Official: Holden factories to close

General Motors has put an end to persistent speculation that it has decided to close Holden’s factory doors  in Australia by announcing just that.

GM announced that it will “discontinue vehicle and engine manufacturing and significantly reduce its engineering operations in Australia by the end of 2017”.

It said its “transition to a national sales company in Australia and New Zealand” was “part of its ongoing actions to decisively address the performance of its global operations”.

GM says that as a result of ceasing manufacturing in Australia, about 2900 jobs will be axed over the next four years, including 1600 at Holden’s Elizabeth vehicle manufacturing plant in Adelaide and about 1300 in Melbourne.

“Holden will continue to have a significant presence in Australia beyond 2017, comprising a national sales company, a national parts distribution centre and a global design studio,” said GM.

The move follows a similar announcement by Ford Australia earlier this year, when it confirmed it will cease manufacturing a year earlier -- by October 2016

However, unlike Holden, Ford will continue to have a local research and engineering workforce, including about 1200 staff at its Geelong R&D facility and You Yangs proving ground.

GM’s official announcement came immediately after workers at Holden’s Victorian and South Australian plants were advised this afternoon.

It also follows calls by Australian Prime Minister Tony Abbott for GM to clarify its position on Holden, following a senior Coalition ministerial leak to the ABC that the decision to close its doors had already been made.

Determined to force GM’s hand on the issue before the Productivity Commission hands down its interim report on automotive industry support on December 20, the federal government now appears to have won the battle in what amounts to a high-stakes blame game.

It’s believed GM had originally planned to delay the announcement, which comes just days after Holden chief Mike Devereux addressed staff on the matter last week, until after the draft PC report next year.

The Australian manufacturing future of Toyota, which will know by mid-2014 if it gets the right to build the next-generation Camry here beyond 2017, is now under a cloud given the uncertainty of Australia’s automotive parts supply chain following the departure of Ford and Holden.

If Toyota follows the lead of Ford and Holden, the jobs of up to 50,000 automotive industry workers could be lost.

GM placed the blame for closing its Australian factories firmly at the feet of its need to make its global operations profitable, as indicated by a Wall Street Journal report earlier this week, following its decision to axe the Chevrolet brand in Europe.

“We are completely dedicated to strengthening our global operations while meeting the needs of our customers,” said GM Chairman and CEO Dan Akerson.

“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.”

GM is quick to point out that since 2001, the Australian dollar has risen from 50 US cents to as high as $US1.10 and from as low as 47 US cents to as high as 79 on the Trade Weighted Index. 

“The Australian automotive industry is heavily trade exposed. The appreciation of the currency alone means that at the Australian dollar’s peak, making things in Australia was 65 per cent more expensive compared to just a decade earlier,” it said.

As a result of ceasing vehicle and engine manufacturing in Australia by the end of 2017, GM expects to record pre-tax charges of $400 million to $600 million in the fourth quarter of 2013.

The costs consist of about $300 million to $500 million for non-cash asset impairment charges including property, plant and equipment and approximately $100 million for cash payment of exit-related costs including certain employee severance related costs. 

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

GM Holden Chairman and Managing Director Mike Devereux said ensuring the best possible “transition” for workers in South Australia and Victoria is “an important priority” over the next four years.

“This has been a difficult decision given Holden’s long and proud history of building vehicles in Australia,” said Devereux. “We are dedicated to working with our teams, unions and the local communities, along with the federal and state governments, to support our people.

“GM remains committed to the automotive industry in Australia and New Zealand. We recognise the need for change and understand the government’s point of view.

“Moving forward, our business model will change significantly, however, GM Holden will remain an integral part of its communities and an important employer both directly and through our dealers,” Devereux said.

GM said the sale and service of Holden vehicles via its Australian and New Zealand dealer network will be unaffected by the announcement, with warranty terms and spare parts availability remaining unchanged.

The official news comes just hours after GM announced its global product development and purchasing chief, 51-year-old Mary Barra, will replace Dan Akerson as GM chairman on January 15.

Akerson, 65, is credited with guiding GM to record profits and a dramatic improvement in vehicle quality, while closing the chapter on government ownership in the company.

Accelerating his succession plan by several months after his wife was recently diagnosed with an advanced stage of cancer, Akerson’s move opens the way for Barra to become the first female CEO in the global automotive industry.

Former Holden chief Mark Reuss will replace Barra as GM’s Executive Vice-President, Global Product Development, Purchasing and Supply Chain, while another ex-Holden boss, current Chevrolet and US marketing chief Alan Batey, will replace Reuss as Executive Vice-President and President of North America.

Holden coverage on motoring.com.au

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