D Day for Holden

Today is D Day for Holden with the embattled company’s boss, Mike Devereux, this morning appearing before the government’s Productivity Commission.

Reports are swirling Devereux could use the occasion to announce Holden's withdrawal from Ausutralia, with the meeting likely to not only decide the fate of thousands of Holden employees, but 4200 workers at Toyota Australia as well.

Holden and Toyota are dependent on their combined volumes to keep local suppliers afloat and costs in check following the planned closure of Ford’s Australian manufacturing operation in 2016.

Canberra sources claim the newly elected federal government is yet to decide its position on whether to grant Holden the increased funding it needs to survive and that the cabinet is split, with industry minister Ian MacFarlane fronting one group advocating increased support, while treasurer Joe Hockey is one of several ministers unconvinced the investment is worthwhile.

Hockey recently appeared to signal he wouldn’t be pressured by corporations such as GM when he stated “I won’t be bullied,” in response to aggressive lobbying on behalf of a US firm pushing to take over GrainCorp.

It might be unsavory that politics will decide the future of such a proud Australian icon (admittedly an American-owned Australian icon), but it is entirely appropriate given the first Holden of 1948 was developed as a result of a government push for a vibrant Australian car industry. Ironically, one of the reasons General Motors was selected to build “Australia’s Own Car” was that it required less government financial support than Ford.

This time around, General Motors has demanded a substantial sum to ensure production at its Elizabeth plant near Adelaide continues to produce cars between 2017 and 2022. It has pegged the investment needed to produce the two global products in Australia at $1 billion and is understood to be seeking somewhere between $275 million and $500 million worth of investment and concessions from state and federal governments.

The Rudd government Mark II believed it was worthwhile, both for Australia and its own future, and announced a deal just weeks before this year’s federal election that secured Holden’s commitment to local manufacturing. Although, it also went on to introduce the potentially disastrous Fringe Benefit Tax changes that kicked local manufacturers where it hurt at the wrong time, before losing the election and rendering both plans redundant.

The Abbott government had trumpeted reducing, not increasing, government car industry assistance before the election, but has since sent out mixed messages. Now, it has called in the bean counters from the Productivity Commission to evaluate the benefits of any automotive assistance deal. It will deliver a preliminary report on December 20 and a final report next March.

Whether the PC’s work will be used to help make a decision, or simply to justify a decision, is yet to be seen. GM executives in Detroit want an answer soon and have already postponed critical work at the Elizabeth plant including $2 million of upgrades for the body shop that were due this Christmas break. Instead, just $250,000 will be spent on a feasibility project that involves minor tinkering with the lines.

How long will they wait? The union says GM needs an answer before Christmas, but that may simply be its own opinion. However, GM is a business and would not hesitate closing Australian plants to ensure its own feasibility if the process dragged on.

After all, it came close to shutting Holden down during the Global Financial Crisis, with only the income from healthy sales of VE Commodore and a government line of credit standing between it and disaster. GM did kill the historic Pontiac brand in 2010, among others, revealing nostalgia counts for nothing in spreadsheet columns.

As for the Holden workers, they have done their bit by signing up to a more flexible and less lucrative agreement. A small group went to Canberra last month to lobby MacFarlane and Hockey along with union chiefs. MacFarlane listened for an hour, Hockey didn’t show.

One Holden worker told Wheels: “You know, it’s just sad that in all of this Holden has become a political football.”

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