Ford Motor Co.
) has decided to shut down its entire Australian operations in
Oct 2016 due to ebbing sales and continued appreciation of the
domestic currency. The automaker will close two plants in
Victoria state - an engine plant in Geelong and a vehicle
assembly plant in Broadmeadows. The closures would terminate
1,200 jobs at the plants.
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According to Ford Australia President Bob Graziano, Ford lost
A$600 million ($581 million) in the last five years in the
country and A$141 million ($136.5 million) in 2012 because
customers preferred smaller and cheaper imported vehicles
manufactured by Japan's Mazda Motor or South Korea's Hyundai
Ford is operating in Australia since 1925. It has manufactured
37,000 vehicles in the country in 2012 and employed more than
3,000 people. In contrast,
Toyota Motor Corp.
General Motors Company
) Holden Ltd. each manufacture more than 90,000 annually.
A strong Australian dollar, which traded above the U.S. dollar
most of the time in the last 2 years, made vehicles manufactured
by local manufacturers (including Ford) even more expensive than
the imported ones. As a result, sales of locally manufactured
vehicles dipped to 221,000 units in recent years from roughly
389,000 units in 2005.
Australian government tried to save the industry by promising
A$5.4 billion ($5.2 billion) as financial support for the auto
industry till 2020. Last year, Australian Prime Minister Julia
Gillard announced an A$34 million subsidy for Ford. The
government has already subsidized General Motors by pledging
about A$275 million in 2012 so that GM continues to produce cars
in Australia for another decade through its subsidiary Holden
However, nothing helped. Apart from Ford's recent announcement of
job cut, GM Holden has also announced to trim 500 jobs or 18% of
workforce in the country due to its appreciating currency and
Annual sales in Australia stand nearly 1.1 million vehicles. Its
automotive industry employs nearly 55,000 people and supports
200,000 other manufacturing jobs. The country's Reserve Bank
expects the Australian economy to grow slightly below trend at
2.5% in 2013 while unemployment rate is expected to increase to
Ford, a Zacks Rank #3 (Hold) stock, posted an increase of 4.1% in
earnings to $1.6 billion and 5.1% in earnings per share to 41
cents in the first quarter of 2013, beating the Zacks Consensus
Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion,
exceeding the Zacks Consensus Estimate of $32.8 billion.
The improvement in revenues and earnings was mainly attributable
to Ford's strong performance in North America and Asia Pacific
Africa. The company's results were disappointing in South America
due to unfavorable exchange rate as well as in Europe due to the
) with Zacks Rank #1 (Strong Buy) is performing well in the