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NEWS
Holden closure part of broader rationalisation: WSJ
A new report suggests Holden is one of several international GM assets failing to meet profitability targetsThe prestigious Wall Street Journal has reported that GM is dissatisfied with the state of its international assets – and Holden is high among them.
In an article published yesterday unnamed sources claimed that GM is embarked on an international slash-and-burn program to reduce costs – and Holden stands out in the Asia/Pacific region as an underachiever. The prospect of the Elizabeth plant in South Australia closing down was described in the report as "likely".
GM is also reportedly preparing to reduce production by as much as 20 per cent in South Korea. The corporation plans to close a factory in Germany, the report also noted, and, as we reported last week, the Chevrolet brand will be retired in Europe. According to the report, high wages and "labour unrest" in South Korea have forced GM's hand, but the situation in Australia is attributed principally to the strength of the Australian dollar and a market shift to imported vehicles.
GM's international operations, the WSJ report notes, posted a profit of US $299 million last year – a decline of 61 per cent from the previous year. According to the report, earnings in China kept GM in the Asia/Pacific region afloat, but without China GM would have "lost more than [US] $100 million."
The report also stated that Dan Akerson, GM's Chief Executive, is under considerable pressure to cut costs globally. Akerson, according to the WSJ, is also concerned that the corporation's South Korean facilities are at risk in the event of war breaking out between the North and the South. The decision to reduce Korean production was made easier by winding up the Chevrolet brand in Europe. Most of the Chevs sold there were built by GM in South Korea.
One person prepared to go on record in the report was Morgan Stanley analyst, Adam Jonas, who told the WSJ that "They [GM] are starting to act like a global organisation, and are breaking up the fiefdoms. There are new people in leadership jobs, the financial controls have been changed and there is more accountability to Detroit."
Jonas admitted in the report that he couldn't "comment on Australia or South Korea specifically."
GM is saddling up for the US Treasury to sell the American government's remaining share in the corporation, and loss-making ventures on the books look bad. Furthermore, private shareholders will demand dividends paid out of the corporation's profits.
The WSJ report cites "automotive industry lobbyists" in Australia making the claim that an end to local manufacturing by Holden was "inevitable." Despite the recent wage deal struck with workers, these 'lobbyists' say that the Cruze (pictured) is insufficiently profitable, and large car sales are in terminal decline, hurting the Commodore also built at Elizabeth.
"They are going. They will not want to put more money in after the current model run winds up in 2016," the paper quoted 'one senior industry representative' saying.
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