EXCLUSIVE: Holden goes ahead with factory upgrade

Holden workers will get a 3 per cent pay rise next week and a scheduled $1000 bonus next month because the three-year wage-freeze deal they signed in September only kicks in if Holden signs a new agreement with the Federal Government to build two new cars from 2016 to 2022.

The delay in that decision -- now not likely until late April or early May while the Federal Government waits for a Productivity Commission report -- means workers will remain on their full benefits.

Despite the uncertainty, Holden will go ahead with a critical upgrade to its factory in Elizabeth to prepare for the next generation Commodore due in 2016 -- even though it is yet to win further funding from the Federal Government. The revelation contradicts Federal Government insiders who incorrectly claimed last week that General Motors executives in Detroit had already decided to shut the Holden factory.

News Corp Australia has been told by factory workers that Holden will make the planned changes to the body shop during the scheduled summer shutdown in December and January, to pave the way for tooling for the new large sedan which, they say, is front-wheel-drive. If the new large car -- which Holden has said it will call a Commodore -- goes ahead, it will be the first time in Holden’s history that its top-selling model is not a rear-wheel-drive car.

News Corp Australia has been told that Holden is spending $250,000 to make the upgrades to the body shop -- effectively where a car starts its life on the production line -- because it would be too costly to do at a later date. The factory preparations should not, however, be viewed as a guarantee that Holden’s manufacturing future is safe, industry observers have warned. 

The car maker is still waiting on a decision about future funding from the Federal Cabinet in late April or early May. An industry insider told News Corp Australia: “The deal may not be done (to secure Holden’s manufacturing future) but this is a prudent move. In the scheme of things, this is not a large sum of money to spend when to delay it would cost much more because it involves shutting the factory for an extended period.”

Meanwhile Federal Industry Minister Ian Macfarlane has returned to Australia following his visit to Toyota executives in Japan last week. His office told News Corp Australia there is still no change to the Federal Government’s plans to wait for the final Productivity Commission review in March, and follow its recommendations. An interim Productivity Commission report due on December 20 is expected to give General Motors and Holden an indication of the Federal Government’s funding intentions.

Earlier today the Federal Chamber of Automotive Industries released a report which claimed the loss of the car manufacturing industry would wipe $21.5 billion of economic activity from the Australian economy. The report also claimed that it would take the economies of Adelaide and Melbourne until at least 2025 to recover from the associated job losses. However the report was done by a firm which found contradictory results in April this year, and recommended industry subsidies be cut.

The new report prepared by the Allen Consulting Group, using economic analysis from Monash University, found that the $500 million the car industry received each year generated a claimed $21.5 billion in economic activity. But a report in April this year prepared by ACIL Allen -- the company formed when ACIL Tasman merged with the Allen Consulting Group -- recommended taxpayer support be cut from struggling industries.

"Subsidies to particular industries are a tax on the remainder of the economy," said the ACIL Allen report prepared for the Property Council Of Australia. "They have become more significant in the last decade, totally nearly $9 billion annually. The more successful industries, those that do not need subsidies, prop up the less successful ones."

COMMENT

Holden’s manufacturing future remains gravely uncertain. But going ahead with crucial factory preparations for the new generation 2016 sedan shows there is still a slither of hope. Contrary to last week’s allegations from anonymous sources in the Federal Government, General Motors categorically has not “already decided” to shut down Holden’s factory operations.

On the contrary Holden is spending $250,000 on a bet that a deal will be done with the Federal Government after March. That sounds like a lot of money but it’s small change in what would amount to a $1 billion investment on the two new generation cars it would build from 2016 to 2022.

Sadly, though, the wait is not over for the 1700 factory workers at Elizabeth. Most likely they will go on their Christmas break during the scheduled summer shutdown not knowing about their company’s long term manufacturing future.

Then they will have to endure a three-month wait for the outcome of the Productivity Commission review -- due on March 31, coincidentally after the SA election. And then they will need to wait for Cabinet to decide if it wants a car manufacturing industry in Australia, or say goodbye to it forever.

joshua.dowling@news.com.au

This reporter is on Twitter: @JoshuaDowling