Ford VFACTS May 2013

[Spammy]

Originally Posted by Barraxr8

There was a huge profit on imported product ( esp : Ranger). A loss on local product, and a large write down of assets.

Without the Asset write down FoA is profitable, but accounting can do anything.

Or put another way the imported cars are profitable and the local cars are losing more $10,000 per car sold. Therefore scrap the local cars and turn the business profitable (which is the underlying concept of most businesses)

Nobody who runs any business could construct an argument to maintain production of the local cars.

[Fordman1]

Originally Posted by Spammy

Or put another way the imported cars are profitable and the local cars are losing more $10,000 per car sold. Therefore scrap the local cars and turn the business profitable (which is the underlying concept of most businesses)

Nobody who runs any business could construct an argument to maintain production of the local cars.

Nope.

Local products isn't that unprofitable, they are pretty much break even.

It is the next investment that is the problem.

[prydey]

Originally Posted by Barraxr8

It is the next investment that is the problem.

i think this is a fair chunk of the problem going forward. global products are able to bring updates to market in a much shorter timeframe.

updating the model every 3 years isn't going to cut it going forward.

the announcement regarding falcon recently has proved to me that there is still a very large percentage of people that see ford as the falcon car company.

[jpd80]

And most likely, the cost of converting Broadmeadows and its supplier base to making global platforms here was probably too great.

[mik]

lets face it after the global financial crisis , like a lot of other companies Ford has become more focused on maximizing its profit margins, and who could blame them , after all they are in business to make a dollar, if anyone had to make a cold hard business decision on where to build cars for the most profit they are going to pick the the cheap energy/labor country over the expensive country every time, and that is no longer Australia unfortunately.

[Brazen]

Originally Posted by mik

lets face it after the global financial crisis , like a lot of other companies Ford has become more focused on maximizing its profit margins, and who could blame them , after all they are in business to make a dollar, if anyone had to make a cold hard business decision on where to build cars for the most profit they are going to pick the the cheap energy/labor country over the expensive country every time, and that is no longer Australia unfortunately.

I don't think closing down Ford Australia manufacturing is that smart. They are losing a lot of knowledge and abilities in removing the manufacturing component from their local engineering skill set - knowledge which is vital in the engineering and design of vehicles. Also closing down manufacturing will cost hundreds of millions in shut down costs, there will be PR and reputation costs and it will result in a sizeable decrease in sales and the removal of Goverment fleet contacts.

Obviously Ford have their reasons, but I don't think it's exactly a black and white case as the only reason they shut is due to lack of volume, volume can be built through new products and markets.

[Brazen]

Originally Posted by Spammy

Or put another way the imported cars are profitable and the local cars are losing more $10,000 per car sold. Therefore scrap the local cars and turn the business profitable (which is the underlying concept of most businesses)

Nobody who runs any business could construct an argument to maintain production of the local cars.

If local cars were that unprofitable they would be closing in 3.5 months, not 3.5 years.

[prydey]

Originally Posted by Brazen

and the removal of Goverment fleet contacts.

the irony being that ford could import something like this

http://www.ford.com/cars/fusion/trim/hybrid/

and probably be more eligible for govt contracts than anything they build locally. buying local isn't a massive priority on many fleet criteria, unfortunately.

whilst there may be some backlash from a small section of the market, i think ford will transform successfully, very similar to what mitsibishi has been able to do.

[Road_Warrior]

Originally Posted by jpd80

And most likely, the cost of converting Broadmeadows and its supplier base to making global platforms here was probably too great.

Not as much as shuttering the plants I think:

http://www.goauto.com.au/mellor/mell...257B79000B52BE

[jpd80]

Originally Posted by Road_Warrior

Not as much as shuttering the plants I think:

http://www.goauto.com.au/mellor/mell...257B79000B52BE

What Ford avoids a lot of that clean up cost by keeping facilities for making prototypes?

[bobthebilda]

Originally Posted by Road_Warrior

Not as much as shuttering the plants I think:

http://www.goauto.com.au/mellor/mell...257B79000B52BE

I think the article takes a few things to the ridicuous -

The contracts with part suppliers will have to be settled and, given that Ford has two vehicle lines instead of Nissan and Mitsubishi’s one model, Ford will probably need to put aside something north of $50 million, which would be twice what those two companies would have allocated.

If Ford had no plans to make cars past 2016, what contracts would they have with suppliers to provide parts post 2016.

There is also a potential for Ford dealers to make loss-of-profit claims against the company – especially as dealers have spent collectively hundreds of millions of dollars on refurbishing their dealerships in the past couple of years (see below) on certain sales expectations that may now be in doubt.

Potential!!!!!! Thats the risk you take when you are a dealer. Holden would have been paying out bucket loads to their dealerships over the last decade for lost marketshare if that was the case.

A major drain on the books comes from Ford’s decision to keep producing cars for three more years.

On Ford’s own accounts we already know that making cars locally has drained $600 million out of the bottom line over the past five years – that’s a drain of $120 million a year.

By keeping the plants open for another three years with sales of local product that will inevitably be falling, Ford will be maintaining the same overheads for another three years that will be progressively throwing up less and less cash.

I doubt the same overheads will continue. As shutdown time draws nearer, and sales continue the (expected) decline, Ford employees will just go to a four day week, then a three day week.

[JPFS1]

Originally Posted by Spammy

You have no idea - without R&D there is no car and you only pay tax on profits and you only offshore profit when you have a profit.

IIRC 100,000 units per year is considered absolute break even point for a main stream manufactuer. Do you think they are more or less profitable at 25,00 units??

Thanks for your kind words.

I understand what you're saying and you are correct, we can assume that with significantly less volume, there could be proportionally, less profit, but not necessarily proportionally less profit per unit. If all fixed costs stay the same while volume evaporated, then yes, profit per unit would drop drastically and even lose $$$ per unit.

But I don't think a business like this is as simple as that and the fixed costs certainly aren't fixed.

However, I don't disagree that investing in a new platform/plant upgrade was the determining factor for closure, but that's a slightly different point to current platform viability, and that was my point.

[Joe5619]

Another 3.5 half years of this.. OMG!!

I think Ford Australia is going to be in trouble (sales & profit wise) for at least the next 4-5 (maybe even 6-7) years. Just like Nissan & Mitsubishi before them.

I still think it is a great shame they couldn't build some oversea model here for our region. I'm sick to death of hearing "supply problems". Build it here FFS & supply is fixed. I know it is not that easy, but it is a nice idea!!

[Smoke Pursuit]

I can't believe how well Falcon is doing considering how neglected it is... From both a Ford and Dealer level. Further to that theres no special edition or big incentive on either to buy... $38,990 for a 7 seat petrol Territory is a rip job... I could walk into my dealership and buy a 7 seat Petrol for $35,000 all day everyday, so why don't Ford advertise it like that?

Took my Ranger in for its 3 kay this morning and had a snoop around the yard, Rangers, Focus' Fiesta and Kuga's everywhere but hardly any Falcons or Territory's. Its like the dealerships have given up the ghost!

[prydey]

Originally Posted by DASH GT

Took my Ranger in for its 3 kay this morning and had a snoop around the yard, Rangers, Focus' Fiesta and Kuga's everywhere but hardly any Falcons or Territory's. Its like the dealerships have given up the ghost!

every dealer would have different data as to what sells in their area. i drive past a couple of dealers here on my commute and there are still plenty of falcons on display.

[janddbone]

They will be lucky to remain in the Top 10...

[JPFS1]

Originally Posted by DASH GT

Took my Ranger in for its 3 kay this morning and had a snoop around the yard, Rangers, Focus' Fiesta and Kuga's everywhere but hardly any Falcons or Territory's. Its like the dealerships have given up the ghost!

And this is directly attributed to the financing of local floor stock, ie wholesale financing for dealers to hold floor stock for you and every other prospective customer to be able to walk in and take a look at a new car that they might want to buy.

This all changed when the GFC hit, Ford Credit decided to pull the pin on Australia, so Gov worked on putting in place a temporary fund to provide liquidity for dealers.

IMHO, this moment was one of the most significant factors in the downfall of local production for Ford. It was a moment where the local arm of Ford Credit handed power to Detroit to supply wholesale funding to local Ford dealers. This was never the case prior (they would historically raise funds for the business in the local market through securitisations, commercial paper
programs, note issues and bank lines), and it was only a matter of time before Detroit tightened their own purse strings to battle their own issues through the GFC.

So, credit completely dries up for Ford dealers to be able to fund local floor stock, in turn, significantly reduced floor stock on offer, customer not happy because there's nothing to see in show rooms.

And finally to quote the MD of FCA Holdings at the time

Wholesale financing is a critical part of the smooth flow of vehicles from the manufacturers to the dealers and makes it possible for dealers to stock a large range of vehicles. A typical medium-size dealer has about 45 days supply of vehicles, or $3 million in new vehicle inventory, on hand at any given time. Used vehicle inventory is typically at 75 days supply, and an average borrowing for this size dealer would be about $1 million. The provision of dealer financing is considered critical to the survival of many of our dealers and it is directly linked to the sustaining and growing vehicle sales of Ford Motor Company.

[jpd80]

Originally Posted by Spammy

Wasn't it a $100 mill loss on actual sales and an additional $170m write down.

Quick calc based on 25,000 cars is $4000 loss per car.

Don't forget $270 million spent on new R & D facilities plus what Ford paid off their internal debt
which stood at $480 million in 2011 before it paid another $130 million off..

There's a lot of money being shifted around and I'm almost certain that it would now
suit Ford's ends to show just how bad the local business is as evidence to change everything.

I too wonder just how many "paper write downs" are being heaped on to make losses look worse.

[ivorya]

I know this is the wrong place to ask this question but we're all discussing anyway....

With the A$$ falling from the Aussie dollar, maybe 80c to the US soon (so they say), will this potentially give the Ford US a chance to change their minds and maybe use the fac's here instead of building elsewhere?

[Joe5619]

Originally Posted by jpd80

Don't forget $270 million spent on new R & D facilities plus what Ford paid off their internal debt
which stood at $480 million in 2011 before it paid another $130 million off..
There's a lot of money being shifted around and I'm almost certain that it would now
suit Ford's ends to show just how bad the local business is as evidence to change everything.

I too wonder just how many "paper write downs" are being heaped on to make losses look worse.

FYI: Paying off debt is not a P&L entry.

[Brazen]

Originally Posted by ivorya

I know this is the wrong place to ask this question but we're all discussing anyway....

With the A$$ falling from the Aussie dollar, maybe 80c to the US soon (so they say), will this potentially give the Ford US a chance to change their minds and maybe use the fac's here instead of building elsewhere?

It is a massive asset, a fully functioning plant with a skilled and trained workforce and with a supplier network in place.

I think we would need to see the dollar in the 60s for it to be seriously reconsidered. Also need to see some consolidation in the market - there are too many brands I think banning less than 5 star ANCAP cars would be a clever way to do this.

[jpd80]

Originally Posted by Joe5619

FYI: Paying off debt is not a P&L entry.

I know that but sometimes we assume the obvious when it's clear that the problem is more
complex than just losing $4,000 a car which was the assumption of the poster I responded to

[Road_Warrior]

Originally Posted by Brazen

It is a massive asset, a fully functioning plant with a skilled and trained workforce and with a supplier network in place.

I think we would need to see the dollar in the 60s for it to be seriously reconsidered. Also need to see some consolidation in the market - there are too many brands I think banning less than 5 star ANCAP cars would be a clever way to do this.

You would also need to put some different products on the table. Ford Edge and Fusion for starters.

[Brazen]

Originally Posted by Road_Warrior

You would also need to put some different products on the table. Ford Edge and Fusion for starters.

No real chance of anything happening, but its interesting to think what would be needed to save it - if it can be at all.

[Bossxr8]

Detroit are only worried about protecting themselves, and increasing their business.

Just after the Ford Australia closure they announced they will be hiring thousands of new workers for new car programs in the US. They are totally inwardly focused now and anything outside the US and maybe China is just getting in the way of Ford North Americas interests.

Ford Europe is only valuable to them because they can take their cars and build them in the US ie Focus, Fiesta and Mondeo/Fusion. As long as it benefits them its ok.

[Spammy]

You can beat on about clever accounting and politics within the Ford empire as much as you want ....but you can't iginore the most obvious reason they scrapped the Falcon: people have stopped buying them.

The sales numbers speak for themselves. And give up on the "Ford stopped advertising them" whinge --- like any smart business they have focssed on winning market share in growing sectors rather than pouring money down the drain on a sector that is winding down.

[buggerlugs]

I have had 2 customers buy XLT Rangers. One is a 2WD with diff lock. One had been told he could have the ranger in 2 weeks. Turned out to be 3 months. The other waited 4 months. Ford nearly lost both sales. One has now done 11,000ks and said he can't fault the vehicle. It is easily the best vehicle he has ever owned. The other guy has said the same. He described it as bulletproof. Ford need to get more of these over here quickly. Best form of advertising is word of mouth...............

[bigwil]

Would love to get a breakdown on ecoboost, NA inline 6, turbo and V8.

[GAFA]

Just had a look at the Facebook page for one of the Ford dealerships . They put photos up of their customers picking up their cars and so far for 2013 the numbers are (based on the number of photos);

Falcon: 10
Territory:10
Ranger: 12
Focus: 21
Kuga: 4 (including 1 older model)
Fiesta: 16
Mondeo:1

I think it gives a good overview of what customers are purchasing.

[russellw]

Sorry for the lateness but the monthly stats are now uploaded in the Technical Portal.
For those who don't read the whole thing, I have included my summary of the Falcon demise below.

By way of commentary, let me say that we have watched the gradual decline of the large vehicle segment in this country to see it replaced by SUV's and the light to small car segments that seem to fit the needs of our (largely) city based populations better than the large sedan that was once the Australian staple. In that era (probably everything up to the mid 70's), small cars were driven by young women and old folk and foreign cars (at least Euro ones) were driven by bearded weirdos. Generalisations of course but close enough for this discussion.

The Australian landscape has changed enormously since then. Populations have doubled (largely through migration) while rural populations have declined. Families declined in size and the small to medium car made sense for the two adult and one point something children that became the accepted norm. We saw this in the eighties when the medium passenger segment was at the strongest it had ever been - large cars were still selling in decent numbers but medium wasn't far behind with the balance being in the smaller classes.

The intervening decades saw the introduction of the SUV as the all purpose family, singles, couples urban transport choice and the sales growth in those vehicles speaks for itself. Public transport in most of our major cities may be rubbish but then so are the (so called) freeway systems and thus the car has become less of a commuting tool and more a weekend and recreational device. The SUV (although misnamed as most of them are far from 'sport') met that recipe for a lot of people to the point that they are now a third of all Australian vehicle sales.

Our hope, from a Falcon perspective, has been that Territory could gain a large enough slice of the SUV market to keep the Falcon as a Territory spin-off rather than the other way around but the segment itself only represent a third of SUV sales and thus around 10% of the market so that the ~1,100 monthly sales didn't provide sufficient volume to support the platform in an environment of rising production cost (per unit) and an inflated Australian dollar.

It's the end of an era for all of us who grew up with and retained a passion for a class and size of vehicle that had failed to make sense to the bulk of our society. That the Falcon (and to some extent the Commodore) were plagued by the perception (real or otherwise) of poor build quality compounded by a less than positive dealer experience for far too many people meant that the only real question facing us as Falcon enthusiasts was when, not if.

The blame lies nowhere and everywhere at the same time.

Ford failed, despite a range of (sometimes harebrained) attempts, to fix the shambles that is the dealer network which has long been a weak spot for the paying customer. That the view became one of prescriptive attention to dealership presentation rather than any real focus on the human elements or even removing those who were well known to be bad, is an indictment on several iterations of FoA management that continues still. Even the long term survival of the brand will, to some extent, require this particular issue to be addressed.

We failed. As enthusiasts we have been the most critical of the brand and their real and perceived faults for the last two decades and the expansion of the interweb has only made that commentary, criticism and dissatisfaction available to the public at large. All manufacturers have quality, production and dealership issues and some of the stories I could tell you around a certain European brand well know for it's three-pointed star symbol would make you glad to be in a Ford - but these are kept relatively quiet given the absence of enthusiast communities built around those marques.

We can, from here, take a glass half full or half empty view.

The latter will bemoan the loss of a vehicle range that in many ways epitomised Australia and the self-image of a strong and rugged country full of strong and rugged people but which reality, if it ever really existed, went away 25 years ago as we became a predominantly more cosmopolitan country - whatever that means.

It's not just the automotive world - the change in the Australian landscape is far reaching and would keep me going for weeks if I wished to cover it all so I shall spare you that. Let me just say that we now have 'latte' rather than 'flat white' and you can have it decaffeinated, with soy, Himalayan goat or skinny milk so that you end up with something that has no coffee and no milk either by the definitions applied in 1975.

The half-full glass people will look ahead to the very real possibility that we will see other Ford global products imported to fill market niches that leave us with some very tantalising propositions - Mustang, Taurus SHO and Ranger SUV to name a few.

Cheers
Russ