Mike Devereux, Chairman of General Motors’ Australian subsidiary, Holden, has just announced 30 minutes ago in a press conference live on Australian Television that Holden will cease to manufacture cars locally in 2017, almost seven decades after the very first Holden rolled out the Elizabeth, South Australia plant back in 1948. This announcement follows Ford stating last May they would close their local operations by 2016. This is a big deal here in Australia where I reside, akin to Volkswagen announcing they would stop manufacturing in Germany or Renault in France, Holden being so intrinsically linked to Australian culture. However if you have been a regular BestSellingCarsBlog reader this should not come as a shock: see also Australia: Is the end of local manufacturing near? and Ford pulls out of Australia.
Mike Devereux cited exactly the same reasons for leaving Australia as Ford Australia CEO Bob Graziano did last May: “the sustained strength of the Australian dollar, a relatively high cost of production coupled with the relatively small scale of the domestic market, and the fact that Australia is one of the most competitive and fragmented auto markets in the world”. For Devereux, the bottom line is clear: “building cars in this country is just not sustainable, as painful as it is to say.” Devereux stressed the fact that Holden does build cars that are popular across the country, building and selling 2 of the Top 5 passenger cars here (the Holden Commodore and Cruze). However, he also admitted that “no matter which way we apply the numbers, the long term business case to make and assemble a car here is no longer viable.”
This announcement, on top of the nearly 3,000 jobs directly affected at Holden, has a fatal knock-on effect on the entire automotive industry in Australia, potentially affecting as many as 200,000 jobs in the wider industry. It leaves Toyota as the sole local car manufacturer, which is simply not sustainable, almost certainly marking the end of local automotive manufacturing in the country. In an announcement published just now as a response to Holden, Toyota states “this will place unprecedented pressure on the local supplier network and our ability to build cars in Australia” and will now work with its suppliers to “determine whether we can continue operating (…) in Australia.” In fact, expect Toyota to pull the plug on local manufacturing soon, as parts manufacturers need a scale that only two carmakers can bring to be financially viable. Devereux himself announced back in June that ”[Manufacturing] is viable with two of us, I don’t think it’s viable with one of us.”
With the Australian government recently signing a free-trade agreement with South Korea and on the verge of signing similar ones with Japan and China, the price of vehicles imported from these countries may be cut by as much as 5 to 10% in the coming months, making local manufacturing even less viable. R.I.P. the Australian automotive industry. This will immensely shake the economic tissue connected to this industry and will affect Australia’s economy as a whole but will also put an end to billions of taxpayers’ dollars ($1.8 billion for Holden alone between 2001 and 2012) injected to artificially sustain an industry bound to be delocalised sooner or later. Holden posted the 2nd biggest loss in its history in 2012 at $152.8 million. In any case, rarely had a single decision in the automotive industry had so many ramifications for the wider Australian economy.
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