Australia’s Slow-Motion Car Crash
By Bernard LaganMay 23, 2013
Australia’s driving future? It’s probably in New Zealand.
Just outside Wellington, New Zealand’s capital, stands Ford’s once-bustling assembly plant. In the mid-1980s it cranked out Ford Britain’s large Zephyr and Zodiac sedans. Later, Ford Falcons were put together in New Zealand by the thousands.
These days the sprawling red-brick Ford plant has been given over to a collection of small markets and a go-kart track.
Head north from the city and you’ll find an unmarked grey building as big as several football fields; it’s been empty and for sale for much of recent history. Up until the early 1990s thousands of people were employed in this hangar of a place, which was constructed in the 1970s by General Motors. The Holden cars made here cornered the New Zealand market, and the plant gave tens of thousands of Pacific Island migrants a working start in New Zealand.
Driving northwest of Wellington, you can’t miss another set of cavernous buildings; covering roughly nine football fields, they were the facility for putting together Chryslers and Mitsubishis. These days the buildings are mostly muted storage bunkers.
All these locations are now silent totems to the New Zealand car industry that once was.
Sure, New Zealand’s was primarily a car-assembly industry, rather than fully fledged manufacturing. The Kiwis bolted major imported components together – engines, transmissions and car bodies – to produce cars for the local market.
But their industry did spawn myriad local auto-component manufacturers, which once thrived making parts for the country’s new Fords, Holdens and Chryslers. There were seat-belt makers, cooling-system factories, exhaust builders and manufacturers of electronics – even large factories that made wheels. They employed designers and skilled tradesmen by the hundreds.
Now they’ve all but gone.
While the demise of Ford Australia this week can be blamed on a high dollar and falling demand for larger cars, New Zealand’s car industry was killed by Rogernomics. That is, it toppled due to the economics practiced by former Labour Finance Minister, Roger Douglas.
Douglas decided long ago – in the mid-1980s – that propping up a car industry with government money better spent elsewhere was a folly. Furthermore he decided New Zealanders should be allowed to import and buy as many cast-off Corollas, Hondas, Subarus and Mitsubishis from Japan as they liked.
The money they saved – in buying used rather than new cars – would be invested in more productive, job-creating activity, Douglas argued.
The evidence of that never materialised, but New Zealanders flocked to buy imported used cars, and continue to do so – around 80,000 a year. Currently, roughly half the three million cars and light commercials on New Zealand roads are used imports.
No wonder, then, that Ford, General Motors and Chrysler swiftly packed up and left New Zealand.
So what’s left? The average Kiwi car is over 15 years old – and therefore significantly outdated in terms of the latest clean-burning emissions and safety technology. By comparison, the average age of Australian vehicles is less than 10 years.
Unsurprisingly, the Australian road-fatality rate of about 7.8 per 100,000 people is well below that of New Zealand, where there are around 10 road deaths for every 100,000 people.
LONG FEARED, IF NOT ANTICIPATED, is Ford Australia’s announcement on Monday that it will shutter its car plants and end antipodean manufacturing 90 years after the first T Model Ford rolled out of its Geelong plant. It is a hammer blow that puts all of the Australian vehicle manufacturing industry into fresh doubt.
Australian vehicle-component manufacturers rely on economies of scale to keep the cost of their products down. With Ford gone, it will be an open question, whether the component makers can hold costs while making and selling less to the remaining car makers.
Ford’s announcement on Thursday comes less than one month after the company’s former global president, the Australian Jac Nasser – now chairman of the world’s biggest miner, BHP Billiton – laid out what he thought would unfold if one of Australia’s big three car makers pulled out:
“As soon as you have a reduction in the scale of domestic manufacturing – let’s assume one of the three decides to exit Australia – then you end up, potentially, with a sub-scale supplier infrastructure. And once that happens, I think, it’s a domino effect.”
The first of Nasser’s dominos has now fallen.
Once Ford has left, Australia’s strict import controls on used vehicles will lose one strong defender. Proponents of allowing the importation of more used cars can also fairly point to the tens of millions of taxpayers’ dollars thrown at Ford over the years, in what can now be seen as a fruitless attempt to get the car maker to stay.
There are multiple reasons behind Ford’s decision to leave, but the high Aussie dollar stands out for having made imported cars cheaper, and also for foiling Ford Australia’s efforts to export its way out of trouble.
Australia is one of only 13 nations with the capacity to conceive, design and build new cars. It has developed an internationally regarded talent pool of automotive designers and engineers, and strong export markets for its locally made car components.
That’s the sharp and clever end of the business.
The one really worth saving.