By on May 23, 2013

File picture of Ford Australia's head office in Melbourne

Ford has long been at the forefront of the currency debate, claiming currency manipulation when the yen went to levels that nearly killed the Japanese auto industry, and shouting “currency manipulation” now that the yen is back to normal levels. Now, Ford itself experiences the devastating effects of changing exchange rates:  Ford is shutting down all its manufacturing operations in Australia. The reason: A strong Australian dollar.  Says Reuters:

“Ford Motor Co  will shut its two Australian auto plants in October 2016, blaming a strong currency and costs that are hitting manufacturers just as the country looks for other sectors of its economy to cushion the end of a mining boom.”

According to the report, the closure of Ford’s  engine plant in Geelong and its vehicle assembly plant in Broadmeadows will cost 1,200 jobs. Ford  built 37,000 vehicles in Australia last year, and has been in the country since 1925.

“Our costs are double that of Europe and nearly four times Ford in Asia,” Ford Australia CEO Bob Graziano told Reuters. “The business case simply did not stack up. Manufacturing is not viable for Ford in Australia.”

The Aussie has climbed from just over 60 cents in 2009 to above parity with the U.S. dollar, where it has been for more than two years. Currently, one AUD costs 97 cents.

A few weeks ago, Jac Nasser, the former head of Ford, warned that Australia’s car industry has passed the point of no return, and said it would die within the next few years.

I am sure that in this case, Ford would have been grateful for a little currency manipulation – or shall we call in central bank intervention – and would not have complained.  GM’s Holden said it will cut 500 jobs, citing damage from the high Australian dollar.

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36 Comments on “Where Is Currency Manipulation When We Need It: Ford Shuts Down Down Under...”


  • avatar
    RobertRyan

    This has caused a lot of angst. Here is an article that appeared in todays SMH. Ford has been struggling with it’s relatively expensive locally produced cars and it’s fairly uncompetitive imports(high dollar or otherwise)
    If you can read it he does not pull any punches. General feeling of anger and disbelief felt towards Ford by a a greater part of the population. They feel betrayed.
    http://www.smh.com.au/comment/why-you-should-be-mad-as-hell-about-the-falcons-demise-20130523-2k2n4.html#ixzz2U5Bb0Y39

    • 0 avatar

      The article was total nonsense. The Ford Motor company owns the Falcon brand not the Australian people. The reason the plant is closing is because no-one wants to buy a Falcon anymore. The same applies to Holden the commodore is dead no matter what Holden Australia currently says. It dropped out of the top 10 sales in April for the first time in its model history

    • 0 avatar
      XYGTHO Phase3

      agree with Mark. The name doesn’t “belong” to us – it belongs to Ford. People aren’t buying the Falcon and Commodore because they’re not what people want anymore.

      Media etc over here are trying to blame everyone, but really it’s a combination of the high dollar, a change in people’s buying preferences, Ford not exporting anything out of Australia…

      I can pretty much guarantee that if some other company bought the Falcon name and slapped it onto something and tried to sell it, it would flop. If we’re not buying the “genuine” thing directly from Ford, why would anyone pay thousands of dollars more for a car with the same name?

      Large cars over here a dead – Holden will discover that soon enough.

  • avatar
    Ron B.

    We the Australian tax payers can say with a lot of Authority that currency manipulation and hand outs are the last thing we want our spend thrift government to get involved with . Especially in this election year.
    The dollar is high,mostly because of the currency from other countries pouring in here to be invested in realestate .That in itself is prov9ng to be a social disaster as housing is becoming insanely expensive everywhere in Australia,both for buyer and renters.
    The other reason Ford Cites, Costs can laid quarly at the feet of the unions who are continually agitating for increased wages although the average minimum wage is over $28 per hour. Thats for the lowest paid workers in the economy.
    The other thing is the insane Carbon tax. Slated to incrase every year,the basic idea is to make commodities ( coal,iron ore,electricity) so expensive that consumption will be reduced , thus the planet will be saved. Sad but very true.
    So Ford couldn’t afford to keep paying huge wages and pay increasing basic costs so it did the only thing opewn to it…close the plants before the costs were passed onto the reat of the company like cancer.

    • 0 avatar
      cthill

      Currently the full-time minimum wage is $15.96 per hour or $606.40 per week. This means that most employees in the national system shouldn’t get less than this.

      http://www.fairwork.gov.au/pay/national-minimum-wage/Pages/default.aspx

    • 0 avatar
      grinchsmate

      You’ve made a few mistakes.

      Minimum wage is AUD15.96.

      The highest Manufacturing and Associated Industries minimum is AUD25.13. That number is for full time worker and doesn’t include benefits, casual workers who receive no benefits get a 25% loading bringing them up to AUD31.40. So the absolute highest minimum possible is AUD31.40. Of course there are other loading that may apply but then we aren’t talking minimum wage. The cost to employer will be higher but that’s not what you’ve said.

      As to the carbon tax, technically its a tax on greenhouse gas emissions but you’re right the point is to make emissions intensive commodities more expensive.

      On foreign investment. ABS 5352.0 ranks foreign investment in property and business services at 5% behind mining, manufacturing, finance and insurance,wholesale and retail, and transport and communication.

      EDIT:
      I looked a bit closer and foreign investment in property and business services does seem to have had stronger growth than other sectors during the period ’09-’10. I don’t know if that trend has continued but I guess you are kind of right.

    • 0 avatar
      Bluto

      28 bucks an hour!?! Haha shit I better get down to my work asap cos they owe me literally tens of thousands of dollars.

      Also, give it up on the ‘insane carbon tax’, you shrieking rube. Whatever the relative benefits or negatives of the scheme are, Ford made literally zero mention of it in its announcement. Beyond that (as many other much better informed posters than you have pointed out) Ford managed to fuck this up all on their own, apart from the 1 billion in Government support they received over the last 15 years – from both conservative and liberal administrations! In conclusion, I want to visit the Australia you keep talking about in all your posts, because it appears to be an exciting fantasy land.

      • 0 avatar
        RobertRyan

        Yes Ford has made many mistakes here. Overall Strategic planning blunders ,the wrong products(AU Falcon), constant interference by Dearborn. They made some good local products that were never advertised or promoted. Their timing was always ‘off”

    • 0 avatar
      thornmark

      My Aussie neighbor say cars are incredibly cheap here vs home.

      She also says Ford and Holden make relatively poor products and people are buying Japanese.

      She does love her old Galaxie and especially, her Thunderbird WAGON!

      • 0 avatar
        RobertRyan

        Ford and Holden do make better products than the imported US cars/SUV’s we get here though, as they use a lot of Asian sourced parts.Asian sourced vehicles are the major sellers here similar to the US.

      • 0 avatar
        Onus

        Sounds like you caught the American coastal car disease. Don’t worry most Americans around here buy Asian makes too. Except trucks.

    • 0 avatar
      ect

      Currency rates are governed by economic fundamentals. It may be politically convenient to blame “foreign speculators”, or people buying real estate, but it just ain’t so.

      Canada and Australia are both resource-based economies. Their currencies fell in the 80s and 90s, because commodity prices (which are most of their exports) were depressed. They have risen since 2003 because commodity prices have risen sharply.

      In both countries, the manufacturing sector is the tail, not the dog. Its fortunes will change as exchange rates change, but manufacturers (and governments, for that matter) have no control over when and how those changes take place. And manufacturers simply cannot adjust to large, sudden, changes in currency values.

      For the AUD, it’s ultimately not about unions, real estate prices or tax structures. It’s the law of supply and demand. Australia’s resource exports are more valuable than they used to be, which means foreign buyers need to buy more AUD to pay for them (or they pay in USD, which the Australian exporter sells for AUD – same result). This increases demand for AUD, which drives the price of the AUD up. Simple as that.

      • 0 avatar
        RobertRyan

        @Ect,
        Again nice Classical Economic Theory explanation for the determination of the AUD. Like all Classical theories it has its flaws. When the AUD was floated it has varied from 60c to the US Dollar to about 90C( Different rate for other trading currencies) in very recent history. This time it has been showing enormous resilience to change although normal factors that have determined it in the past were well and truly trending down.
        This time the ” economic easing ” of both the US and Japanese Goverments has kept it and other high trading currencies up (Economic easing another name for a Government putting excess money into the Economy by buying Government Bonds). As well the Investors have taken advantage of the relatively high interest rates being offered here i.e 3%.
        Now the US government is winding back its “economic easing” and the AUD has begun to drop. Interest have also been cut here as well, still a long way to go to get down to the 0% interest offered elsewhere.

  • avatar
    ydnas7

    There are many reasons for Ford’s failure in Australia
    Key among them is failure to anticipate OR respond to the market

  • avatar
    RobertRyan

    Either way Ford was losing. Its imported vehicles are not the saviour they thought they would be and Ford Australia never had its vehicles and parts as part of the Ford global supply chain. Thanks to various Dearborn based Managers.

  • avatar
    RobertRyan

    This sort of comment has annoyed a lot of people. if it was the US and he said the F150 would now be built totally in Thailand, then it would come close to this clanger of a statement.
    Other comments from the article:
    “The Falcon name is inextricably linked to Australia and being produced here,” Ford boss Bob Graziano says. “We will retire that name when we retire that vehicle (in 2016).”
    Just like that.
    No discussion with Australians.
    No hint of returning the Falcon design rights to the taxpayers and car owners who have subsidised its development”

    • 0 avatar
      thornmark

      You might remember that the original 1960 Falcon was imported to Australia – it was a big seller but a poor fit for your roads – the cheap front suspension basically fell apart.

      It earned the name “Foul Can”. Then you made your own, better, Falcons.

      Here the guy who dreamed it up went on to run the Vietnam War and the Falcon just became another of Ford’s disposable names as it morphed into the equally bad Maverick and then Granada.

      For Australia, suddenly it’s 1960! All over again.

      • 0 avatar
        RobertRyan

        Yes remember the “Foulcan” rather well, later Australian Fords were vastly better. They kept on improving them after their introduction in 1960. The last Falcon’s have been pretty refined vehicles.

  • avatar
    MrWhopee

    Not sure how the Australian feel they have the right to be angry. Sure, it’s bad news to them, but bad things happen, due to circumstances or just bad luck. Ford did not prevent or sabotaging anyone wanting to build a car business in Australia, but they have a right to do with their own business in Australia as they please. How is it Ford’s fault? The tax break or whatever incentives they’ve given to Ford has probably prolonged Ford Australia’s existence for many years. If they had forced Ford to guarantee Australian production beyond whatever those incentives can make possible, Ford would likely say no, rather than submit to something that’s unprofitable for them in the long run.

    • 0 avatar
      RobertRyan

      Well without going in to the mainly finer points which there are many, Others from Australia can elaborate on the many mistakes made by Ford that has nothing to do with the current financial situation. Seemingly a lot of these clumsy decisions came from Dearborn overriding local managers.

      • 0 avatar
        ydnas7

        A few years back, at auction yards, a V6 Camry would sell for a decent premium over an I4 Camry.

        Then the state government tiered annual rego rates 3cyl/4cyl/6cyl/8cyl

        Guess what, now an V6 Camry sells for the same as an I4 Camry at the auction yard. So a V6 costs more to run and depreciates faster than an I4. Differing states have that type of rego law, mine would’ve been one of the last, Ford’s slowness to offer an 4cyl ecoboost hastened the Falcon death.

        http://news.drive.com.au/drive/new-car-comparison/fuel-for-thought-fourcylinder-v-hybrid-v-lpg-20120511-1yg69.html

        RWD is alive and well here, The German RWDs have had a fantastic decade in Australia. I live in a poor suburb and still see many BMW 1 series and Nissan 370Z.

        The prior labour (Rudd) government and the prior liberal (Howard) government tried to help the local automotive industry. But the current labour (Gillard) government is toxic for manufacturers.

        • 0 avatar
          RobertRyan

          Agree on that and hopefully the Greens can roll her in her own Electorate.

        • 0 avatar
          Onus

          Maybe a government change can reverse the decision. You have 3 years.

          • 0 avatar
            RobertRyan

            @Onus,
            I think the problems with Ford are a bit like the “Canary in the Mine” there are other export orientated industries that have been savaged by the high dollar. The more the US /Japan ease up on te money printing the better for everyone, including themselves.

  • avatar
    jimmyy

    In the US, Ford was saved from bankruptcy by Bernanke’s money printing, which depreciated the dollar against many currencies, by various government loans, and by Obama attacking Toyota with recall attacks … these recall attacks are similar to the IRS attacks on Republicans. Australia is on the wrong side of this Bernanke printing press, especially since wall street parks printed money in Australia’s currency … Australia’s currency is a hard currency since Australia is loaded with natural resources, so it will appreciate. The US is manipulating the exchange rates such that firms locate manufacturing in the US while pocketing a profit … this strategy has allowed companies like Ford to sell overpriced vehicles with reliability problems to middle class Americans. This is a house of cards that will not last. I smell a depression in the cards … brought to you by the money printing democratic party. Stay tuned.

    • 0 avatar
      RobertRyan

      Agree very unsustainable in the long run and now the “darling” of cut price manufacturing everywhere, China is struggling. Not good at all for the Global economy.

    • 0 avatar
      Onus

      It has nothing to do with Democrat vs Republican. Stating it was just the Dems would be complete miss information. They all hold a stake in what happened.

    • 0 avatar
      Conslaw

      ” this strategy has allowed companies like Ford to sell overpriced vehicles with reliability problems to middle class Americans.”

      For the most part, I don’t think Ford models are overpriced. The segments are too competitive for that. (The exception that proves the rule is the MKS.) The poor reliability is to a large extent based on issues with Sync and MyFordTouch. I have a 2013 C-Max with MyFordTouch. I haven’t had a bit of problem with it.

    • 0 avatar
      raph

      Man, sour grapes… Toyota recall attacks… over priced domestic vehicles with reliability problems…

      Although I’ll give you currency manipulation which Bernanke needs to stop before Iran’s drams are realized (true story one of Iran’s plans to figuratively “nuke” the US involves somehow getting the world to switch to another reserve currency).

    • 0 avatar
      ect

      Australia’s currency will fluctuate with commodity prices. Over the last 150 years, the trend line for commodity prices has been down, not up. We have seen a spike in commodity prices during that past 10 years, but nobody I’ve ever met has a crystal ball that always accurately predicts the future.

      Ford largely saved itself. The Ford family owns only about 6% of the stock, but they control the Board. They were highly motivated to avoid the kind of “sponsored” restructuring that GM and Chrysler went through, because they would inevitably have lost this control. Ford mortgaged everything (literally), and used this cash hoard to fund new model developemnt and ride out the Great Recession. And Bill Ford had the good sense to withdraw as CEO and hire a top-notch exec to run the company. So, kudos to Ford.

  • avatar
    skor

    It’s a shame. Ford of Oz was the only Ford division to produce a proper passenger car I6. Ford Oz also kept the muscle car era alive long after it died in the US.

  • avatar
    BrianL

    The US and Japan manipulate currencies, Australia is the loser.

  • avatar
    schmitt trigger

    Currency manipulation is a two edged sword.

    As other posters have correctly mentioned, some devaluation will help manufacturing be more competitive against a foreign manufacturers. But in this highly globalized world, where your dog food and the flowers one purchases for the loved one, to a thousand things in between, they all come from other countries and will become more expensive.

    However, it will make certain things -real estate a prime example- cheaper to foreign buyers. And native buyers will feel the pain of much more expensive housing.

    Unfortunately, there are no simple solutions…it is really a tightrope that central banks have to walk.
    But hey! it could be far worse. You could be living in Greece, or Cyprus or Spain, and have a Central Bank which is not-in-your-country, and gives a rat’s ass about your economic problems.


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