Ford Will Close Its Australian Plants in 2016

Ford Motor Co. plans to shutter its two car factories in Australia by October 2016 and dismiss 1,200 workers after losing $600 million in the country over the past five years.

Ford, which began making the Model T in Australia in 1925, says it intends to close its Broadmeadows assembly plant in suburban Melbourne and a nearby engine facility in Geelong. Late last year the company shed 440 employees at those plants and cut output 29%.

Ford says it will retain about 1,500 employees in non-manufacturing jobs in Australia, including more than 1,000 designers and engineers in Broadmeadows. The site is one of the company's four global product development hubs.

Ford has been hit hard by double-digit declines in demand for its flagship Falcon fullsize sedan. The Australian dollar's 83% surge against the yen in less than five years opened the way for a flood of Japanese imports and made Australian-built cars more expensive abroad. Ford says its costs in Australia are double those of its European unit and nearly four times as high as at its Asian operations.

The company has received US$1.1 billion in Australian state and federal assistance since 2000, including the $105 million it got last year in exchange for a pledge to keep producing vehicles there until at least 2016.

Ford's exit could lead to the demise of Australia's auto industry, according to Jac Nasser, chairman of mining giant BHP Billiton Ltd. and former Ford CEO. Nissan and Mitsubishi have ended local production, leaving Ford, General Motors' Holden unit and Toyota supporting a large supplier base. The loss of one more carmaker would trigger a "domino effect," Nasser said last month.