Automotive

Australia’s automotive industry is set for a period of immense change. Ford’s announcement that it will cease manufacturing vehicles in Australia in 2016 has exacerbated the ‘perfect storm’. For years, Australia’s 1,100 locally owned, small- to medium-sized businesses – including automotive electrical, instrument, component and accessory manufacturers – have seen reduced domestic demand and a high Australian dollar affecting export opportunities. It is clear Ford’s exit will have a dramatic effect – manufacturers, component manufacturers and dealerships are considering a very different industry and future.

While some commentators have suggested the closure may mark an imminent end to the automotive industry in Australia, many others believe that this development will change the domestic industry – for the better. A leaner, more innovative industry may emerge – one that will be defined by its advanced research and development, and ability to build on its existing export market. This will require more than just will, but a series of measures to ensure businesses in the supply chain can restructure and create a more sustainable platform for the future.

Issues

Component manufacturers are now faced with the daunting task of restructuring their organisations, armed with the knowledge that Ford production volumes are only likely to decline further before the 2016 shut down. Most component manufacturers recognise that restructuring is necessary for their short-term survival, and that additional investment in new technologies, innovation in production processes and succession planning are also vital to make them globally competitive and viable in the long term. However, many do not have the financial capacity to restructure their operations so their cost base is in line with reduced sales volumes.

Questions that should be asked

Automotive component manufacturers should ask themselves:

  • How can I refine or diversify my product portfolio to take advantage of new markets?
  • How can I optimise my financial structure to mitigate the effects of lower volumes and high costs?
  • What strategies should I employ to shore up my business, while also preparing for a different industry?
  • How do I embrace and invest in innovation with my current cost base and business model?

Our expertise

PPB Advisory has a dedicated team of automotive specialists, all of whom have extensive operational, restructuring and turnaround expertise. In addition, some members of our team have professionally managed and operated dealerships. We also have relationships across the industry and throughout the supply chain with key government departments, which allow us to act quickly and solve problems efficiently.

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