News - Holden
Comment: Detroit gave up on Holden
No chance: GM's decision to only import a tiny number of VF Commodore-based Chevy SS's Stateside was reflective of a wider trend.
Holden’s production future was doomed when GM denied it larger-scale exports to US
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17 December 2013
IN THE fallout from the General Motors withdrawal from manufacturing cars in
Australia, it is now quite clear that no amount of government money was going
to save Holden.
In the tens of thousands of words that have been written on the subject,
attempting to pinpoint the factors that were at play to bring about the
so-called “perfect storm” of circumstances that ended up in the demise of the
car-maker in Australia, the fact is that GM did not have its heart in
Australian manufacturing any more.
Basically the sales dominance General Motors once enjoyed in Australia, which
delivered very large profits in its most recent unbroken run from 1993 to 2004,
had slipped through its fingers over the past decade.
GM was looking at years of more struggle, years of more handouts and ongoing
relentless political fallout to the point where it was clear that many in the
mainstream media, which lost sight of the wider benefit of continuing to make
cars in Australia, and posturing economic ‘dries’, were going to turn Holden
into the most hated car brand in Australia.
Think: The taxpayers’ pariah. Think: The corporation raking in billions of
dollars in profits each quarter internationally but dipping its hands into the
public purse Down Under.
It was not always so, and the turning point was the global financial crisis.
In the lead-up to the GFC, as exports to the Middle East fired (especially the
Caprice) and Pontiac exports were gaining steady traction in the United States,
Holden was looking at a scenario where every second car made in Adelaide would
Toyota had already reached the position where for every four Camrys made in the
Altona plant in Melbourne, three of them were exported. That figure now sits at
30 per cent local sales to 70 per cent exports.
But the GFC swept all that achievement away for GM. The effect on Holden was
dramatic as its Middle East demand sagged and the Pontiac division was closed.
It has been Struggle Street ever since. Recent profits were probably more a
reflection of the $1.2 billion that Canberra was injecting into the company
than of commercial success.
And, in post-chapter 11 GM, loss-making divisions and strategies become orphans
very quickly indeed.
Holden boss Mike Devereux talked up the local car performance by saying that
Commodore and Cruze were among the top five sellers in Australia. But that is
not enough anymore because the fragmentation of the market has been so
Between 2000 and 2012, 20 brands were introduced to the Australian market. But
the fragmentation and competition is so fierce that nine brands have also
departed between 2000 and this year. Four of them were GM brands – Cadillac,
Saab, Hummer and Opel.
Still, there remain more than 50 non-truck brands on sale in this country,
factoring in a quarter of newly launched Chinese brands not present on the
VFACTS list of manufacturers.
The number of core models available has increased from 283 in 2000 to 362 today
– an increase of some 75 models. In the GoAuto.com.au new-car catalogue there
are 2225 model variants listed.
Within this crowded house there are 33 brands which sell fewer than 10,000
units a year and of these, astonishingly, 25 sell fewer than 2000 units a year.
Getting volume sales from each model on sale is becoming impossible.
The best performer in this area is Toyota which in 2012 mean-averaged 12,100
sales per model entrant. Mazda was next with 11,500 sales per core model
fielded. Holden, Hyundai and Ford managed between 8300 and 9000 sales per each
But they continue on and this has a Swiss cheese effect on the established
market entrants to the point where once great sales leads are gone and will
The top-selling cars in Australia, the Corolla and Mazda3, will only be able to
achieve volumes somewhere north of 40,000 units this year. That is not enough
to sustain a plant and a far cry from the 100,000-plus Commodores and
derivatives sold here 10 years ago.
With local sales prospects for any single car entrant so low, only an export
program was going to make the Elizabeth plant viable, and the only true pathway
for that to happen was to sell Commodores in America which still has a taste
for that kind of car.
As a niche premium car in Chevrolet showrooms, the Commodore should have had a
bright future, given that volumes across the Chevrolet network did not have to
be large by US standards. Three Aussie cars per dealer per month would not seem
to be a big ask, and that would have produced about 110,000 export sales to add
to the local production.
As niche cars, the range could have been filled out by the Sportwagon and the
Ute, the latter already destined to be a Pontiac before the division was closed.
As it is, the Commodore-based Chevrolet SS has just gone on sale in the US to
positive reviews in which some US motoring writers have generously aligned it
favourably with the BMW 5 Series.
But too many people inside the Renaissance Centre in Detroit, for whatever
reason, do not want Holden cars selling in America as Chevrolets in anything
other than niche numbers.
We have been hearing the mantra from Holden in recent years that it has to make
money in Australia and cannot rely on exports for profits. Definitely a storm
And then, former managing director of GM Holden Alan Batey, while in charge of
Chevrolet earlier this year, said that Chevrolet would only ever take cars from
Australia in very limited numbers.
Currency could have been an issue, but as far back as Denny Mooney’s time at
the helm in Australia Holden had embarked on a policy of hedging the dollar by
importing, mostly from the US, key elements and a significant proportion of
parts built into the US-bound cars out of Adelaide.
An increase in the value of the Australian dollar would make the sourcing of
those parts cheaper – V8 engines and gearboxes, for example – thus taking much
of the sting out of the dollar’s movement in either direction.
GoAuto has been told that also preying on the minds of GM executives are the
more stringent corporate average fuel economy regulations which were brought in
last year. This means that the more Commodores sold in the US each year, the
harder it is for GM to meet the average required across its entire range. This
is effectively a non-tariff barrier against the Commodore.
The message was clear. Detroit did not want Australian cars to sell in the home
market in any numbers. Without that, no matter what car Holden built, Elizabeth
was always going to be surplus to requirements.
It is also true that GM must have been greatly encouraged by the successfully
smooth departure of Mitsubishi Motors from making cars in Adelaide, and
additionally delighted by the way Ford is going to exit Australia and still
import cars to our market as though nothing had happened.
From Detroit, Australia’s come-one, come-all open door for importers must have
looked very appealing indeed.