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FAQ | Holden shutdown

Joshua Dowling
CarsGuide

13 Dec 2013 • 4 min read

Q. Why did Holden’s US parent, General Motors, make the decision?

Holden had no prospect of becoming profitable as a manufacturer in the current economic climate, and there was no sign of an improvement. Because the new-car market is so fragmented Holden could no longer rely on domestic sales to provide sufficient factory throughput. The strong Australian dollar made exports unviable. GM can build the same cars in our neighbouring Asian countries more cheaply, and import them into Australia and make a profit. Despite a significant injection of taxpayer dollars, Holden has lost $432 million over the past five years because of its local production. In May, Holden’s chief financial officer said the losses were “a direct result of Holden building cars in Australia”.

Q. Would more federal government money have stopped the closure?

Had Holden received an increase in taxpayer assistance -- said to be $150 million per year -- the factory could have remained open beyond 2017, but it merely would have delayed the shutdown as sales continued to slide. The sales forecasts of the cars Holden proposed to build were regarded as “optimistic” and there was secret a contingency to shut the factory before 2020, according to documents obtained by The Adelaide Advertiser.

Q. Could the closure tip SA or Australia into recession?

While the nation’s thoughts are with the Holden workers and their families -- and those of the parts suppliers --  the Adelaide economy is unlikely to be hollowed out like Detroit. Even if every one of the 6000 workers across the industry do not find a new job, SA’s unemployment would rise by a maximum of 0.9 per cent, based on Census data. Studies have shown up to 20 per cent of the workers may not find jobs in the short term. Victoria will feel a bigger impact, with 28,000 workers employed in the parts supply industry if Toyota follows Holden and closes in 2018.

Q. What happens between now and 2017?

Holden is yet to announce its plans for the Elizabeth factory site and Port Melbourne engine plants. But the company will continue making cars and engines as usual until their respective shutdown dates in 2017 and 2016.

Q. Could Holden's Elizabeth plant in Adelaide close before 2017?

It is possible but highly unlikely. Holden will be able to take advantage of having the rear-wheel-drive large-car market to itself once the Ford Falcon bows out in 2016. Holden may not make much profit on the fleet sedans, but enthusiasts will likely pay top dollar to buy the last Holden V8s. Furthermore, the tooling and development for the Commodore has already been paid for. Holden only needs to pay for the materials, labour and the running costs of the factory to keep it operating.

Q. Where will Holdens be built after 2017?

Holden won’t say, but it’s a fair bet most will come from where today’s imported Holden are sourced: South Korea and Thailand. Don’t be surprised if we source a car or two from China or in a factory yet to be built in, for example, Vietnam, which is regarded as the next Thailand for the car industry in this region. Holden may even revert to taking some European Opel cars and rebadging them as Holdens as it did in the late 1990s and early 2000s.

Q. Will the Holden name remain?

Holden plans to keep the Holden name but it will be under increased pressure from Detroit to adopt the Chevrolet nameplate. It depends how badly damaged the Holden brand becomes over the next four years. Holden is one of the strongest brands of any kind in Australia, but it could become Chevrolet if GM thinks it will sell more cars that way. With the engineers gone, future Holdens won’t be tuned locally by Australians for Australian conditions, so they will be Holden by name only. Future Holdens will be no more Australian than a Hyundai.

This reporter is on Twitter: @JoshuaDowling

 

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