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Ford Announces New Engine Direction - (Australia)

July 18th, 2007

Ford Australia today announced a key step in a new product manufacturing strategy that will allow the company to achieve production efficiencies and access global economies of scale.

From 2010 Ford Australia will import a global new Duratec V6 engine, including high performance derivatives, for use in the company's locally made Falcon, Falcon Ute and Territory model lines. The improved economies of scale resulting from the globally-sourced engine will offer increased flexibility to potentially incorporate future alternative fuel strategies, particularly diesel technology.

As a result, the company will discontinue its Australian I6 engine operations in Geelong in 2010. Redeployment opportunities will be maximised wherever possible and the company will work closely with its employees and unions to minimise the impact on the 600 people affected by the decision across engine operations. The company's remaining 1400 employees in Geelong and 3000 in Campbellfield will not be directly impacted by the decision.

Construction of the company's new Research & Development Centre, announced in 2006 as part of Ford's $1.8 billion Australian investment program, will continue and is due for completion later this year. Significant investment programs in new emissions laboratories and wind tunnel technology at Ford's test facilities at Lara will also continue, along with usual operations at the company's stamping plant and Ford Discovery Centre.

The decision to introduce the new engine and discontinue engine operations at Geelong follows industry-wide changes in consumer behaviour, including lower demand for large cars and the corresponding increase in popularity of smaller, imported vehicles. These changes have seen sales of locally produced vehicles as a percentage of the total industry in Australia fall from 36.1 per cent in 1998 to 19.4 per cent year-to-date in 2007 (Source: VFACTS).

"The Australian car market has fundamentally and permanently changed," said Ford Australia President Mr Tom Gorman.

"Our new engine strategy is a direct response to the lower manufacturing levels of locally produced large vehicles. Although we remain committed to our current local vehicle lines – Falcon, Falcon Ute and Territory, it is imperative that we improve our ability to respond to the increasing consumer desire for alternative fuels, improved performance, and better fuel economy while spreading the investment required across a broader base of vehicles. Importing the new engine from 2010 will allow us to achieve these goals."

The new engine will be sourced from high volume US engine facilities that are anticipated to produce approximately one million engines per year by 2011. In contrast, Ford Australia's engine operation currently produces 70,000 engines each year.

The next stage in Ford Australia's new manufacturing strategy is to improve the capacity utilisation at its Campbellfield manufacturing plant.

"We are currently investigating a number of alternatives that will allow us to return our Campbellfield manufacturing facility to 100 per cent capacity," said Mr Gorman.

"We look forward to working with our employees to ensure we can deliver on the next step in our process to continue building our business here in Australia."

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