GM Holden Ending Vehicle Production in Australia

Less than a day after insisting no decision had been made, GM Holden announces it is ending vehicle production in Australia.

General Motors Chairman and CEO Dan Akerson says in Detroit the automaker will discontinue vehicle and engine manufacturing and significantly reduce its engineering operations in Australia by the end of 2017.

The announcement comes soon after Acting Prime Minister Warren Truss tells the House of Parliament he had written to Mike Devereux seeking an answer after the GM Holden chairman and managing director told a Productivity Commission inquiry no decision had been made, but refused to reveal when the parent company would make that decision.

A Parliamentary transcript quotes Treasurer Joe Hockey as calling on GM Holden to come clean with the Australian people about their intentions.  “Either you are here or you are not,” he says.

Akerson says as far as manufacturing is concerned, GM is not.

The Australian newspaper reports Devereux denies he misled the Productivity Commission when, giving evidence the day before, saying he was informed by GM leadership during a teleconference later in the afternoon that a decision had been made to exit manufacturing.

But later, following his testimony before the commission, Devereux tells a news conference in Adelaide, “It doesn't make long-term sense for us to continue assembling vehicles in Australia.”

The decision to end manufacturing in Australia “reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” Akerson says in a statement.

As a result, about 2,900 GM Holden jobs will be lost, 1,600 from the South Australian vehicle-manufacturing plant and 1,300 from the automaker’s workforce in Victoria. GM says the subsidiary will continue to have a significant presence in Australia as a national sales company, national parts distribution center and a global design studio.

“This has been a difficult decision given Holden’s long and proud history of building vehicles in Australia,” Devereux says. The company was founded in 1856 as a saddle maker and moved into the automotive sector in 1908. It became a GM subsidiary in 1931.

Devereux says GM remains committed to the automotive industry in Australia and New Zealand. “GM Holden will remain an integral part of its communities and an important employer both directly and through our dealers.”

GM says that since 2001 the Australian dollar has risen from $0.50 to as high as $1.10 in U.S. dollars, and the Australian automotive industry is heavily exposed to import trade.

“The appreciation of the currency alone means that at the Australian dollar’s peak, making things in Australia was 65% more expensive compared to just a decade earlier,” the company says in a statement.

As a result of the decision to shutter the plants, GM says it expects to record pretax charges of $400 million to $600 million in fourth quarter-2013. The charges would consist of $300 million to $500 million for non-cash asset-impairment charges including property, plant and equipment and $100 million for cash payment of exit-related costs including employee-severance-related costs.

Additional charges are expected to be incurred through 2017 for incremental future cash payments of employee severance once negotiations are completed with the employees’ union.

Australia Industry Minister Ian Macfarlane says in a statement he is disappointed GM Holden didn’t give the government time to complete its assessment, through the Productivity Commission, on its support for the industry.

“I understand that Holden’s decision is a result of many factors including the impact on its operations from the high Australian dollar, making it very difficult to export vehicles to what have, in the past, been very successful export markets,” he says.

The government says it will consult with Toyota Australia, which is maintaining production in the country, and the components sector about the impact of the shutdown.

Toyota says in a statement it is saddened to learn of GM Holden's decision. “This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia.

“We will now work with our suppliers, key stakeholders and the government to determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia.”

The Australian Manufacturing Workers Union says it is devastated by the news, with National Secretary Paul Bastian calling it a black day for manufacturing in Australia.

Bastian says it is a catastrophe for as many as 50,000 people employed in the auto industry that did not have to happen.

“We knew heading into the election that the (new government) had plans to remove co-investment, but the entire industry hoped they would (realize) the impact of their decision,” he says in a statement. “The government has failed to come to its senses.”

Bastian says the government’s lack of commitment to provide support for the auto industry undoubtedly led to GM Holden's pullout.

The Australian Associated Press quotes AMWU National Vehicles Div. Secretary Dave Smith as predicting the slow death of Australian auto manufacturing will continue. Mitsubishi ended production in 2008 and Ford will shutter its plant in 2016.

“It's now highly likely that Toyota will leave Australia,” Smith tells reporters outside GM Holden's main office in Melbourne. “In fact, it’s almost certain.”

About 2,500 Toyota workers at its Altona plant in Victoria will vote Friday on a new contract and the outlook is not good, the automaker says.

The proposed labor agreement is about improving flexibility and removing outdated and uncompetitive practices and allowances, Toyota says in warning workers that rejection of the contract could force the automaker out of Australia.

“Toyota (is) trying to negotiate with its workforce by putting a gun to their head,” Smith says. “This is unacceptable. If Toyota is serious about staying in Australia, it would be campaigning for the government to continue to support its local operations rather than attacking its loyal and committed workforce.

“If you are asking your workers to reduce their conditions to keep your company in the country, you better be committed to the future.”