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Bruce Newton15 Aug 2013
NEWS

GM to decide Holden's future by October

EBA step one, new government step two, then what?

GM Holden Managing Director Mike Devereux hopes to have the company’s crucial business case for local manufacture of the next-generation Cruze and Commodore ready for parent company General Motors by early October.

Devereux was speaking the day after Holden employees at the company’s Elizabeth assembly plant in Adelaide voted in favour of a new Enterprise Bargaining Agreement (EBA) that includes a three-year wage freeze.

The new EBA, which is also being ratified by Holden staff in Victoria (most of whom are expected to abstain to ensure it passes) over the next few days, is a crucial first step in the company’s push to strike a revised deal to build the next-generation Commodore and Cruze.

The second step comes after the federal election on September 7 and a negotiation with the new Rudd or Abbott government to determine what automotive industry policy will be and what co-investment Holden will be provided with.

“I would hope we could conclude that relatively quickly in late quarter three or early quarter four of this year,” Devereux told motoring.com.au at today’s launch of the Trax small SUV.

“As soon as I have something to pitch to GM outside this country, to leadership, I will.”

Holden has only a narrow negotiating window in which to work after the election because it intends to start steel works in the Elizabeth body shop over the Christmas break, avoiding any impact on production of the current Cruze small car and VF Commodore.

Of course, all this would be a moot point if Holden and the federal government can’t strike a deal. Then it would stop building cars in 2016, around the same time as Ford. That in turn could trigger the departure of Toyota and the end of all car manufacturing in Australia.

If Holden continues to manufacture in Australia beyond 2016, it is expected to produce the next-generation Cruze and an all-new Commodore based on a development of GM’s front-drive Epsilon II platform, that could be called E2XX, which underpins the new Malibu mid-size sedan.

If it does not, like Ford, its dealers would sell a range of imported models only – potentially under GM’s global mainstream brand, Chevrolet, which could eventually replace Holden in the longer term.

Holden had signed a deal in 2012 to commit $1 billion toward building the next-gen Commodore and Cruze, with the federal government providing $225 million and the South Australian government $50 million.

But Devereux backed away from that deal shortly after the launch of the Holden Commodore VF and Ford’s announcement that it will cease local manufacturing no later than October 2016 in May, saying conditions had changed and more assistance was required.

“After the election we have to have a solid conversation with whoever is running the country about what the combination of policy settings will be,” Devereux told motoring.com.au. “And there are a lot of things in that word ‘policy’, it is a large word. So we will have a good solid conversation with the Rudd government or the Abbott government on that.

 “I think there’s certainly an understanding of what our business case looks like for that next-generation product and for the billion dollars that we need to invest in the country,” said Devereux.

“We need to have some good solid conversations about what settings are going to be around that and the return on that investment, and we won’t know what they are until there is a sitting government. It is a complex equation.”

The Rudd Labor government has drawn fire for its decision to restructure FBT rules just prior to the election and drew only a lukewarm response to a promise of an additional $200 million in funds and a campaign to have all levels of government buy Australian-made cars.

The Coalition has promised to chop $500 million from the $1.5 billion available through the Automotive Transformation Scheme up to 2015 and conduct a productivity commission review into the future of the industry.

“I am going to put my head down for the next three weeks and let the country have its choice who is going to run the place,” Devereux said. “We will let that process happen and we will take care of our own business within our own operations, run the plant the best way we can and then have a chat with who runs the country.”

Devereux said he believed there was still a will within the country for tax dollars to be co-invested in local automotive manufacturing and directed a blast at its critics.

“People are buying Australian-made cars in great numbers, otherwise the two I make wouldn’t be in the top 10. So it’s factually inaccurate and I think irresponsible for people to say ‘Australians don’t want Australian-made cars’, whether they are politicians, whether they are journalists, whether they are mums and dads.

“They do want Australian-made cars and every month they vote with their pocket books and make them two of the top 10 cars in the country.”

Devereux played down reports that GM’s global manufacturing boss Tim Lee would be in Australia following the federal election on September 7 for government meetings and to make a decision on whether Holden continues to build cars here or not.

“He was scheduled to come here in late September and I am not sure if I will have him come or not have him come, because I am not sure I will have something to talk to him about. If you make someone come here you certainly want substantive things to conclude.”

Devereux, who spent Tuesday in Adelaide, refused to comment on the result of the vote because it was still in progress. Holden will issue a statement at 5:00pm on Friday.

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