Ford Stops Production in Australia image

Ford announced it will stop manufacturing vehicles in Australia, 90 years after founder Henry Ford began producing the Model T in the region.

The main reason for stopping production is the increase in the currency which undermines Australia’s auto industry possibility to compete with imports. Ford Australia President Bob Graziano said that costs in the region are double those in Europe and four times the costs in Asia. The automaker plans to cut 1, 200 jobs at the Melbourne and Geelong plants by October 2016. Over the past year the Australian dollar has increased 28% against the yen, which caused a cut of exports and stocked sales of cheaper imported vehicles.

“Australian manufacturing can’t keep its head above water,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “High labour costs mean we can’t compete long-term against lower cost countries, especially in Asia. The strong exchange rate is exacerbating Australia’s lack of competitiveness.”

The fact that Ford stops production in Australia, is a clear sign that the labor market in the region continues to weaken due to the currency strength, which makes trade-exposed industries uncompetitive. Opposition leader Tony Abbott said that this is a “black day for Australian manufacturing” and that the government has to cut regulation and taxes to encourage investment.

Source: Bloomberg