Car production cutbacks will flow through to SME suppliers

Production cutbacks at Toyota Australia and Ford Australia will flow through to SME parts suppliers, experts have warned.

Ford Australia announced it will cut production by 20% to 209 cars a day as demand for large cars continues to fall.

Sales of the company’s flagship Falcon large car have fallen a staggering 40% so far this year, falling from 7,328 to just 4,448.

Over the last decade, Falcon sales have slumped from a high of 73,220 cars in 2003 to 29,516 last year.

Meanwhile, Toyota Australia has announced it will cut production by 50% in May and June after the supply of parts from Japan was disrupted by the earthquake and tsunami.

The company will not cut any of its 3,300 workers, but manufacturing workers will work half-day shifts and spend time on training and plant maintenance.

“It is important to note that this is a necessary response to a short-term supply issue and we intend to resume 100% vehicle production as quickly as possible,” Toyota’s executive director of manufacturing Chris Harrod said in a statement.

The production cuts will have a direct flow-on affect on Australia’s car parts makers, many of whom have been struggling to stay profitable in an environment of falling demand, rising costs and repeated demands for lower prices from car manufacturers.

Zoran Angelkovski, chief executive of tyre maker Cotinental in Australia and the president of the Federation of Australian Parts Manufacturers, says the industry is scrambling to ascertain the flow-on effects of the cut backs.

“It’s too early to assess what this means. Obviously it will have an effect, but each parts company is trying to ascertain the impact on their business.”

“But it’s very disappointing for us. It’s a tough industry as it is at the moment.”

“The biggest concern is really for those SMEs that might have one customer, such as Ford or Toyota.”

Angelkovski says the industry has been hit by a series of blows this year, including the dumping of the Government’s Green Car Innovation Fund and a decision by parts maker Robert Bosch to cut back its Australian production.

Concerns about rising fuel prices and carbon price have also hurt.

“There is obviously a market demand out there, but with the discussions about climate change and carbon pricing, everyone is looking for that smaller, fuel-efficient vehicle.”

Angelkovski says the latest production cutbacks are yet another blow for the Australian automotive sector.

“Our members have a difficult time riding out the global financial crisis. IT was tough, but they got through by taking decisions and being quick to take those decisions.”

“But it all comes down to volumes for the industry and these announcements will cut volumes further.”