GM's decision to close down engine and vehicle manufacturing and most of the engineering operation of its Australian Holden unit follows Ford's announcement earlier this year that it will end its long history of carmaking there by 2016.
Their departure has many experts saying it's only a matter of time before carmakers are extinct Down Under: The only manufacturer left there will be Toyota and the experts doubt that will be enough to keep needed Australian parts suppliers in business.
Why care about Holden? The unit has been a source of engineering and development for GM rear-drive car platforms, such as the underpinnings of the Chevrolet Camaro. It also has been making finished cars for the North American market. The former Pontiac G8, modern-era Pontiac GTO and the coming Chevy SS rear-drive performance sedans, as well as the current Chevy Caprice police vehicle, all have been based on Holden products and built in Australia for the U.S.
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GM's announcement did not say what would happen to the vehicles being sold here or where engineering and development now done in Australia would be shifted in the future.
Holden became an automaker in the early 1900s and was bought by GM in 1931. And like its home country, it has been known for some distinctive, brash and even quirky vehicles. Among others, it builds the last of GM's El Camino-style car-based pickups, a vehicle style called a "Ute" there.
The company said it would continue to do business in Australia and New Zealand but that Holden would become a sales organization, importing and distributing vehicles made elsewhere. It also said it would keep a design studio.
The GM and Ford decisions buck the current trend in the auto industry of "make! 'em where you sell 'em" to keep costs and income in the same currencies.
GM noted in its announcement, however, that the Australian dollar has risen from 50 cents to the U.S. dollar to as high as $1.10. That hurts profits on vehicles made there by making exports more expensive and less desirable, and thus having to rely on the small Australian auto market. And it erodes earnings when the Australian income is consolidated in U.S. currency back into GM's overall earnings.
Meanwhile, the rising currency and falling tariffs, including a free trade deal being phased in with South Korea, have cut sales of Australia-made vehicles to just 10% of total sales, Bloomberg News reported, and helped make the Hyundai i30 the No. 3 seller. Holden's Commodore already had been bumped to No. 2 by the Mazda 3.
"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," said GM CEO Dan Akerson.
Jobs lost will include 2,900 who work directly for GM. Beyond the workers employed directly by GM, Ford and Toyota, an estimated 42,000 Australians work for suppliers, according to Bloomberg News..
GM said that its expects to record pre-tax special charges of $400 million to $600 million in the current quarter for the shutdown, including "$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." The company said that "additional charges are expected to be incurred through 2017" for future employee severance payments, which still are to be negotiated with its union.
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