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Costs forcing Ford to depart Australia

– Ford will stop making cars in Australia, nine decades after founder Henry Ford first began building Model Ts in the country, as a surge in the currency undermines the local industry’s ability to compete with imports.

Ford Australia faces costs double those in Europe and four times those of its Asian divisions, local President Bob Graziano told reporters Thursday.

He announced the loss of 1,200 jobs from October 2016 at two plants in Melbourne and Geelong.

Australia’s three carmakers have struggled as a 27 percent rise in the local dollar against the yen over the past year stoked sales of cheaper imported vehicles and cut exports. The closure of one threatens the viability of the whole industry and is a blow to Prime Minister Julia Gillard, whose Labor party is trailing in polls ahead of a Sept. 14 election.

“Australian manufacturing can’t keep its head above water,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “High labor costs mean we can’t compete long-term against lower cost countries, especially in Asia. The strong exchange rate is exacerbating Australia’s lack of competitiveness.”

Ford, which began assembling Model T’s at Geelong west of Melbourne in 1925, is the smallest of the nation’s three manufacturers after units of Toyota and General Motors.

The removal of one could spark a “domino effect” as the industry as a whole becomes too small to support its own supply chain, Jac Nasser, chairman of the world’s largest miner BHP Billiton and former chief executive of Ford globally, told an event in Melbourne last month.

Ford’s forecasts showed its local plants weren’t able to make a return, even if the company assumed almost double the likely level of government assistance, Graziano said Thursday.

“Manufacturing is not viable for Ford in Australia for the longer term,” he said. “Our locally made products continue to be unprofitable, while our imported products continue to be profitable.”

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