is not necessarily a purchase they have to make today. They're putting it off."

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