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.