GM Holden Confirms Small-Car Project; Oz to Provide Financial Aid

Australian state and federal governments are giving GM Holden Ltd. a combined A$179 million ($122 million) in aid to build an all-new small car based on General Motors Corp.’s global Delta small-car platform starting in third-quarter 2010, the auto maker says today.

As previously reported by Ward’s, the new car will be based on the Chevrolet Cruze/Daewoo Lacetti to be built in at least four other General Motors Corp.’s plants around the world. A version already is being produced in South Korea by GM Daewoo Auto & Technology Co. and also will be built in the U.S. at GM’s Lordstown, OH, facility in 2010.

Australia’s federal government is providing the Melbourne-based auto maker a A$149 million ($102 million) grant, and the South Australian state government is providing A$30 million ($21 million).

At a news conference, GM Holden Chairman and Managing Director Mark Reuss declines to reveal how much the auto maker is spending on the project, but says it is a significant amount. Industry analysts say the auto maker’s investment will be about A$200 million ($137 million).

The announcement comes the same day the Australian Bureau of Statistics reports the country’s new-vehicle sales fell 5.2% seasonally adjusted in November to 75,592 units. It was the fifth consecutive decline and the lowest monthly figure since April 2003.

GM Holden’s small-car program is the third major production project for the Australian industry. Ford Motor Co. of Australia Ltd. plans to build the Ford Focus starting in 2011, and Toyota Motor Corp. Australia Ltd. will begin production of the Camry Hybrid in 2010.

GM Holden’s new front-wheel-drive car will be built as a sedan and hatch at the auto maker’s Elizabeth manufacturing facility in South Australia. Design and engineering work will take place at the company’s headquarters in Port Melbourne, Victoria.

New Holden small car to be based on upcoming Chevy Cruze.

The vehicle will feature new technologies to increase fuel efficiency and reduce greenhouse-gas emissions. Start-stop hybrid technology and the capacity to run on alternative fuels, such as E85, diesel, liquefied petroleum gas and compressed natural gas, all are being considered.

It will be GM Holden’s first locally produced car beyond its current range of large vehicles since the Asian economic crisis ended Vectra production in 1998.

The program will require 500-600 existing employees at Elizabeth and is expected to provide 500-600 local supplier positions, the auto maker says in a statement.

Reuss says the car provides an opportunity to take a leading role in developing alternative fuels and fuel-saving technologies in Australia for Australians.

“We recognize the needs and desires of motorists are evolving with growing concern around environmental factors and shifting consumer sentiment,” he says, according to a government transcript of the press conference.

“Such evolution calls for an innovative approach to complement our current offering. We are planning for the future to produce a wider range of cars in Australia to cater for a variety of driving needs.”

Flexible manufacturing will be introduced at the Elizabeth plant in order to produce a series of GM global vehicles in years to come. Reuss says the new small car also provides an opportunity to develop an export program, particularly to other right-hand drive markets around the world.

Government funding for the project demonstrates commitment to an Australian automotive industry that extends beyond manufacturing at GM Holden to thousands of suppliers and dealers across the country, he says.

“That demonstration was clearly seen by our parent company in its decision to support this program,” Reuss says of GM. “By working together, we have ensured GM Holden will continue to make a major contribution to the nation’s economy for many years to come.”

GM Group Vice President and Asia/Pacific President Nick Reilly says the small-car announcement recognizes the ability of GM, GM Holden and the Australian automotive industry to see the future and move in the right direction.

“This program simply would not have occurred without such partnerships,” he says in a news release.

Industry Minister Kim Carr says the federal government’s contribution is the first grant of funds since the launch of the A$6.2 billion ($4.2 million) New Car Plan for a Green Future, which is designed to transform the Australian automotive industry to produce fuel-efficient, low-emissions vehicles and create high-skill, high-wage jobs.

The federal funding will be matched by the auto maker. “It will not be provided up front; it will be provided on staged levels over the next three years,” he says in a statement, insisting the government will not allow the domestic auto industry to crumble into dust.

“We aren’t prepared to leave the industry (that) you have put your lives into at risk, either,” he tells workers at GM Holden’s Elizabeth plant, where the announcement was made. “Nor are we prepared to sacrifice the countless direct and indirect benefits this industry brings to Australia.

“It is the backbone of Australian manufacturing. It underpins our ability to make things. It underpins our ability to defend ourselves. It is the lifeblood of communities across the country.”

Those who say the Australian car industry has no future are wrong, he adds. “This is an industry with an infinite capacity to adapt and renew itself.

“This isn’t about me or the prime minister,” Carr says of the GM Holden project. “It isn’t about Mark Reuss or (GM Chairman and CEO) Rick Wagoner in Detroit. This is about you. It is about your jobs and your future.”

Says Australia Prime Minister Kevin Rudd, also on hand for the announcement: “The government that I lead will do everything physically possible to continue to support this great industry and this great company into the future.

“The whole intention here with this new car is to provide more fuel-efficient vehicles and, therefore, provide a sustainable basis for the continuation of the industry into Australia’s long-term future, as well.”

South Australian Premier Mike Rann admits waiting for approval for the project from GM headquarters in Detroit was tense.

“To Mark Reuss, I have to say your call from Detroit just a couple of days ago was a great relief,” Rann says at the news conference.

“The car industry around the world has been in turmoil. There have been commentators in the past two weeks talking about the end of the car industry in the U.S. And so this is absolutely the best possible time to give a jolt of confidence to the industry.

“The fight back for the Australian car industry begins right here, right now with this announcement.”

Says Reuss: “The positive news that we’ve received from the government and from a corporate standpoint on the support of this project is nothing more than remarkable…I tell you it’s an emotional time for me here as an American to be part of this renaissance of this auto industry in this crisis.”