Dumarey deal: General Motors now the key

Attributed to George Svigos - Director of Corporate Affairs, General Motors International - the statement reiterates the reasons GM elected to shut down local manufacturing. But it also confirms it is taking the Punch proposal seriously.

The statement reads:

"This is an industry-wide issue, a number of key macro-economic factors made it unsustainable for the three car-making companies to continue local manufacturing. As we said at the time, Holden and GM left no stone unturned to continue manufacturing in Australia but the business case simply did not stack up. Issues of scale and global competitiveness have not changed and the local vehicle market has continued to fragment, particularly with the increasing number of free trade agreements.  The challenge of viability for the local supply chain will only accelerate once large-scale local manufacturing ceases.

We have always said that GM will assess any detailed proposal from any party interested in the ongoing use of the Adelaide site. An initial approach has been received by GM from Punch International. As requested by the Australian Government, this is being thoroughly reviewed by GM on a strictly commercial-in-confidence basis."

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The South Australian government has given cautious public support to Guido Dumarey’s bid to buy Holden’s Elizabeth plant and keep building the locally designed and developed Commodore post-2017. However, the state government has made it clear the Belgian businessman must do a deal with owner General Motors before it can do anything more.

That was the message from South Australia’s automotive transformation minister Kyam Maher at a doorstop press conference in Adelaide this morning (February 4) after attending a meeting with SA Premier Jay Weatherill, Dumarey and fellow Punch Automotive executive, Marc Maes.

“We will do what we can as a government to help Punch in their [sic] ambition to keep making cars in South Australia,” Maher told local media.

“However, there are a number of hurdles that have to be overcome both with General Motors and the state and federal governments before this becomes a reality.

“We will continue to support Punch Automotive as we can but there is still a long way to go before this becomes a reality,” the minister stated.

Maher struck a more conservative tone than federal innovation minister Christopher Pyne who met with Dumarey and Maes in Canberra on Tuesday. They also had a brief meeting with Prime Minister Malcolm Turnbull on Monday.

Dumarey is pitching to purchase the Elizabeth plant from GM, as well as gain a ‘free license’ to develop the Zeta architecture that underpins Commodore and would be used by Punch as the basis for a new premium and light commercial model ranges for local sale and export.

Maher said there were “significant hurdles” still to overcome for the bid to be successful.

“It will require funding from the federal government under the Automotive Transformation Scheme,” he explained.

“It will require further negotiations with Holden about using intellectual property and the site.

“There is still a long, long way to go. We will do what we can to help Punch Automotive, but there are still significant hurdles to overcome.”

While the Zeta IP has been widely touted as the most obvious stumbling block in Dumarey’s pitch, the responsibility for clean-up (or remediation) of the Elizabeth site is now emerging as an issue too.

Clearly, if clean-up of the site was required it would be a multi-million dollar exercise and a cost both GM and Punch would be keen to avoid. Mitsubishi as the land owner was financially responsible for remediation work when the Tonsley Park plant in Adelaide closed in 2008.

“There are all sorts of issues and one of them is about site remediation,” Maher confirmed.

“There is contamination at Holden as there was with Mitsubishi and the liability for that remediation is one of the issues that will certainly have to be discussed if this proposal is to go forward.”

Maher confirmed the SA government could offer “regulatory assistance” with the remediation issue but did not elaborate.

“We don’t know what Punch will be asking for but we stand ready to assist them wherever we can,” he added.

Maher made it clear that the next step for Punch was to sort out its deal with General Motors, only then could the state and federal governments seriously enter discussions and negotiations. He confirmed Punch had yet to hand over a detailed proposal to the state government.

motoring.com.au understands that Dumarey and Punch have entered initial discussions with General Motors at a global management level (rather than through Holden) about the acquisition of Elizabeth and Zeta.

Dumarey has set a mid-2016 deadline on his bid, a timeline supported by Pyne. Maher also indicated a deal would have to be struck quickly.

The minister also played down expectation of success, a message that Premier Wetherill has also delivered in the past. He also stated there other post-Holden offers for the Elizabeth site.

“The first step is for Punch and General Motors to discuss what they need to discuss to make this happen,” Maher said.

“We are being cautious. We do not want to build up false hope, not just for the workers at Holden, but for the many more thousands of workers in the supply chain,” he stated.

Premier Weatherill previously indicated (on ABC radio in Adelaide) that he was still lukewarm on the Dumarey bid.

"It seems on the face of it to be an unlikely proposition, but we're treating it very seriously. It's a big hurdle," Mr Weatherill said.

"The last thing I want to do is give the people down there false hope… So we've got to be a little bit realistic."

He was also concerned by the liabilities surrounding remediation of the contaminated Holden's plant.

"He needs hundreds of millions of dollars to subsidise his operation to do what he wants to do," Mr Weatherill said.

"He has to get hold of the factory from Holden; I think some intellectual property from them. [And] there's the whole question of the remediation of probably one of the most contaminated sites in the state.

"He may not want it with the liabilities. He may want somebody else to pick up that bill. They are things we'll talk to him about," the premier stated.