Wheels in motion for car industry demise

[SlickHolden]

http://www.drive.com.au/Editorial/Ar...rticleID=12458

Is the Australian car industry truly prepared for the potential shocks lurking just around the corner, asks IAN PORTER.

The Australian automotive sector has been almost powerless against the onslaught of international competition.

Producing less than 1 per cent of the world's vehicles, it finds itself in a parlous position where one more significant event - further appreciation of the Australian dollar, another oil price rise or the failure of a significant parts maker - could make the decline irreversible.

The car and parts sectors have been pummelled by massive imports from new sources such as South Korea, Thailand and China. The industry has been hurt a strong Australian dollar and, most recently, hit by falling sales of six-cylinder models at home.

Profit margins are non-existent, which means no one is willing to invest in the future.

That is why federal and state governments came up with a $100 million package for Ford last month, in return for a commitment to invest in a new Falcon model. But the giant Ford group, which is in trouble in the US, was not prepared to commit to the project at a time when Falcon sales were sagging.

Changes in the industry are only just starting to be reflected by production volumes. Vehicle production reached a 22-year high of 411,000 units in 2004, but that figure dropped 6 per cent to 388,000 in 2005.

The drop this year will be much sharper following cuts by Ford and Mitsubishi and the cancellation of GM Holden's third shift late last year.

Toyota will also produce fewer cars as it is staging the introduction of its two new models, the Camry in July and the Aurion V6 later.

The combined effect of these cuts is a massive reduction in the efficiency of the parts industry. This has been compounded by the decision of GM Holden and, to a lesser extent, Toyota, to source parts overseas while preparing their next models for market.

The decline in activity has also had an effect on the macro scale, as the surge in vehicle imports in recent years and the loss of parts contracts to overseas suppliers has worsened Australia's trade balance.

The automotive industry has been the best-performing manufacturing sector - its exports rising above $5 billion again in 2005. But that is almost insignificant compared with the automotive import bill.

In 2005, Australia imported $23.5 billion worth of vehicles and parts. Since 2001, imports have grown at about $1.3 billion a year, but in 2005 they jumped by $2 billion.

The removal of virtually all tariffs in recent years, the replacement of wholesale tax on cars with goods and services tax, and consistently low interest rates have made cars cheaper than ever, accelerating the new vehicle market.

There have been four consecutive annual sales records since 2002, but unfortunately for the local producers, all of the extra sales are imports.

The proportion of the market taken by local cars has slumped from 40 per cent in 2001 to less than 30 per cent - the lowest share for any domestic automotive industry in the world.

Most of the extra sales have been in the small and light-car sectors, where prices can be as low as $14,000.

The Australian love affair with the six-cylinder car is over, undermining the local industry's 50-year-old foundations. Sales of the Ford Falcon and Holden Commodore have dropped by 20 per cent or more, shaking the local industry and threatening its survival.

Slumping local car production is making life tough for Australian parts makers.

[d-quik]

**sighs**

oh well, thats life

[Falcon500]

Well its bad its not only haveing money leave the country but it is also costing local jobs.

[SlickHolden]

You just wonder if things will ever be great again?
I think everyone knows they need to make changes for the future but holden got in faster then a petrol tax. It seemed that they might have jumped the gun to fast, But maybe it was the plan ?

But overall i think Australia will suffer it's not right, Australia has invested heaps in the local car makers it will be a shame if all that which they have invested went down the dunny, Then people will go overseas to build and design cars.
I wonder what the plan is to get things back on track will the government give the others a hand out with a Claus in there also?
I couldn't believe that was in the money offered to Ford thats like you wont a million? Get down and kiss my dirty AAAAAAA First.

[Falcon500]

Well personally i think the goverment is doing an ok (not neciserily right or wrong but ok) thing they are ensuring at least one more falcon model and they are ensuring local jobs and local parts....why cant they make this offer to holden mits? or give them more incentives to source locally and while their at it relax fuel excise......

[SlickHolden]

I don't think needs it but maybe GM won't allow it? Mitsub should get it then the 380 can sell with some confidence behind it.

[Falcon500]

Originally Posted by SlickHolden

I don't think needs it but maybe GM won't allow it? Mitsub should get it then the 380 can sell with some confidence behind it.

GM is not in any position what so ever not to take a hand out all considering how much shit their in right now.

And I dont think any ammount of confidence will save the 380 but the recent goverment support they are getting (fleet cars) will hopefully help them keep their head above water.

[fpv_gtho]

Well Ford got the grant with the premise they'd give local suppliers a chance in their future developments. With the hackjob Holdens taken to local content it'd be pointless offering the same thing to them.

[adrenaline]

I havent really done any of the maths (and I dont know the profit numbers), but does spending near 1 billion on a falcon/ commodore actually pay off over it's life cycle. And furthermore, considering our market is so small wouldnt you think that ford/ GM utilise the rear drive platforms more than they are??

[fpv_gtho]

Well i'll clear up some numbers here for the AU's "total" life span.

AU - 700 million
series 2/3 - unknown, assume 200 million together

BA - 500 million
mk2 - 100 million
BF - 200 million
BF2 - 100 million

Thats 1.8 Billion Ford may stick into their latest chassis. Now what will they get back from it...
sales
1998 - around the 60-70K mark
1999
2000
2001 - 50K mark
2002
2003 - 60K mark
2004
2005 - around the 50K mark

So you can see the AU caused a dive in sales, the BA managed to pick that up but then the oil prices kicked in. So maybe hazard a guess of around average sales around 55K-65K per year.

Prices are another thing to consider. AU's started around the 30K mark, but BA's were around the 35K mark. So say the average price for an AU could be around $35K, and the average BA was around $40K.

Worst case scenario, Ford sells 55K per year at an average $35K. That puts them at getting back 1,925,000,000 per year. Best case scenario is about 65K at $40K, which brings back 2,600,000,000. Difference in revenue of around 700 million, enough to fund the AU.

This is of course not considering profits vs cost per unit price.

[SlickHolden]

Originally Posted by Falcon500

GM is not in any position what so ever not to take a hand out all considering how much shit their in right now.

And I dont think any ammount of confidence will save the 380 but the recent goverment support they are getting (fleet cars) will hopefully help them keep their head above water.

I think GM wants holden to use them more up more of there interest thats why i think Mooney is a wanker

[Falcon500]

If that the attitude their takeing their gonna sink real fast.

[SlickHolden]

Thats why i want the hamburgler back Mooney is a hand and knees bloke with GM he needs to remember he runs holden not GM and he thinks arse kissing GM will get him places, I think he';s next job will be trolley boy

[mmm_aapls]

I work for a first tier automotive supplier and I can tell you that the from where I sit, the automotive industry is in trouble. We build components for Holden, Toyota, Mitsubishi and a little bit of Ford. Over the last 3 - 6 months, we have lost a lot of business, especially from Holden and Toyota.

Holden sourced most of the products we made overseas at a cheaper rate, and cancelled contracts here. Things that we had devolved from scratch, and told would be put into cars, got scrapped and sourced globally.

Toyota is a bit different, they wanted to expand their supplier base and so gave some of our business to another Japanese based company.

In my opinion, automotive suppliers are in alot more trouble than the EOM's. I mean, all manufactures are going global, which opens the doors for cheaper cars and development, but it means that suppliers in Aus have to bite the bullet and start sourcing their own components from the global market.

[charged]

They had o n the news that Tenneco(Monroe) will be shedding a further 70 positions, as Toyota will be sourcing the parts they use to supply locally through Asia instead. Very sad for the people down south of Adelaide whose jobs are dependent on the car industry. Looks like Toyota are certainly sourcing their parts globally.