Without the additional cash, Holden will pull out as early as 2016, at the same time Ford will shut its factories in Victoria.
General Motors had already decided to close its Holden plant in Adelaide, but the delivery of the news got a last-minute reprieve.
The closure of Holden’s Elizabeth factory in Adelaide was planned as part of a global restructure that involves the closure of three plants worldwide. The Detroit-based car giant, which had planned to announce the closure on Friday last week, granted Holden a last-minute reprieve after deciding it didn't want to book the cost of the closure in this quarter's financial results.
The postponed announcement has left the Holden workforce in limbo, with deep uncertainty about the company's future in Australia and hardened rhetoric from the government that it would not increase financial assistance to the carmaker. GM signed off on the plans last month, sources close to the decision said.
The other closures, which include one in Korea, are expected to go ahead but Holden was granted a stay of execution so that GM could spread its balance-sheet writedowns, which already include up to $1 billion this quarter.
Holden on Friday denied that a final decision had been made on the plant's future. However, its closure announcement had already been drafted and circulated, sources said, with workers due to be informed of the decision at yesterday's 2.15pm change of shift. A decision in the early hours of Wednesday morning forced a change of plan.
GM had decided "to cut Holden some slack" after it appealed for a stay of execution in the hope of winning over the government on additional funding. Holden wants long-term commitments to help fund the replacement for the Commodore from 2016, which was scheduled to be the Malibu mid-size sedan, and eventually annual "rent" payments to keep its Adelaide plant alive.
Without the additional cash, Holden would pull out as early as 2016, at the same time Ford will shut its factories in Victoria. The government dug in its heels on Friday. Tony Abbott said it would offer nothing beyond the $500 million in funding to 2017 promised at the September election. "We think there's more than enough money on the table," the Prime Minister said. "But there is no more.
"We took a policy to the election that...includes very substantial ongoing support for the motor industry. We stand ready to make that support available." He called on Holden to set the record straight on where it stood. "The message we're getting from Holden is they're in two minds; I would like them to clarify exactly what their position is," he said.
The government has asked the Productivity Commission to review the merits of providing financial assistance to the car industry, with a draft report due on December 20 and a final report at the end of March next year. A source close to the government said it believed Holden had already decided it was going and the Coalition was now resigned to the decision. "It's game over," he said, "but this is political poison."
The government believes it is being painted as the villain when the decision to quit has already been made. "They have decided to leave Australia; it is now a matter of timing," one minister said. Another raised doubts about the government's strategy. Holden sources said Mr Abbott's comments were an "extraordinary" attempt by the Coalition to "bully" GM into an announcement before Christmas.
Coalition sources said Mr Hockey was told of the imminent decision on Wednesday morning, but by that evening GM had changed its plans. Company insiders say Mr Hockey and Mr Abbott are trying to force Holden's hand by making the company's decision public. Sources say the Prime Minister and Treasurer want the bad news of Holden's closure finalised before the end of year.
South Australian Premier Jay Weatherill said "right-wing ideologues" within the Coalition wanted Holden to leave. He said Holden managing director Mike Devereux had denied reports about the decision and MPs committed to "scorched earth economics" were trying to undermine Holden. "The right-wing ideologues in cabinet are saying...let's scupper this right now," Mr Weatherill said. "If Tony Abbott had any guts at all, he would be here looking these workers in the face and telling them that he has already made up his mind."
Australian Manufacturing Workers Union state secretary John Camillo said absenteeism was increasing at the Elizabeth plant because of the uncertainty surrounding its future. "We've got workers, we've got families, we've got communities who are really worried about whether Holden is going to survive or not," Mr Camillo said. GM is understood to have rescheduled the closure announcement for late January, after the Detroit motor show.
Additional reporting by PHILIP KING