Holden sitting pretty

Holden MD Mark Reuss stood before Australia's media this morning and painted a bright picture of the company's future. Reuss spoke of the company being "on the verge of turning a profit" and cited future export potential plus improvements to the VE Commodore large-car range and the introduction of the locally-manufactured Cruze small car as signs of a dynamic, upbeat company that has already put the worst of its economic straits behind it. The Holden chief was briefing the local media after parent company GM issued a statement overnight that it had officially filed for 'Chapter 11' bankruptcy status (more here). In the US, Chapter 11 is a legal avenue that allows a business to continue trading, free of creditors issuing proceedings against the company.

"This is an epic day, as an American in Australia, representing Holden," Reuss stated in his opening remarks.

"It's sort of like studying for the final exam; the final exam this year, and we passed -- so this was a pretty good day for the place here.

"We are safe, we are part of the 'new GM', which is just terrific. Chapter 11 is not like administration here in Australia, as you all know. This is an opportunity for the parent company to restructure and create what's called 'the new GM', of which Holden is a vital part -- and we are one of three vital subsidiaries in Asia/Pacific.

"We're very happy with that. This has no direct [impact] on our employees, our dealers or our Holden suppliers -- or most importantly our customers. We still have the best-selling car in Australia. People love it and we're going to keep making it, selling it and servicing it -- just like we always have.

"Our dealer warranties and service again, remain unchanged. We are a viable sustainable business in the long term. Again, we have worked for 18 months to do that. We are cashflow-positive, we are liquid, we are on the verge of turning a profit here this last month -- even in a down business.

"We have taken the necessary actions here from a structuring standpoint on production, matching very closely our production with demand here in Australia and around the world in a global financial crisis.

"Our [production] development here in Port Melbourne is all on track and our investment remains unchanged. You're going to see us introduce a barrage of fuel economy... CO2 and alternative fuel-saving technologies here into Commodore -- our best-selling car -- over the next year or so.

"You're going to see us launch our new small car that will be produced in Adelaide -- and that car is in dealerships here right now in this month.

"Just to reinforce: Holden is safe, we are part of 'the new GM'; we have worked extremely hard to do that. We have great partnerships with the Australian federal government, the Australian [state] governments in South Australia and Victoria. Our unions across all of our sites, and our workers.

"We have taken a lot of decisions here over the last year -- with integrity. We've had pay cuts across the whole company -- including myself. We've had a restructuring to two crews and one shift without any job losses in Elizabeth. We basically are producing now what people want on a demand basis in Australia and around the world.

"One for one, we're producing exactly what the demand is -- which is a very tight-controlled production system, which has done nothing but help us here.

Reuss subsequently reiterated during a Q&A session that Holden's financial position, its solid infrastructure and 'bricks and mortar' holdings, combined with cashflow and imminent profit, have left it in a much stronger position than has been the case for GM in Europe.

According to the Holden MD, there are some borrowings from the parent company, but these are readily reimbursed as cars are built and the company starts making a profit from the new product line. That situation won't change, but nor will Holden be able to draw down large sums of money, as happened in the mid-1980s, since the parent company is now in a "bridge loan activity with the United States Treasury".

"We've been operating pretty much as a stand-alone, self-funded unit here since that's been going on, which is very positive..." said Reuss. That said, the parent company is funding 75 per cent of the locally-manufactured Cruze development, as Reuss confirmed later in the session. The bridge loan activity is earmarked for December, at which point, Holden must be officially self-funding, but Reuss says that the company is already in that situation.

In the circumstances, GM was bound to retain Holden, rather than flog it off -- but Reuss, careful to remain optimistic, didn't touch on whether GM refrained from selling Holden on the basis that it might have been a hard sell in the current economic climate -- or that finding a buyer for a smaller subsidiary in a remote location might be a tough ask at the best of times.

Reuss, queried about the Holden's profitability in recent times, refuted that the company had not been profitable at any time since 2004 -- describing such a suggestion as an "overstatement". He further advised that the company's 2008 financial statements would serve to clarify the situation once they're released.

As for job losses, Reuss was unequivocal.

"We have no plans for any job losses right now," he said, also mentioning that a skilled workforce would be an important part of an expanded exports program the company was developing to offset the loss of the Pontiac G8 business.

On the subject of product, Reuss foretold of upcoming spec changes for the Commodore -- and by implication, Holden is running against the stream within the GM world.

"You're going to see everything that flows through the vehicle -- the powertrain, everything else -- over a long period of time. I think that we are changing the way we do cars here, fundamentally.

"The reason why I say that is we have trained the world -- in General Motors, not just Holden -- to wait for big sums of money to show up and then we do a whole new model, and we say how great it is and how it's going to solve everything.

"I think Holden, in the future, is going to operate on a very deep and profound technical basis of what rear-wheel drive means -- and what it means in Commodore. And when I say that... the next new Commodore's next month and the next new one after that is the month after that. So we're going to have a very long road of continuous improvement, technology, fuel-efficient savings, on mass -- all that stuff. It's going to roll into this car over a very long period of time."

As far as Holden's international ties go, Reuss says the company is adopting a wait-and-see approach to Saab and Hummer, both of which are up for sale.

It's off-topic in a way, but Reuss spoke of the fortunate economic situation in Australia, not just for Holden, but for all industry.

"You look at some of the crises that happened right before the [Chapter 11] filing of the parent company around the world -- there's huge transactions and dollars taking place on ownership changes. You don't see that in Australia. You see Australia reinvesting in the product and the makers that are in Australia for the future -- and that's very important.

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