Are imported SUVs slowly killing off the big Aussie sedan?

Australian motoring writer Paul Gover, editoralising on today’s decision by Ford Australia to axe 440 (more) workers from the Falcon engine and car plants at Geelong and Broadmeadows, reckons so.

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“”The Falcon will die in 2016,” he said bluntly in the Herald Sun.

“The family-sized Ford has been on a slippery slope for nearly a decade, and the Holden Commodore has also been going badly backwards this year as customers have switched in ever-increasing numbers to imported SUVs.

“Things would probably be worse for Ford and its workforce if the Territory SUV was not contributing 50% of sales for the troubled carmaker, which is being hit worst by another 25% downturn in large car sales this year.”

The rise of the SUV has been mentioned often this year in despatches by local trade group FCAI – the Federal Chamber of Automotive Industries. Year to date (end June) industry sales are 547,854 units of which 153,255 were SUVs, up 33.4% year to date. Large locally-made sedans aren’t broken out in the data specifically but FCAI’s ‘large’ category is off 20.2% to 31,315 units.

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Data on the internet suggests Ford sold 29,516 Falcon sedans and wagons in 2010 plus 9,099 utes. Last year, it was 18,741 and 6,814. In 1995 it was 81,366 and 6,922. Local publication GoAuto News reckons the automaker has sold 7,695 Territory SUVs so far in 2012 – up 52.5% on last year – largely on the back of the popular diesel variant introduced last year. In comparison, Falcon sales for the first six months of the year were just 6,846 units.

Gover reckons both Falcon and its General Motors’ Holden arch-rival, the Commodore, are only locked in by manufacturer commitment and federal government subsidy till 2016. After that, he predicts the Falcon, and Ford Australia manufacturing, will die.

If the Commodore is also yanked, that will leave Holden knocking out the Cruze and Toyota building Camrys, both dependent on a component industry trying to compete with Korea and China on a relatively paltry annual local volume – 219,376 last year and 112,260 year to date – down from 334,772 in 2007, according to FCAI data.

The Australian auto industry has been on a slow decline for decades, in some ways reflecting the US industry to which its wagon was originally hitched. It began when wagon makers started bodying early imported auto chassis. After the second world war, government invited global automakers to bid for a full manufacturing project and GM got the nod with the ’48 Holden, a scaled-down Chevrolet. Chrysler and Ford, previously assemblers, went full local manufacture with the 1960 Falcon and 1962 Valiant and Volkswagen and Leyland Australia were there as well along with a brace of CKD assembly shops like Australian Motor Industries (which morphed into today’s Toyota Australia).

To give Holden a fair go, the Aussie industry was originally heavily protected by import tariffs and, some would argue, later also by a rather unique set of Australian Design Rules covering safety and emissions. Over the years, Holden gradually retrenched from having an assembly plant in every state, Leyland Australia’s plant shut in 1974, Volkswagen left (selling out to Nissan) in 1976, Chrysler sold out to Mitsubishi in 1981, and Toyota took over AMI. Gradually, import tariffs reduced, CKD assembly was no longer needed, various government industry plans were tried (the Button model rationalisation era led to some bizarre product sharing models such as the Toyota Lexcen-badged Holden Commodore), Nissan closed its plant in 1994 and Mitsubishi shut down earlier this decade.

Which left Holden (Commodore), Toyota (Camry) and Ford (Falcon). The first two have achieved some export success, reviving (in Holden’s case) or introducing left-hand-drive and enjoying some success in the Middle East (both) and the US (Holden with Pontiac and now Chevrolet-badged Commodores). But both programmes have taken a knock since the credit crisis and GM’s decision to axe Pontiac, the Chevrolet volume is much lower.

Ford Australia, to my knowledge, has never built a LHD Falcon which leaves New Zealand (75,000 new cars a year in total) as its biggest export market. Five years ago, there was talk of investment in a LHD Falcon and local build of the now-current Focus but, in the end, the idea of left hook Falcons was canned and Ford built a second car plant in Thailand to build Asia’s Focus – it started production last month.

Camry aside, the Ford and Holden are prehistoric – big, six cylinder or V8 (until Ford’s recent launch of an I4 EcoBoost option), sedan, wagon, ute (El Camino-style pickup truck) and, until not that long ago, panel van. Just what the 1970s ordered.

They still sell in some numbers because there’s taxi business, the Outback travelling stock agent who still likes his big sedan, and people who want to tow a big boat, caravan or trailer.

But Aussies are increasingly showing that they reckon an SUV – and just about every non-North American one you can think of is on sale down there – will do just as well and so sales of the traditional Falcon and Commodore have been sliding for years. It’s likely the US Taurus will eventually replace the Falcon as an import tap is easier to turn on and off in response to market fluctuation than a complete local manufacture programme. The model has been sold briefly in Australia before but was overpriced. Holden could probably source the Impala as a Commodore replacement if another local model is ruled out.

Certainly, huge future investment in unique replacements for just one shrinking market is unlikely to be forthcoming from hard-pressed head offices in Detroit who see growth in markets like India and China and product plan accordingly.

If Ford goes, it’s going to be increasingly hard for local suppliers to stay in business – some have recently been in trouble. That’s going to make it difficult for GM and Toyota.

It’s a worst-case scenario, but how long will GM and Toyota stay committed to building just Cruze and Camry in a 1m-unit market?