Ford's assets to pay their way?

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Ford's assets to pay their way?
Words - Ken Gratton
Are 'wholesale' customers the means of securing local manufacturing in Oz?

How much is production of Bosch brake rotors worth to Ford Australia? The contract, as we reported yesterday, is not finalised yet, but an arrangement to cast as many as one million rotors a year from the one plant must be worth a substantial sum of money to the local vehicle builder.

Not enough though, to support a company as relatively large as Ford Australia, in isolation.

But with Ford also accruing revenue through another facility, ACART (Advanced Centre for Automotive Research and Testing), there's a business model emerging for Ford to raise revenue and improve profit -- without necessarily building and selling more cars. Offering 'B2B' services for all its R&D or production facilities could make each facility its own 'profit centre' within Ford Australia.

The Carsales Network interviewed Ford President Marin Burela after the announcement yesterday and questioned whether this Bosch contract -- and the ACART joint venture -- were representative of a new tactic from Ford to 'future-proof' the business.

"We're always looking at opportunities," Burela answered, "but we don't have anything to talk about... beyond what we actually announced..."

Burela, however, doesn't rule out future joint ventures and supply contracts to external customers for these and Ford's other local facilities.

"In today's world, one can't bury one's head in the sand and pretend that you can't or shouldn't be thinking about the business in a very different way.

"We have invested very heavily in our Australian operations over the years. In fact, the investment -- including what we announced... over the last few years -- is totaling up towards $1.8 billion. So when you make those sort of investments, you need to make sure that you know how you're going to utilise the assets and the skill level and the capability that, in fact comes with that.

"I would never say 'never' to anything. Many years ago, it would not have been palatable to consider [something like the Bosch contract], but it's the right thing to do..."

What has changed then? Why are 'blue-collar' or 'white lab coat' facilities going all entrepreneurial now?

"I think the thing that has probably changed, is that many years ago, people tend to -- they did -- operate in silos or pillars. It was very rare that people were willing to look to the left and to the right.

"I take a very simple view that says that we have invested in our people, we've invested in our facilities, we've invested in technology -- and it's right for us to look for opportunities for all of that skill and knowledge and investment to be deployed to deliver value to all those involved..."

Such a change in management philosophy creates a new conundrum for a smaller-scale manufacturer like Ford. Burela had admitted during the formal announcement that the casting plant was up for sale before Bosch and the Victorian government arrived with deep pockets full of cash.

New-found viability of the casting plant may well prolong manufacture of the current inline six powering the Falcon and Territory. Is Ford more likely to upgrade that engine to Euro 5 emissions standard if production of that engine from the Geelong facilities can be economically sustainable? That's one question -- and don't expect a direct answer from Ford as yet.

Furthermore -- and this is reading more into the whole can of worms -- if the inline six gains a new post-Euro 5 lease of life, the Falcon and Territory would/could continue in production as uniquely and exclusively indigenous designs sold nowhere else in the world?

If that's the prognosis then, how does the casting plant news impact on the company's global product strategy, 'One Ford'?

"Extremely well," responds Burela. "In fact, I spoke to Alan Mulally* and Lewis Booth* -- and others in Dearborn -- about this proposal some months ago and they received it with great enthusiasm, because they saw it as something that was very innovative.

"It was something that was very progressive. Let's face it, there aren't too many casting plants in Australia. There aren't too many casting plants in the Ford world -- and for this casting plant to have been able to demonstrate a level of competitiveness to be able to win and secure business, that would otherwise have gone to China is a significant vote of confidence in the people, the leadership team and the facilities that we have here..."

There's a wrinkle in this good-news story though. The environmental upgrade for the plant wouldn't have happened as it has without funding from the Victorian state government. While neither Bosch nor Ford has said as much, perhaps the upgrade was a pre-requisite to Bosch signing a contract with Ford. It's not unknown for a business to insist its supply chain partners adopt a 'greener' stance. It's something Holden has got behind in the past.

Without the state government's involvement -- and Premier John Brumby yesterday refused to reveal how much the spend was -- who can say whether the partnership between Ford and Bosch would have come this far?


* Alan Mulally is Ford's President and CEO; Lewis Booth is Ford's Executive Vice President and Chief Financial Officer

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