November 2, 2012 / 3:42 AM / 8 years ago

Auto supplier collapse threatens GM, Ford production in Australia

CANBERRA (Reuters) - The closure of Australia’s Autodom Ltd AIE.AX, a top Australian auto parts supplier, could shut down production at local units of Ford and General Motors by next week and executives are working frantically to save the company.

A stop sign is seen near a General Motors (GM) Holden storage facility in Melbourne June 2, 2009. REUTERS/Mick Tsikas

Autodom, a $2.1 million supplier of parts to local units of Ford (F.N), Toyota (7203.T) and the General Motors Holden unit of GM (GM.N), has indefinitely closed its plants in two Australian cities amid a halving of car production in the wake of the global financial slowdown.

Australia’s automotive industry, based mainly in southern Victoria and South Australia states, is a major contributor to Australia’s manufacturing base with three manufacturers exporting $3.3 billion worth of vehicles a year with the aid of around 160 component makers.

But despite hefty government subsidies and tariff support worth around A$2.5 billion ($2.60 billion) a year, the industry has struggled to maintain manufacturing jobs, with the Australian arm of Japan’s Mitsubishi Motors Corp (7211.T) closing its car plants in 2008.

Coinciding with Autodom’s woes, GM Holden said it was cutting 170 jobs at its Adelaide assembly plant because of falling demand for locally-built vehicles.

The Australian dollar has also traded at record highs above parity with the U.S. dollar over the past year, putting a strain on manufacturing exports.

Autodom chief executive Calvin Stead said his company, which employs around 400 people, had been hard hit by high local production and labour costs and manufacturing lines that could not be quickly scaled back.

“We need time and assistance to reorganise ourselves,” Stead said in a statement, adding he was disappointed by the lack of support for his company from key players in the industry.

A shutdown of the company’s operations was expected to halt production at Ford and GM Holden as soon as next week. Autodom, which supplies complex metal and plastic components to carmakers, is Australia’s largest press metal manufacturer.

Ford, which buys hundreds of components from Autodom for its locally-built “Falcon” sedan and “Territory” SUV vehicles, was likely to be most affected by the shutdown.

“We are currently assessing what effect it will have on our production,” Ford Australia spokeswoman Sinead Phipps told local media. “We are okay until the middle of next week, but if it’s not resolved it could potentially affect our production then.”

A spokesman for Australia’s Industry Minister Greg Combet said Autodom was negotiating a restructuring proposal with its key automotive stakeholders that could see the plants reopen.

“The government is monitoring the situation and is liaising with the motor vehicle producers. However this is a commercial issue between Autodom and its stakeholders,” he said.

GM Holden said the closure could also halt production of large “Commodore” sedans and smaller “Cruze” vehicles by next week, with spokesman Craig Cheetham telling that Autodom produced “critical components”.

GM Holden has now cut 310 jobs since February, while Toyota also cut 350 jobs at its Melbourne operation.

“Every effort has been taken to avoid this decision, including the use of market response days. However current new car demand necessitates a reduction to permanent employees,” GM Holden said in a statement.

Sales of new motor vehicles in Australia surged by the most in 14 months in September to reach an all-time high, a sign consumers have more confidence to splash out on big-ticket items even while being cost-conscious on retail spending.

New vehicle sales rose by a seasonally adjusted 4.7 percent in September to 98,701, following an upwardly revised 4.3 percent rise in August. Sales were up a hefty 14.4 percent compared to September last year.

But a July IBISWorld study forecast revenue growth to shrink by 1.4 percent from $10.7 billion between 2013 and 2018, despite a temporary rise in car production in fiscal 2012-13 as buyers moved to smaller, more fuel-efficient vehicles.

Boosted by the stronger dollar helping drive down import costs, Australian buyers have shifted increasingly to carmakers like Mazda (7261.T) and Hyundai (011760.KS), which have seen market share grow on sales of fuel-efficient small cars.

($1 = 0.9614 Australian dollars)

Editing by Matt Driskill

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