Line rate could be increased.

[vztrt]

While it has been slightly with Marin saying that the Falcon & Terri will jump up 20% in sales the line rate will surely need to be increased.

It also explains what some of us have been trying to say about Fords lower sales numbers.

http://www.goauto.com.au/mellor/mell...2576F1001176B7

Ford predicts million market

Australian new-vehicle market could return to one million mark this year, says Ford

25 March 2010

By MARTON PETTENDY

FORD believes Australia’s new-vehicle market this year could return to the million mark it exceeded in 2007 and 2008, while sales of its locally built Falcon and Territory will increase by up to 20 per cent.

Ford’s prediction of between 970,000 and one million sales for 2010, revealed by president Marin Burela in a conference call with media yesterday, is far more ambitious than the general industry consensus, which puts this year’s total industry figure at around the same level as 2009, when 937,328 new vehicles were sold.

While the annualised running rate stands at 1.027 million vehicles after two boom sales months in January and February, industry analysts attribute the positive start to after-effects of the federal government’s 50 per cent business tax allowance in 2009 and point to a continuing private buyer strike despite improving consumer confidence.

Mazda Australia managing director Doug Dickson said his company's research indicated that private buyers were not yet back in the market.

“Look at the first two months of 2010 in the context of the tax break for which we are thankful, but it has distorted the market and we’re not sure how long that will last,” he said.

Mazda believes new-car sales to private buyers eventually will increase in line with increasing consumer confidence – despite the fact another official interest rate increase is expected next week.

“Consumer confidence is back up but it has not yet translated into private buyers returning to the market,” said Mr Dickson. “The level of sales is not keeping pace with consumer confidence, but in time it will.”

While the Australian industry peaked at 1,049,982 new vehicles in 2007 and followed-up with the only other million-plus figure (1,012,164) in 2008, when the global financial crisis struck, the Federal Chamber of Automotive Industries’ official 2010 forecast of “at least 940,000” has not changed since January.

Mazda, which lies just 207 vehicle sales behind Ford in fourth place overall so far this year, expects a total market of about 950,000 vehicles, and hopes to notch up at least 80,000 sales for a market share of 8.4 per cent – up from 8.3 in 2009.

While Ford will not divulge its share aspirations for 2010, it is determined to improve upon the 10.2 per cent share it achieved last year – when it was the only Australian car-maker not to lose share – but says it is not worried about being beaten to third place behind Toyota and Holden this year.

Hyundai was Australia’s third top-selling brand in Australia for the first time ever in February with an 8.8 per cent share, but holds 8.5 per cent year-to-date – right behind Mazda (8.7 per cent) and Ford (8.8).

“To be honest, what I’m more interested in is profitable share, not share for share’s sake,” said Mr Burela. “(Fourth) would be an unusual result, but it’s one that I wouldn’t be necessarily get concerned with because for us business is about delivering value and having a profitable business that connects with our customers.

“We’re not satisfied with maintaining our 2009 share. Our share will increase in the second quarter. We will grow share in 2010 and if we do so I don’t expect to be fourth.”

Mr Burela said Ford, which previously also predicted a 940,000-vehicle market in 2010, did not expect the industry to be running at a million-plus rate in the first quarter.

“Some of the 2010 growth is driven by flow-through from 2009, but there is also some evidence of the industry standing on its own two feet,” he said.

“People are placing orders – the order bank is strong. We’ve lifted our daily line rates and we’re confident we’ll have a very solid, strong year. We’re very bullish about the 2010 industry and for Ford. We’re ranging the industry between 970,000 to a million units.”

Mr Burela said Ford’s 2010 share slump is due to low stock levels following the run-out of vehicles landed under last year’s 10 per cent passenger car import duty regime, which has now dropped to five per cent. “We have certainly suffered a little bit (in terms of share), but there’s good reason for that and I’m not concerned by that,” said Mr Burela. “We had a very clear strategy for how we wanted to finish 2009 in terms of inventory. We did not want to be caught with cars at 10 per cent when cars at five per cent were coming.”

Mr Burela said Ford had lifted its daily production rate from an average of 258 vehicles per day in 2009 to above 270 this year to meet demand. Ford’s Broadmeadows assembly plant has operated three Saturday overtime shifts already this year and scheduled a further two in April.

“I have not seen a situation like the one we have in ford Australia right now,” he said. “Our turn ratio of stock that we have in dealer hands is almost running at 100 per cent per month.

“In other words everything that’s out there right across the whole of the country we are turning over literally within the same month. Our competitors are running at turn ratios that are significantly lower than that, even though their demand is up as well, so we’re running at supercharged levels right now.

“The demand we have for the Falcon in March once again will outstrip supply. When we compare Holden (Commodore) sedan to (Ford Falcon) sedan we know that our Falcon sedan sales are incredibly strong. We are getting a 36 per cent (market) share on Falcon sedan, versus 26 to 27 per cent 12 months earlier.”

Mr Burela said that despite Ford’s decision to axe the Falcon wagon by mid-year (see separate story), Ford Australia production could be up by as much as 20 per cent on 2009 levels.

“We’re planning conservatively to ensure we don’t build inventory levels up. At the same time, my expectation even without (Falcon) wagon as part of our mix in 2010 is that our build volume out of Broadmeadows will increase by 15 to 20 per cent this year.

“We’re extremely confident that volume demand for Falcon, Ute and Territory will be 15 to 20 per cent higher that it was in 2009.”

Mr Burela said the elimination of the Falcon wagon would reduce plant complexity and better position Ford to meet demand.

“I think we have the landscape so well covered with the product line-up and we’ve now positioned ourselves to further optimise the efficiency of what we build in 2010.

“As a result of talking Falcon wagon out of our build it actually frees us up to in fact be able to supply the demand that’s there on Falcon, Ute and Territory.

“We’ve increased our line rates, we’re working overtime… Taking wagon out and taking out the complexity of building all these derivatives allows us to satisfy demand.

“You’re going to see a lot more cars coming off the production line in 2010.”

Mr Burela declined to say whether Ford Australia would return to profit in 2010, following its third consecutive – and record - operating loss of $274.4 million in 2008.

“Every decision we make helps us with profit,” he said. “Our objective is very clearly to return the company back to profits.

“You can do the mental arithmetic yourself – when you’re lifting your line rates for more throughput at the end of the line, reducing complexity, providing products that customers really truly value and want, you’ve got a formula for success.

“We’ve got all the bases covered. It’s going to be an exciting year in 2010 and moving into 2011.”

[Lightning Strike XR6]

Awesome stuff more positives.

[sxckevo]

im very happy sounds very good

[bobthebilda]

This is all very puzzling. According to Vfacts. Ford oz sold 2514 falcons in feb 2010 (plus a few hundred more to nz), plus 1000 utes and 700 territories (last two figures are rough, but think i read them somewhere. At a guess, that comes to about 4500 cars per month. If they are making 270 per day @ 21 days per month = 5760, where are all the other cars going. Or Have i got the ute and territory numbers wrong??

[4Vman]

Take note doom sayers and business "experts" who see market share as more important than profit.....


“To be honest, what I’m more interested in is profitable share, not share for share’s sake,” said Mr Burela.

[Revolver]

Good news, certainly quells parts of my fear for ford expressed in the "are we on the wrong side" Thead

BBII

[z80]

I paid $1.47 a litre this week.

What could possibly go wrong in 2010?


ok ok I'll shut up.....

[Ghiadude]

Originally Posted by z80

I paid $1.47 a litre this week.

What could possibly go wrong in 2010?


ok ok I'll shut up.....

If your driving a petrol car that may or may not be a worry ... thats why ford is making a concerted effort to introduce diesel in territory and mondeo as well as focus and fiesta, not to mention LiLPG in the Falcon and maybe even territory. When you factor in that all that the competition realy have is 3.0 SIDI which the base falcon is better than anyway...

[Windsor220]

Originally Posted by bobthebilda

This is all very puzzling. According to Vfacts. Ford oz sold 2514 falcons in feb 2010 (plus a few hundred more to nz), plus 1000 utes and 700 territories (last two figures are rough, but think i read them somewhere. At a guess, that comes to about 4500 cars per month. If they are making 270 per day @ 21 days per month = 5760, where are all the other cars going. Or Have i got the ute and territory numbers wrong??

They sold 4143 vehicles last month in Aus.
Did they work everyday or was there any down days? They had a break over January some time I think.

[vztrt]

Originally Posted by Windsor220

They sold 4143 vehicles last month in Aus.
Did they work everyday or was there any down days? They had a break over January some time I think.

They lost about a week with the shortage of parts from a manufacturer.

[aussie muscle]

Mr Burela said Ford’s 2010 share slump is due to low stock levels following the run-out of vehicles

i suppose ford save a lot of money not having stock sitting on the grass.

[bobthebilda]

Aussie muscle, with the size of the broadmeadows and geelong plants, and the fact they are only producing 4500 cars a month (when they are producing), I would assume that keeping the weeds under control would have greater priority than producing cars.

[Joe5619]

Originally Posted by aussie muscle

i suppose ford save a lot of money not having stock sitting on the grass.

Yes, but how much did he save by bring stock in this year at 5% duty compared to 10% last year!!! Profit mate, profit!!

[Wally]

vztrt, there appears to be a contradiction on market share slump in the article, your thoughts? Also seems they haven't made profit yet, but they are working on it.

Be nice if they can return to real profitability, but I can't see Ford headquarters being satisfied with small EBIT because of small turnover, when they can invest their money in places like China and get big returns albeit with big turnover. Ford was founded on mass production, not niche.

[bobthebilda]

Joe5619, If Burela delayed the importation of any cars under some pretense that it was going to save 5% then he should be sacked straight away. 3 points to consider 1) without importing cars to sell, you cant sell them and thus dont make a profit 2) If they thought importing them at 10% and selling them after the rate dropped to 5% (without making a profit), then they are operating on non sustainable margins ( a sale with any profit is still a profitable sale) and 3) They would have put themselves way behind the competitors, thus making themselves, dare i say, less competitive.

I think Burela has been listening to too many Reuss and Batey headlines, and thinks that if things are shocking, its none of my making. I can blame the global financial crisis, i can blame the high australian dollar, I can blame the lack (sic) of government subsidies, I can blame the small australian market, I can blame the australians who dont want to buy the car that I make for them blah blah blah blah blah.

[Joe5619]

Originally Posted by bobthebilda

Joe5619, If Burela delayed the importation of any cars under some pretense that it was going to save 5% then he should be sacked straight away. 3 points to consider 1) without importing cars to sell, you cant sell them and thus dont make a profit 2) If they thought importing them at 10% and selling them after the rate dropped to 5% (without making a profit), then they are operating on non sustainable margins ( a sale with any profit is still a profitable sale) and 3) They would have put themselves way behind the competitors, thus making themselves, dare i say, less competitive.

I think Burela has been listening to too many Reuss and Batey headlines, and thinks that if things are shocking, its none of my making. I can blame the global financial crisis, i can blame the high australian dollar, I can blame the lack (sic) of government subsidies, I can blame the small australian market, I can blame the australians who dont want to buy the car that I make for them blah blah blah blah blah.

Mate, I'm a Management Accountant & stock costings is what I do for a living.... Trust me, running low (not empty) for stock on hand at year end (remember they are a US stock listed company & have a Dec year end) is normal practice. Adding the benefit of better costings in 2010 & you'd be a fool to over stock yourself come Dec 2009! Not knowing the actual product costing I’m only guessing, but we could be talking a 300,000 dollar difference in 2010 profit because of this. It could also mean the difference between hitting budget targets or not (Margin & OP percentages I’m talking about) & getting a bonus or not for office workers!

Remember Ford at the moment is all about making profit, not being number one in sales racing!!

[Blast2]

that's great : for FORD about time

[4Vman]

Profit is king... no mater what size your business.

[vztrt]

Originally Posted by Wally

vztrt, there appears to be a contradiction on market share slump in the article, your thoughts? Also seems they haven't made profit yet, but they are working on it.

What contradiction is that?

Well the last financial statement they endured a loss (mainly with re-structure). Its hard to get a number on manufacturing plant at broady as the figures are for Ford Asia Pacific South Africa. But as a whole I know they turned a profit. I do hope they turn a profit, but I do believe that a line rate increase will actually be needed.

[bobthebilda]

Joe, I understand where your coming from, but importing cars is not like ordering stock from a factory 50 kilometres away. Just in time and Kanban are all the rage in the manufacturing industry. Walk into a ford dealership and look at the build date on an imported car (especially a european sourced car). The supply chain is quite long. I can only guess that the reason Ford is slowing the supply time of long lead time vehicles, is to conserve cash flow. I'm sure ford has alot more trouble sourcing the fiesta from germany (thailand soon i think) and the focus from south africa, than others do from thailand, south korea and japan

[Fordman1]

Originally Posted by vztrt

What contradiction is that?

Well the last financial statement they endured a loss (mainly with re-structure). Its hard to get a number on manufacturing plant at broady as the figures are for Ford Asia Pacific South Africa. But as a whole I know they turned a profit. I do hope they turn a profit, but I do believe that a line rate increase will actually be needed.

I think they are about break even ATM.

No line rate increase this year. They will just work as many Saturday's as possible, and re-evaluate in Qtr 4.

Maybe early in 2011 with the new Territory.

[bobthebilda]

Even if one does put on rose colored glasses, takes LSD, and has just spent a day with a naked Jennifer Hawkins, its still hard to see any positives from any of the non negative assessments. No company wants tor un at a loss, no company wants to just breakeven. Mullaly wants to see a return on invesment. Any future investment will be decided this way. Producing 4500 cars a month will never provide a return a decent return on investment. Toyota produces 2.5 times more cars at its Altona Plant (with I beleive roughly the same number of employees), and is wondering if it gets a return on its investment. I think it would be good to track the similarities between Burela's comments and those of Mitsubishi's Australian CEO prior to March 2008.

[4Vman]

Originally Posted by bobthebilda

Even if one does put on rose colored glasses, takes LSD, and has just spent a day with a naked Jennifer Hawkins, its still hard to see any positives from any of the non negative assessments. No company wants tor un at a loss, no company wants to just breakeven. Mullaly wants to see a return on invesment. Any future investment will be decided this way. Producing 4500 cars a month will never provide a return a decent return on investment. Toyota produces 2.5 times more cars at its Altona Plant (with I beleive roughly the same number of employees), and is wondering if it gets a return on its investment. I think it would be good to track the similarities between Burela's comments and those of Mitsubishi's Australian CEO prior to March 2008.

You obviously must be very farmiliar with the operational costs of Ford to be able to predict profitability based on line rate..
Tell us what average margin cars are going out at? How many cars do they need to sell at that margin to break even or turn a profit???

[bobthebilda]

4VMAN, The benefit to Holdens and Ford Australia at the moment, is that $1 would produce a respectabel profit/ margin at the moment. This arises out of recent auditors opinions that

".

Now i know this doesnt mention Ford oz, but i also do recall seeing a similar article if Ford Global did not throw in financial support for Ford Oz, and Max Yasuda from Toyota has also expressed concerns..

So if you have no net assets, it means any profit is a great profit. As i recall seeing these articles in Sept 09, then a 5% reduction in your import competitors costs as well as a 10% appreciation of the Australian Dollar in that time, means that Sept 2009 veiws are way too optimistic.

The important thing is that someone ina coma costs $500000 a year to keep alive, if they die, you only have to pay $5000 to bury them, and the issue ends, you greive a while, and get on with life. The Australian car companies are comatose, and we just need someone with more mental guts (rather than Kim Carrs physical guts) to kill it off.

[Wally]

Originally Posted by vztrt

What contradiction is that?

Well the last financial statement they endured a loss (mainly with re-structure). Its hard to get a number on manufacturing plant at broady as the figures are for Ford Asia Pacific South Africa. But as a whole I know they turned a profit. I do hope they turn a profit, but I do believe that a line rate increase will actually be needed.

I'd have to read it again, but it appears the writer says there hasn't been a market share slump, but Burella wants to regain market share from the slump...maybe I'm not reading it correctly. Maybe I should have a look at Russel's charts .

APA did return a US$75m loss for the year just ended which included a fourh quarter profit of US$11m, but as you say, trying to separate out the three cost centres is almost impossible. Once again I recall the article does mention Burella wants to return to profit, so I guess it's being slightly in the red.

[jpd80]

Originally Posted by bobthebilda

Even if one does put on rose colored glasses, takes LSD, and has just spent a day with a naked Jennifer Hawkins, its still hard to see any positives from any of the non negative assessments. No company wants tor un at a loss, no company wants to just breakeven. Mullaly wants to see a return on invesment. Any future investment will be decided this way. Producing 4500 cars a month will never provide a return a decent return on investment. Toyota produces 2.5 times more cars at its Altona Plant (with I beleive roughly the same number of employees), and is wondering if it gets a return on its investment. I think it would be good to track the similarities between Burela's comments and those of Mitsubishi's Australian CEO prior to March 2008.

It's directly in line with Mulally's view of right sizing production to true market demand.
It's a hard concept to accept and not even GM gets it yet, that's what they went broke.

When you think that Ford originally planned for the XT to be 60% of Falcon sales,
you can see how the volume has shrunk with receding fleet sales, the ones who want 20-30% discount...
So while it looks to everyone that Ford is going out the back door, they are actually
far more financially sound then their GM rivals at Holden who struggle at every turn for exports.

[vztrt]

Originally Posted by Wally

I'd have to read it again, but it appears the writer says there hasn't been a market share slump, but Burella wants to regain market share from the slump...maybe I'm not reading it correctly. Maybe I should have a look at Russel's charts .

I can see what you mean. It is a bit confusing. What I think they were trying to imply was that Ford stayed even in 2009. But Marin was referring to the start in 2010 where Fords share has dropped, but thats due to issues with supplying cars to dears. Least that's the way I understand it.

[jpd80]

As GM North America taught everyone, being sales leader does not guarantee profitability.
I would sooner Ford Australia be 4th in sales but profitable that lead with losses...

[bobthebilda]

One issue I have heard about in regards to the build quantities at Ford and Holden (especially for some suppliers), is the percentage / Number of Utes that now make up the builds. Utes have increased in percentage numbers (especially at Holdens), and is causing alot of issues with suppliers who provide alot of the internals. I think both companies do alot more of the Ute themselves than they do the sedans /wagons. Thus whilst builds of cars are down a little, when you build a Ute, the glass supplier, the seat supplier, the door panel supplier, the carpet supplier, the power window actuator supplier etc etc gets hit harder.