Further investment at Broady

[Brazen]

Originally Posted by dimka100

You are right, I did this simple calculation to try and work out the profit margin Ford would need to maintain for each Falcon sold just to pay off the R&D investment costs in to a significant model upgrade over a three year period.

I obviously do not know the average profit per Falcon sold (profit in this case being the revenue minus all manufacturing/marketing/sales related costs but excluding cost of R&D) so I used the following few numbers:

At $5,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $195 mil
At $7,500 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $292.5 mil
At $10,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $390 mil
At $12,500 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $487.5 mil
At $15,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $585 mil

So assuming that a decent model update would require an R&D budget of say 500million, with the current forecasted sales numbers of 13,000 annually, ford would have to make somewhere in the region of $15,000 per car once to cover the cost of R&D and make a tiny profit. Considering the cost of the Falcon, and that majority of cars are sold as heavy discounts to fleets, it seems highly unlikely that Fords margin per sale is anywhere near that region … hence investing such a substantial amount of money based on the current sales projections would absolutely make no financial sense. OFCS having the government chip in a whole bunch of money would change the balance, but it would have to be a pretty substantial chip in …

Volkwagen makes about $535 per car, Toyota which is really good for a mainstream car maker makes about $2700 profit on each car. I would assume Falcon would be a bit less than VW because of such small scale which makes car production expensive.

[Polyal]

VW make $500 per car? WTF..really? Thats why a new Jetta is only $26k drive away.

From what I remember Ford make easily what you have stated for Toyota

[Brazen]

Originally Posted by Polyal

VW make $500 per car? WTF..really? Thats why a new Jetta is only $26k drive away.

From what I remember Ford make easily what you have stated for Toyota

Ah Ok, I have no idea - these are numbers which float around.

Actually its probably easy to work out profit here, just look at the profit for the year and divide by production (over simplified I know).

[dimka100]

Yeah but that's final profit included the expense of R&D (which is usually the highest component), what I listed above was profit excluding R&D to try and work out how viable a significant R&D investment is.

Also I firmly believe that in the Australian market where cars are far overpriced in comparison to other developed economies the profit per car figure is far higher than what they quote overseas.

Originally Posted by Brazen

Volkwagen makes about $535 per car, Toyota which is really good for a mainstream car maker makes about $2700 profit on each car. I would assume Falcon would be a bit less than VW because of such small scale which makes car production expensive.

[Polyal]

I dont know why but I had a cost of a falcon being around $15k not including the sales channel additions and marketing. Pulling it out of my backside though, I just recall it being around that figure.

[prydey]

Originally Posted by Bossxr8

I think any future plans are in serious danger after the latest market response meetings.

Just can't see the place even being close to viable when Falcon sales are down so low and they are predicting it will get even worse, based on the huge amount of down days planned. Only hope for a future model past 2016 must solely rely on an export plan or its curtains. You could never pay back a half billion+ investment for a new model solely relying on such pitiful local sales.

I'm hoping they do have some sort of export plan, can't see any other way.

both you and the OP work at Ford in some capacity, obviously in different areas. the OP has a very positive news story to share and yet you are still throwing your wet blanket around, being all negative?? i just don't understand why you wouldn't be excited by this news. why would ford continue to invest if they were shutting it down?? as mentioned already, ford australia is one of only 3 hubs that can design and build a car from scratch. there is manufacturing here, and the signs are it will be here for some time yet.

chin up mate. start believing rather than be sucked into the tripe you read surrounding sales data. pretty sure ford would have access to much more in depth data than what the experts on AFF have.

[Nikked]

Can't have one thread thats positive about ford, without someone bringing it down.

[prydey]

i found it rather ironic that the mods were very quick to close many threads on the topic of the recent events at FPV due to speculation not being helpful without knowing all the facts, and yet when it comes to ford, its a general free for all!!

surely that same factless speculation is also tarnishing the falcon brand.

this is a very positive sign for ford australia. haters should just stay the hell out of this thread.

[stevz]

Originally Posted by Nikked

Can't have one thread thats positive about ford, without someone bringing it down.

They are not bringing it down, they are just being realistic.
It is sales volumes which dictate the viability of the plant and if sales remain this low the future will look increasingly grim. It's a fact, there's no point beating around the bush. Anyone who thinks a software update will be the saviour is delusional.

[Nikked]

Originally Posted by stevz

They are not bringing it down, they are just being realistic.
It is sales volumes which dictate the viability of the plant and if sales remain this low the future will look increasingly grim. It's a fact, there's no point beating around the bush. Anyone who thinks a software update will be the saviour is delusional.

This isn't a thread about sales.


This is a thread about investment into manufacturing, and the possibility of more features in the falcon.

[prydey]

Originally Posted by stevz

They are not bringing it down, they are just being realistic.
It is sales volumes which dictate the viability of the plant and if sales remain this low the future will look increasingly grim. It's a fact, there's no point beating around the bush.

if sales volume = saved, then maybe explain why mazda are also in the poop and holden are trending the same as ford with local large car production???

Originally Posted by stevz

Anyone who thinks a software update will be the saviour is delusional.

anyone who thinks this is solely about a software update is delusional. do you really think ford would issue a press release because they updated the software?

[prydey]

Originally Posted by Nikked

This is a thread about investment into manufacturing, and the possibility of more features in the falcon.

exactly. why update the software unless the local products were about to be given these features.

[stevz]

Originally Posted by prydey

if sales volume = saved, then maybe explain why mazda are also in the poop and holden are trending the same as ford with local large car production???

Well lets see.... Locally produced cars, Holden: Commodore 2521 + Cruze 2860 + Ute 817 + Caprice ~150? = 6348

Ford: Falcon 1008 + Territory 1280 + Ute 584 = 2872

That's a massive difference of 3500 units.

Holden has committed to local manufacture for at least the next decade. New Commodore is just around the corner. A new export deal has been announced.

What has Ford done on the other hand? They committed to build the current Falcon to 2016 with an update in 2014. What happens after 2016? They have been deadly silent about this, which is why there is so much uncertainty.

Originally Posted by prydey

anyone who thinks this is solely about a software update is delusional. do you really think ford would issue a press release because they updated the software?

So what is it about then? Please enlighten us???

Originally Posted by prydey

exactly. why update the software unless the local products were about to be given these features.

It is most likely a neccesary update to continue production of the current model. It does nothing to guarantee the future after 2016 whatsoever.

[jpd80]

Originally Posted by stevz

They are not bringing it down, they are just being realistic.
It is sales volumes which dictate the viability of the plant and if sales remain this low the future will look increasingly grim. It's a fact, there's no point beating around the bush. Anyone who thinks a software update will be the saviour is delusional.

So Steve, what is the greater madness:
1) Ford continuing to only sell profitable models and keep to tight budgets?

OR,

2) Holden throwing caution to the wind to invest huge sums into a vehicle that
sells at 2500/mth in the hope that something will change in the next four years?

An outsider to this situation might see it as a race to the bottom and
the only sure thing is that Ford now has the opportunity to change first..

[stevz]

Originally Posted by jpd80

So Steve, what is the greater madness:
1) Ford continuing to only sell profitable models and keep to tight budgets?

OR,

2) Holden throwing caution to the wind to invest huge sums into a vehicle that
sells at 2500/mth in the hope that something will change in the next four years?

So if Ford builds one falcon for the whole year and sells it at say, 20k profit, does that make them viable?
Your assumptions/speculation on profits per vehicle are just that and cannot be relied on, but even if Holden were making less profit per vehicle, the volume is what keeps not only the plant ticking over, but the whole supply chain and dealer network, something which you seem to overlook.

[jpd80]

Something for everyone to consider:
1) Yes, FoA would find it hard to justify another regional big car solely for the Australian Market
2) China also has need for a large car similar to ours, they have Mondeo to Fiesta covered but no large car..
3) No, the answer is not Taurus or Falcon exports, it's co-development and defraying costs onto a bigger market..

[Luke Plaizier]

Originally Posted by stevz

They are not bringing it down, they are just being realistic

Pessimists always think they are being realistic. No, they are just being pessimistic.

Pessimists have no greater claim to the realism of their guesses and opinion than optimists do.


Lukeyson

[prydey]

Originally Posted by stevz

Your assumptions/speculation ..............are just that and cannot be relied on,

stevz, what makes your assumptions any more reliable??

my 'assumption' is, ford are very keen to see manufacturing continue in this country and are still investing money into the australian operations. what more positive sign do you need. forget about sales figures tripe and realise that ford are looking to continue to build cars here in australia to service our country and possibly a few neighbours depending on how integrated the whole process is. whether it will be continued to be badged as a falcon remains to be seen but i have no reason to believe why they would change it.

the future is in what holden now do with cruze and what toyota do with camry, but thats not to say the whole concept can't be started here in aus. our R & D here is right up there with the best of them.

[bob^]

Yes he is being negative about Ford in Australia, but try not to be when you get told of all the up coming down days.
The writing is on the wall, and the employees know it. I have seen first hand how much the place has slowed down in the space of 4 years.

[jpd80]

Originally Posted by stevz

So if Ford builds one falcon for the whole year and sells it at say, 20k profit, does that make them viable?

I'm sorry, you don't get a pass on a ridiculous strawman argument, it's not just about profit per vehicle,
it is about the whole investment cost that's spent up front and how many vehicles have to be sold
to recover those costs but stop thinking of profit per vehicle as a fixed cost, it is extremely variable..

Your assumptions/speculation on profits per vehicle are just that and cannot be relied on, but even if Holden were making less profit per vehicle, the volume is what keeps not only the plant ticking over, but the whole supply chain and dealer network, something which you seem to overlook.

What I said was that Ford have pulled back from low profit sales to fleets, something said by CEO Graziano.
That is something Alan Mulally taught Ford and why they adhere to strict right sizing, something GM finds hard to do..

Holden has gone deeper into investment and must therefore sell more cars to recover costs, yes?
Conversely, Ford has spent much less, continue to do so for 2014 and therefore does not need to recoup as many costs, yes?

Were nearly there....

Edit, Olive branch time:
I agree that when it comes to investment, spending a few hundred million to generate nearly
$3 billion local revenue (Holden) and nearly $2 billion local revenue (Ford) is really chicken feed when
you consider neither of them has any corporate replacement that could guarantee that income stream.

On topic,

Two pieces of important information on this thread from a reliable source:

1) new software to tune features not found in current local production

2) Another vehicle is being worked on....

[phillyc]

Originally Posted by jpd80

Were nearly there....

Edit, Olive branch time:
I agree that when it comes to investment, spending a few hundred million to generate nearly $3 billion local revenue (Holden) and nearly $2 billion local revenue (Ford) is really chicken feed when you consider neither of them has any corporate replacement that could guarantee that income stream.

On topic,

Two pieces of important information on this thread from a reliable source:

1) new software to tune features not found in current local production

2) Another vehicle is being worked on....

There is some good stuff there!

[Shonky.]

Originally Posted by jpd80

So Steve, what is the greater madness:
1) Ford continuing to only sell profitable models and keep to tight budgets?

OR,

2) Holden throwing caution to the wind to invest huge sums into a vehicle that
sells at 2500/mth in the hope that something will change in the next four years?

An outsider to this situation might see it as a race to the bottom and
the only sure thing is that Ford now has the opportunity to change first..

+1 for this

It seems that the positive sign everyone is looking for is a BIG further investment. In lean markets that is suicide.

The recent news we have seen points to cost cutting. Rather than see this as more doom and gloom I see it as running a bit smarter to try and stay in business.

[Shonky.]

The news (OP article) is good because it's a sign that there is intention to stick at it in the near term. I hope the knockers are right and it didn't cost too much, although this **** about putting a disc into a computer......please

You know Commonwealth Bank spent $1.1B on their core system migration.

Apples and oranges i know, but IT doesn't always = token upgrade

[Brazen]

12000 Falcons a year is smart? Now I've heard everything.

[Shonky.]

so you think they should invest more?

don't get your point

[Nikked]

Ford Au will build close to 37 thousand cars this year...its not a geat amount, but its not a bad amount...

[stevz]

Originally Posted by Brazen

12000 Falcons a year is smart? Now I've heard everything.

It seems that quite a few people here are inventing their own theories in an attempt to justify their flawed arguments. If you had said 10-15 years ago, hell even 5 years ago, that the plant would be viable on 12000 Falcons per annum, you would have been laughed out of existence. Now all of a sudden building/selling the least amount of cars possible is somehow a wise business plan?

[Dr Smith]

Originally Posted by stevz

Well lets see.... Locally produced cars, Holden: Commodore 2521 + Cruze 2860 + Ute 817 + Caprice ~150? = 6348

Ford: Falcon 1008 + Territory 1280 + Ute 584 = 2872

That's a massive difference of 3500 units.

Holden has committed to local manufacture for at least the next decade. New Commodore is just around the corner. A new export deal has been announced.

What has Ford done on the other hand? They committed to build the current Falcon to 2016 with an update in 2014. What happens after 2016? They have been deadly silent about this, which is why there is so much uncertainty.



So what is it about then? Please enlighten us???



It is most likely a neccesary update to continue production of the current model. It does nothing to guarantee the future after 2016 whatsoever.

Holden wanted more money and had to make a bigger, read as longer, commitment to get it approved from the Aust. Government. Their export program, while helpful as any extra volume is great is not enough to save anything and frankly only a token from GM Corp. if we're honest. Ford have and always play their cards closer to their chest and it's frustrating they haven't in the past blown their own trumpet. They also received a smaller grant from the Aust government and didn't need to divulge their plans post 2016 and in the Ford way didn't say anything publically. One thing is certain, you can bet your house whatever Ford's future plans, the option of staying as a manufacturer in Aust. is the first goal and only if this is exhausted and impossible will something else eventuate. Sure they have to look at all options but staying is the primary objective. If Ford don't have to say anything now it's guaranteed they won't based on past history.

In your above comparison you have to also factor in fixed costs with those build numbers, Holden would have a tip over point for their production vs profit level that isn't the same as Ford's simply because they don't r&D, build and assemble the same way. And as anyone running a business knows creative (legal) accounting can also change the impression of your finances. Only a fool would say we'd prefer to build 30K cars vs 100K, however it's how it's all managed before the big decisions are finalised that is most important, Ford US is ruthless enough to cut quickly if things were so bad it's useless.

Now back to the main topic, as careful as the OP could be he has given us more information then we could have hoped for and only in time will we know what insight we have been given. It's far more positive then we realise. And China is more important then we realise and I'm not talking ship loads of iron ore!

One other thing, if Ford Aust. decided to build here a whole new car from scratch to be on sale mid 2016 it doesn't need the same timeframe of past due to the massive improvement in computer aided R&D and prod plus they would be sharing the work with the US and European based engineers as Ford Aust. engineers do now for overseas projects. We really don't know just how much they do colaborate and it's only growing but I better stop now.

[jpd80]

Continued Falcon production:
If you were investing the cash TODAY to do it...then no, it wouldn't be smart.
but since the money has already been spent, building whatever cars Ford can
means recovering money with every build, not doing so throws away billions
in income that may not be replaced by substituting products.

Now then VF:
Holden is about to spend all that cash updating Commodore for another four years,
the main reason I see them doing that in a shrinking segment is because the returns
are still there in terms of business and manufacturing activity and parts supply contracts.
As Stevez mentioned above, parts supplies to dealerships is also a valuable sied effect
of local manufacturing and helps the entire chain by increasing business volume and income.

"Another vehicle is being worked on.."
If Ford is indeed working on another vehicle for this market, it could stabilize manufacturing volume
and give Ford unrestricted supply to another vehicle that can be sold at reasonable return.
Ford may not have a Focus production line to match Holden's Cruze but having say,
a Fusion or Mondeo line that produces half as many but at much higher prices could be better
especially if it competes with Camry head to head and actually grows sales with diesel and hybrid

[stang65]

Originally Posted by stevz

It seems that quite a few people here are inventing their own theories in an attempt to justify their flawed arguments. If you had said 10-15 years ago, hell even 5 years ago, that the plant would be viable on 12000 Falcons per annum, you would have been laughed out of existence. Now all of a sudden building/selling the least amount of cars possible is somehow a wise business plan?

It`s LS1 forums you were meant to log into for god sake everything you post is negative........What are you doing here? Bored maybe?