Ford CEO says carmaker ‘almost pulled out’ of Australia

The Ford Ranger may have been Australia’s favourite car last year but at one point the company “almost pulled out” of the country altogether, the American carmaker’s boss has revealed.

The comments by Ford chief executive Jim Farley at the 2024 Wolfe Conference in New York earlier this month have reignited fears among local dealers that the government’s proposed new emissions standards may be the “straw that breaks the camel’s back” and lead to other major brands exiting, just as Holden did in 2020.

“If you look at what happened with GM, Holden used to be the biggest brand in Australia — it was withdrawn from the market in early 2020,” said James Voortman, chief executive of the Australian Automotive Dealer Association (AADA).

“The point we’re making is that manufacturers, when they’re in the Australian market, it’s a really small market in global terms and if it’s not viable they will pull out. In the case of Holden, 200 dealerships were exterminated overnight.”

There are 196 Ford dealerships in Australia, and Mr Voortman said many were “nervous”.

“The question is what effect this policy will have on decision-making in places like Detroit, Tokyo and Stuttgart,” he said. “That’s why we’re getting a lot of dealers concerned that some of those brands might question their commitment to the market.”

Carmakers, dealers, industry experts and the federal opposition have raised concerns about the Albanese government’s proposed new carbon emissions standards, slated to take effect next year, with warnings that motorists could expect to pay up to $13,000 more for some of the most popular utes and SUVs.

Energy Minister Chris Bowen and Infrastructure Minister Catherine King have repeatedly insisted that the New Vehicle Efficiency Standard (NVES) will not affect price or availability.

Figures compiled by the Federal Chamber of Automotive Industries (FCAI) suggest the top-selling car in 2023, the Ford Ranger, would incur a penalty of $6150 under the proposed 2025 CO2 target and by 2029 the same vehicle — assuming no efficiency improvements in that time — would incur a penalty of $17,950.

Speaking at the Wolfe Conference, Mr Farley referenced Australia in the context of the success of the Ford Ranger in overseas markets.

“So it’s funny, we don’t really talk about Ford anymore overseas, but we should because our Pro business is very profitable in Europe now,” he said during a Q&A session, the Ford Authority website first reported.

“We have a very small footprint in China. So, we’re totally unique among the other OEMs. Not a lot of risk, not a lot of reward, but we have a very profitable Ranger business. People wouldn’t realise this. The second highest volume vehicle at Ford is Ranger. Ranger globally outsells Super Duty. We are now number two in pick-ups outside of the US and pick-ups are growing big time. We sell 5000 Raptors in China for $US150,000 each, and we’re the best-selling vehicle in Australia. We almost pulled out of Australia.”

Ford has withdrawn from various markets in recent years as it revamps its business operations, including shutting down manufacturing in Brazil and India.

Ford’s Australia ‘turnaround’

A Ford Australia spokesman told news.com.au that Mr Farley “was illustrating the change to our business that occurred when we stopped manufacturing vehicles in Australia, and the turnaround that has led to Ranger being Australia’s top-selling vehicle in 2023”.

Ford ended local production in 2016 after 91 years of manufacturing in Australia, closing down its Broadmeadows factory that built the Falcon and Territory and its Geelong factory that built engines.

The company maintains vehicle development and design operations in Melbourne and a testing ground near Geelong, but experts have previously questioned whether Ford has a future in Australia.

Last year Ford slashed around 400 of its 1800 remaining local employees, the majority in product development and design, as part of “a global drive to improve efficiency and transform its operations to meet future needs”.

“Australia will continue to be the centre of development for the Ranger and Everest globally,” a spokesman told CarExpert.com.au at the time.

But Mr Voortman said there was no guarantee that Ford would stay.

“If you look at the comments made by Holden executives in the two years running up to the decision to exit … the local management will always say they’re staying, they will always commit themselves to the market,” he said.

“But as we saw with Holden and other brands that have left like Chrysler, [Holden’s German sister brand] Opel or [Nissan premium arm] Infiniti, if it does not stack up they will withdraw and divert resources elsewhere.”

The Ford Ranger and the Toyota HiLux have vied for the top spot as Australia’s most popular car for the past three or four years.

Last year Ford sold 87,800 units, largely off the back of the Ranger and its Everest SUV sibling, down from a peak of 135,172 sales in 2004 during the heyday of the Falcon, according to CarExpert.com.au.

General Motors’ announcement in 2020 that it was killing off the iconic Holden brand blindsided and outraged the federal government, which slammed the manufacturer for “walking away” from the Australian market after accepting billions of dollars in subsidies.

“I am disappointed but not surprised,” Prime Minister Scott Morrison said at the time. “I am angry, like I think many Australians would be. Australian taxpayers put millions into this multinational company [but] they let the brand just wither away on their watch.”

The new emissions standards unveiled by the Albanese government earlier this month do not ban any particular model, but instead penalise car brands if the average emissions of all new vehicles they sell is higher than a cap, which will reduce each year until the end of the decade.

As a result, manufacturers will be forced to sell more zero and low emissions models, or cut back on the sale of popular ute and SUV models, to avoid being hit with fines for breaching the mandatory pollution caps.

$1000 savings questioned

The government says that if Australia catches up with the standard in the US by around 2028, Australians stand to save about $1000 per vehicle per year.

Mr Voortman has pushed back on that figure, saying it takes into account fuel savings and reduced maintenance costs, but ignores the “significant” cost of depreciation, and the higher costs of insurance and repair.

Depreciation figures from the AADA suggest that an electric vehicle loses more than four fifths of its value after five to seven years.

In January 2024, the average value retention for all used cars was 96.6 per cent in the first two years, compared with 84.9 per cent for EVs.

Used cars from two to four years old retained 85.4 per cent of their value, but for EVs this fell to 63.8 per cent. By five to seven years, EVs retained just 17.5 per cent of their value, versus 69.6 per cent for the entire market.

“We’re calling into question these claims of $1000 in savings for motorists because they haven’t included all the additional costs you will face,” Mr Voortman said.

“Depreciation is a massive cost, insurance is well known it’s a higher cost, and the repair costs — look at rental company Hertz, they offloaded a number of their Teslas because they were finding repairs were prohibitively expensive. It’s really important we include those in the modelling.”

Speaking to reporters earlier this month, Mr Bowen said it was “not a restriction on what Australians can buy” and noted that in countries with vehicle efficiency standards such as the US and New Zealand] “utes and SUVs are often the top-selling car”.

Ms King added that evidence from international markets was there would be no impact on price. “There is just no evidence to say that it will affect price at all, SUVS or utes or any other vehicle,” she said.

FCAI chief executive Tony Weber claims the “impact on consumers will be enormous” and has called on the government to release its own numbers.

The government has declined to release the modelling under Cabinet confidentiality rules, claiming it would “not be in the public interest”.

“Eighty pages of analysis, information and options were released on February 4,” a spokeswoman for Ms King said last week. “The government is now engaging with industry as we finalise this important policy to deliver more choices to Australian car buyers.”

Mitsubishi Australia chief executive Shaun Westcott last week warned carmakers have to “survive by making a profit” and “there may have to be an increase in prices of cars somewhere” depending on its portfolio makeup.

Toyota Australia said it supported a mandatory fuel-efficiency standard that was “ambitious” but “doesn’t leave Australians behind”, while Mazda Australia said it advocated for a “realistic transition” while encouraging the government to “ensure the affordability and mobility needs of consumers are considered”.

frank.chung@news.com.au

Leave a Comment