GM plant closures prove Holden factory’s demise was inevitable

COMMENT

Ask almost anyone with an interest in the local automotive manufacturing industry – which isn't quite dead yet – and they will say the same: Holden's closure of its Elizabeth manufacturing plant could have been avoided.

Some argue that enough government money thrown the way of the GM subsidiary to keep the doors open and the lights on at Elizabeth would have done the trick.

There are those who argue that unionised workers could have kept their jobs if they had only taken a wage cut or a wage freeze – as if any self-respecting Aussie would do that.

So it's government, the unions, the foreign exchange rates/lack of export markets, the cost of doing business in Australia, dwindling consumer demand for large cars ... it's even the perception of a damaged brand.

But few think to mention or even recognise a significant problem for Holden has been the woes of its parent company, General Motors.

That has rarely been made clearer than in the news today that GM is ending production of some of its high-profile models sold in North America. Along with the cessation of those model lines, GM is also expected to shutter plants.

In a press release that echoed the up-beat announcement by Ford Australia that it was 'accelerating' its 'business transformation' – weasel words if ever you've read them – GM announced overnight that it would be 'Transforming product development, 'Optimizing product portfolio', 'Increasing capacity utilization', and job cuts were to be implemented through 'Staffing transformation'.

“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM chief Mary Barra was quoted as saying.

“We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

Cost reductions are estimated to be in the vicinity of $US4.5 billion for total cash savings of $US6 billion. Among the cost reductions are the possible closure of up to five plants at Oshawa in Ontario, Canada, Detroit-Hamtramck, Lordstown in Warren, Ohio, Baltimore, Maryland and Warren, Michigan.

The first three plants mentioned assemble vehicles, the remaining two manufacture powertrain components.

Along with the prospective plant closures, GM will retrench 15 per cent of its salaried staff, including 25 per cent of its executive workforce. That amounts to 3800 staff in the USA and 2900 more in Canada.

Vehicles that are expected to die include Chevrolet Impala, Volt, Cruze and the Buick LaCrosse.

Rumours are circulating about the Cadillac CT6 and XTS too, products built at the Detroit-Hamtramck facility. It has been reported that GM is yet to make the plant closures official while awaiting negotiations with the UAW (United Auto Workers) next year.

Note that all of these vehicles are passenger cars, not SUVs or commercial vehicles. Mary Barra was reported as saying earlier this week that GM is turning its attention to autonomous and electric vehicles. In this regard, GM is following the same path mapped out recently by Ford.

GM has also confirmed the closure of its production plant at Gunsan in South Korea and has revealed it will close two other international plants (outside North America).

While the Commodore and Astra hatch and wagon are sourced from the now PSA-owned Russelsheim factory in Germany, Holden has already axed the Korean-sourced Spark, Barina and Captiva, and says its future product plan is unaffected by yesterday's announcements.

During the fourth quarter of 2018 and the first quarter next year, GM faces pre-tax charges of between $US3 and $US3.8 billion for accelerated asset write-downs and pension charges, with up to $US2 billion for 'employee-related' expenses.

The new GM was never likely to recover the sort of market share (and global sales-champ status) of the old GM, and its history since the GFC and its subsequent bail-out by US tax-payers has been one of divestiture.

It has bailed out of Europe, pulling the plug on the Chevrolet brand there and selling Opel/Vauxhall to the French; it has dropped out of developing markets elsewhere around the world and now it's even trimming back in its home market.

One thing for certain from all this? Nothing was going to keep the Elizabeth plant producing cars beyond 2017, or perhaps even the subsequent closure of 30 Holden dealerships -- including one of the brand's first and longest serving, Muirs Holden in Sydney (pictured).

Ford could have continued manufacturing in Australia, Toyota might have stayed also, the government might have dug deeper for automotive subsidies and the unions could have been totally quiescent.

And even with all that, and new export markets found, with the dollar stable at around US 50 cents, Holden still would have ended local production.