Holden will close its Australian operations, including Elizabeth in 2017, the company has told its South Australian workforce. In a statement, the company says it will discontinue vehicle and engine manufacturing by the end of 2017 and significantly reduce engineering operations in Australia.
About 1600 positions at the Elizabeth plant will be "impacted", the statement says, and about 2,900 across the country. The announcement comes only one day after Holden chief executive Mike Devereux said that no final decision had been made about the company's future in Australia.
Mr Devereux said emphatically yesterday that no decision had been made to close the company's assembly plants despite growing speculation production would stop as early as 2016. It also comes as General Motors overnight named global product development chief Mary Barra as the new CEO of the company.
Acting Prime Minister Warren Truss said Mr Deveraux told him about 1.20pm SA time the decision had been "made in Detroit" that the company would be "closing a significant part of their operation" in Australia and New Zealand by the end of 2017.
"We regret the fact that GM is to phase down its operations in this country," Mr Truss told Parliament. Amid uproar in Parliament from Labor MPs, Mr Truss said the Government "wanted Holden to remain manufacturing cars in Australia". Mr Truss said the government stood ready to assist sacked workers and to support dealers and employees.
Earlier on Victorian radio station 3AW, Treasurer Joe Hockey predicted job losses were "greatly exaggerated".Mr Hockey said only 2000 jobs were directly related to making cars - 1760 in South Australia and 200 in Melbourne.
Outgoing CEO and chairman Dan Akerson said the decision to end manufacturing in Australia reflected "the perfect storm of negative influences the automobile industry faces in the country".
"(It includes) the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world," he said.
Mr Devereux said an important priority over the next four years would be the "best possible transition for workers in South Australia. This has been a difficult decision given Holden's long and proud history of building vehicles in Australia," he said. "we are dedicated to working with our teams, unions ... and governments to support our people."
The company will move to a national sales company in Australia after cutting its manufacturing operations. It is possible an announcement by Holden could come on or before December 20 - the last day of work for Holden factory employees before the scheduled summer shutdown, and the same day the preliminary report by the Productivity Commission is due to be released.
Earlier today, Federal Treasurer Joe Hockey said it was not good enough for Holden to say it had not made a decision on the future of its Australian manufacturing plants. The company yesterday told a Productivity Commission inquiry into the car industry it had not decided whether to continue manufacturing cars in Australia, but Mr Hockey said reports out of the US indicated a decision had been made.
He urged GM Holden chairman and managing director Mike Devereux to be "fair dinkum"."I think we have the right on behalf of taxpayers to ask what their intentions are," he told Fairfax radio today.
Mr Hockey said the Federal Government wants an Australian car manufacturing industry but it needed to be competitive. "All I know is taxpayers are putting $48,000 per year towards each manufacturing employee in the motor vehicle industry," Mr Hockey said.
"That's a huge taxpayer contribution to the employment of other people." Acting Prime Minister Warren Truss said taxpayers have already stumped up more than enough money to help Holden stay in Australia amid a spate of attacks from Labor that the government is "bullying" the carmaker to shut its doors.
Mr Truss this morning continued his call for Holden to come clean about its intentions for the Australian car industry, following a letter he sent to Mr Devereux yesterday. He said the Coalition's axing of the Fringe Benefits Tax changes - which would have put a $1.8 billion impost on the car sector - along with the government's commitment to scrap the carbon tax would provide much-needed assistance to Holden.
A total of $1 billion in taxpayer money available through the car transformation fund was also "more than adequate", Mr Truss said, in response to criticisms of the Coalition's decision to not provide an additional $500 million promised by Labor. Holden has lost $432 million over the past five years and the company openly admits it loses money on each car it builds in Australia.
Official statement from Holden
As part of its ongoing actions to decisively address the performance of its global operations, General Motors today announced it would transition to a national sales company in Australia and New Zealand. The company also said it would discontinue vehicle and engine manufacturing and significantly reduce its engineering operations in Australia by the end of 2017.
"We are completely dedicated to strengthening our global operations while meeting the needs of our customers," said GM Chairman and CEO Dan Akerson. "The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world."
As a result of the company's actions, approximately 2,900 positions will be impacted over the next four years. This will comprise 1,600 from the Elizabeth vehicle manufacturing plant and approximately 1,300 from Holden's Victorian workforce. Holden will continue to have a significant presence in Australia beyond 2017, comprising a national sales company, a national parts distribution centre and a global design studio.
GM Holden Chairman and Managing Director Mike Devereux said an important priority over the next four years would be to ensure the best possible transition for workers in South Australia and Victoria. "This has been a difficult decision given Holden's long and proud history of building vehicles in Australia," said Devereux. "We are dedicated to working with our teams, unions and the local communities, along with the federal and state governments, to support our people."
The sale and service of Holden vehicles will be unaffected by this announcement and will continue through the extensive network of Holden dealers across Australia and New Zealand. Warranty terms and spare parts availability will remain unchanged. "GM remains committed to the automotive industry in Australia and New Zealand. We recognize the need for change and understand the government's point of view. Moving forward, our business model will change significantly however, GM Holden will remain an integral part of its communities and an important employer both directly and through our dealers," Devereux said.
Since 2001, the Australian dollar has risen from US$0.50 to as high as US$1.10 and from as low as 47 to as high as 79 on the Trade Weighted Index. The Australian automotive industry is heavily trade exposed. The appreciation of the currency alone means that at the Australian dollar's peak, making things in Australia was 65 percent more expensive compared to just a decade earlier.
With the decision to discontinue vehicle and engine manufacturing in Australia by the end of 2017, GM expects to record pre-tax charges of $400 million to $600 million in the fourth quarter of 2013. The charges would consist of approximately $300 million to $500 million for non-cash asset impairment charges including property, plant and equipment and approximately $100 million for cash payment of exit-related costs including certain employee severance related costs. Additional charges are expected to be incurred through 2017 for incremental future cash payments of employee severance once negotiations of the amount are completed with the employees' union. The asset impairment charges will be considered special for EBIT-adjusted reporting purposes.