SYDNEY, Australia—Ford Motor Co. is blaming soaring manufacturing costs and plummeting sales in its decision to shutter its two Australian auto plants, ending production in the country by 2016.
The closure of the U.S. automaker’s plants in the state of Victoria will mean the loss of 1,200 jobs and will transform the company into an import-only brand in Australia. Ford began making cars in Australia in 1925 and is the third largest auto manufacturer in the country.
“We understand the very real impact that this will have on our team,” Ford Australia President Bob Graziano told reporters at the company’s Melbourne plant. “We came to this conclusion only after thoroughly reviewing our business and exhausting all other alternatives.”
Australia’s stubbornly high dollar has put pressure on the country’s auto manufacturers, making locally-produced cars far more expensive than those made overseas. Last month, Ford’s chief competitor, Holden, said it was cutting 500 jobs amid the high dollar and falling demand.
“The strength of the Australian dollar bears down on Australian manufacturing and it does make it a difficult environment for manufacturing to prosper,” Australian Prime Minister Julia Gillard said following Ford’s announcement.
The automaker also released its annual financial report, which showed a loss of $141 million Australian dollars ($136 million) after tax for the 2012 financial year. That follows a loss of AU$290 million in 2011, and a total loss of AU$600 million over the past five years.
Graziano said a reduced demand for large cars and the high price of production in Australia had left the manufacturing operation uncompetitive. Ford’s production costs in Australia are twice that of Europe and nearly four times higher than in Asia, Graziano said.
“Manufacturing is not viable for Ford in Australia in the long term,” he added.
Around 1,500 employees, including dealers and those in product development, will continue working for the company after production ends in October 2016.