A tiny Ford bump along Australia's economic highway

Ford lost touch with consumers, as often happens with protected industries. And while its exit from Australia is a political drama, the national economy will barely notice.

Crikey

Is Ford's closure of its Australian operations, announced in Melbourne today, a disaster? Are its employees, plus the component manufacturers that depend on Ford, victims of the strong dollar and economic rationalist ideology? Does this demonstrate the decline and fall of Aussie manufacturing?

No, no and no.

Due to the Ford closure around 1200 people directly will lose their jobs, plus more in the automotive components sector. It comes after more than 400 workers were retrenched last year. Thousands of families will be disrupted and many workers may struggle to find jobs without significant retraining. But unemployment is still relatively low, and there's more than three years until the final Ford closure. Without downplaying the impact on affected workers, Australian Bureau of Statistics labour mobility data suggests that around 7000 workers change jobs every day in Australia. So, the Ford closure won't even add the equivalent of one day's worth of mobility, even though the losses will be confined to a much smaller area.

And while the strong dollar and lower tariffs for imported vehicles since 2010 haven't helped, the key reason for Ford closing is because Australians, despite buying new cars like never before, don't like Fords. In 2012, Ford's best selling model, the Focus, barely scraped into the top 10 selling models despite a big lift in sales. Its second-best selling model, the Ranger, is a ute. Its flagship family sedan, the Falcon, was 21st, suffering a 25 per cent slump in sales. And that came after a 37 per cent slump in sales in 2011 (Ford says it will "retire" the nameplate in 2016; the question is whether it will make it to 2016). In the year to March, Ford suffered a nearly 14 per cent dip in total sales.

These aren't the numbers of a company suffering increased competition from a stronger currency, but a company that can't convince consumers to buy its flagship product any more, a company that has lost touch with consumers, as so often happens with protected industries.

Nor is the closure representative of Australian manufacturing. For all the stories about high-profile manufacturers struggling, in the year to February the total manufacturing workforce fell by just 3000, or a third of 1 per cent, to 954,000 in trend terms – the lowest fall in years.

The prime minister, who as recently as April claimed the election of Tony Abbott would see the car industry close in Geelong, this morning announced the federal government would contribute $30 million to a $40 million package to "support the economic development and diversification of the Geelong and northern Melbourne regions". She dismissed suggestions that automotive manufacturing was unviable in Australia and claimed it was a major strategic industry. The federal government will also be pumping an additional $10 million into the Automotive New Markets Program for component manufacturers.

Why the loss of 1200 jobs in one region attracts $40 million in handouts wasn't explained by the prime minister, although the electoral logic of trying to hang on to the highly marginal electorate of Labor-held Corangamite is clear.

In truth, Ford's closure should have happened well before now. But the Detroit multinational has kept factories operating because it has been paid to do so by a government deluded that making physical products is somehow a more real economic activity than services, or producing intellectual property – and funded by unions with a vested interest in keeping uncompetitive factories open to employ their members. It was a scam perpetuated at the expense of taxpayers, but one that couldn't survive changes in consumer preference and the removal of the barriers that hindered consumers from choosing what they wanted.

Unfortunately Holden and Toyota will continue to receive taxpayer bribes to maintain uncompetitive operations because they play a minor role in Australian manufacturing.

This story first appeared on www.crikey.com.au on May 23. Republished with permission.