Wednesday, July 18, 2007

Probable Ford plant closure

The near certain decision by Ford to close its 6-cylinder plant in Geelong, thereby eliminating 600 jobs, is devastating for the workers concerning and a major problem for the Geelong community. It will be interesting to see how the two parties address this closure issue only a few months out from a Federal election given the planned tariff cuts in 2010 from 10 to 5 per cent. It is a test of resolve and rationality.

Apart from tariff protection the Australian Government has provided enormous assistance to the Australian automobile industry over the last decade in terms of its ACIS scheme. Labor is already committed to an additional $500 million ‘green car’ handout and the government provided Ford with $208 million in 2005 to improve fuel efficiency and $52.5 million last year to develop new models. But the demand for large 6-cyclinder vehicles in Australia, and limited opportunities to export, is insufficient to sustain local production of these vehicles longer-term given persistently high fuel prices.

It is time for Labor and the Coalition to do a deal not to engage in populist politics in response to this development – it would be extremely costly longer-term to rely now on short-term palliatives that create uneconomic investments. The parties should focus on issues involved in getting these Ford workers new jobs. Indeed have a political debate on this. But policies should not be focused on retaining jobs in inefficient lines of activity that have no prospects of longer-term viability.

Update: It happened.

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