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Holden export loss eats profit

GM's decision to discontinue Pontiac in North America has hit Holden hard.

A small after-tax profit of $12.8 million was overwhelmed last year by net losses of $210.6 million because of the axing of the Holden-built Pontiac export program. These losses also included a series of special, one-off charges totalling $223.4 million, mostly because of the cancellation of the export program. The special charges stemmed mainly from the closure of the Family II engine plant in Melbourne.

Last year's loss is significantly more than the $70.2 million loss posted in 2008. GM-Holden's chief financial officer, Mark Bernhard, said the result was disappointing but a by-product of one of the most severe economic downturns in recent memory.

"This had a substantial impact on both our domestic and export sales," he said. "Much of our loss was incurred as a result of GM's decision to discontinue the Pontiac brand in North America."

High-volume exports of the Pontiac G8 ended last April, impacting the company's build numbers. The company built 67,000 vehicles last year, significantly down from the 119,000 built in 2008. It exported 88,000 engines, compared to 136,000 in 2008.

Bernhard said other key Holden export markets were also hit by the global economic downturn, which led to a dramatic decline in demand for locally built cars from Holden's overseas customers.

"At a local level, despite producing Australia's top-selling car, the Commodore, our domestic market was also impacted," he said. These factors resulted in revenue declining from $5.8 billion in 2008 to $3.8 billion in 2009. However, Bernhard said as the health of the world economy started to improve in the second half of the year, so too did Holden's finances.

"At this time that we started to witness the benefits of some of the more difficult restructuring decisions made during the year to ensure we were operating on a leaner, more efficient base," he said. "This contributed to the company's positive operating cash flow of $289.8 million."

Bernhard is confident Holden will return to a profit soon, particularly with local production of the Cruze small car starting in Adelaide early next year. "While we've had a good start to the year, I'm not in a position to declare victory just yet," he said.