Holden plays safe with ForEx protection

Holden's new MD, Mark Bernhard, has told local journalists the Aussie GM brand will source its cars from Europe, Asia and the USA.

Asked by motoring.com.au why Holden would choose to source cars from America, which seems likely to enjoy a favourable exchange rate against Australia for the foreseeable future, Bernhard explained that Holden can amortise its foreign exchange costs by sourcing imported vehicles from across multiple markets. In theory, what it loses by importing a handful of 'sports cars' from America, it can offset by selling hundreds or thousands of vehicles from South Korea or Thailand.

"If the product's available then we take the product – if it's right for our customers and our market," Bernhard responded.

"The currency footprint is an interesting one. Certainly if we look to have cars from Europe, Asia [and] the US, it does help smooth out some of those currency fluctuations for us – and in some cars we may be winning, some we're losing. But we're not heavily skewed to one currency."

Over the past 20 years or so, Holden's imported car lines were predominantly from Europe (mostly Belgium) and Asia (South Korea and/or Thailand). Unfortunately, the three major currencies involved are also substantially stronger against the Australian dollar than they were four years ago. That change in value for the Aussie dollar would have helped Holden export larger numbers of locally-manufactured product to the world, but has come too late.

Currently the Korean Won is very strong – fewer than 900 per Aussie dollar – but was as weak as 1200 per dollar back in 2011. Compared with the Thai Baht, the Australian dollar currently buys around 25, but was buying as many as 33 during 2013. The decline of the Aussie dollar against the Euro has not been as sharp as against the Won or the Baht, but in 2012 one dollar was buying around €0.85; it's now buying less than €0.65.

And everyone's well aware of the Aussie's slump against the Greenback – worth US $1.05 back in 2011, now hovering around US $0.70.

That seems to be the flaw in Holden's plan; when it's the Aussie dollar losing ground, rather than the Greenback rising above the rest, there's just nowhere to hide for an importer in this country. Bernhard has a couple of years yet while he can still amortise costs from a fourth market – Australia itself. While the Aussie dollar is so weak, exports of Commodore can earn Holden revenue from overseas, but the sales numbers of Chev SS and Caprice PPI are just not in the same league as imports of Colorado, Captiva and Barina. At least selling the local product here, still in fairly large numbers, reduces the impact of currency exchange rates across Holden's entire product portfolio.

Ultimately, concern about volatile landed cost may be completely academic for a car like the Corvette (pictured), which may yet be the rear-wheel drive V8 sports car Holden has been hinting it would bring into the local market. In the past Australians have proven themselves more than willing to pay through the nose for such a car, but the Corvette would be priced at such a level – even when the Australian dollar is relatively strong – that it would never sell in large numbers anyway. 

According to Bernhard, General Motors is well aware of the difficulties associated with pricing imported cars in a commodities market like Australia – and the parent company will accept some peaks and troughs.

"We're part of General Motors, so General Motors will wear the pain," he said.

Bernhard's remark, if taken in a literal geographic context (sourcing from the USA, rather than 'North America'), would seem to rule out Canada, the home of Camaro production, as a source for imported product.

Establishing supply from America could also pave the way for Holden to sell select Chevrolet models like the Silverado pick-up and SUVs like the Traverse or Tahoe in Australia – if the sums add up for the business model.