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Costs threaten Holden’s next-gen cars

Cruze control: Holden’s need to stay competitive against a flood of cheaper imports has placed its future car program under threat.

Holden boss Mike Devereux says costs may chop its future cars program

Holden logo19 Jun 2013

HOLDEN’S next crop of locally made cars is under direct threat from high costs that make it uncompetitive to build them in Australia.

Holden managing director Mike Devereux said if the company could not trim costs from its cars, future plans for extending its manufacturing future in Australia were unviable.

“We know that our next-gen business case is challenged with the current economic environment,” Mr Devereux said yesterday after announcing the car-maker wanted to open up talks with unions in a bid to cut labour costs.

“We know that it costs too much per car to make the cars here right now, and we have to reduce that,” he said.

Holden is already planning for the next-generation Commodore replacement, with speculation rife that it will move to a more compact global front-wheel-drive platform.

In the meantime, Holden has received $275 million in state and federal grants, as well as a $1 billion commitment from its US parent to develop the next Australian Cruze small car and, potentially, an as yet undisclosed model based on the same architecture.

“We definitely have some decision points from a vehicle development standpoint for those two vehicle architectures,” Mr Devereux said.

 center imageLeft: Holden managing director Mike Devereux

“I’ll obviously keep those confidential for GM, I’m just focussed on between now and August when we want the workforce to vote on what they want to do going forward,” he said.

Holden revealed yesterday that each car that rolls off its Adelaide production line costs $3750 more than the average across all General Motors’ international car-making factories.

It said it wanted to open up talks with unions representing 1600 blue-collar Holden workers that will remain after the end of next month – the car-maker currently has 400 voluntary redundancies on the table – and called for a vote on accepting whatever new terms are thrashed out by an August 1 deadline.

Meanwhile, Mr Devereux also flagged more pain for the Australian parts supply industry, saying the Commodore’s half-in-half mix of imported to locally made components was creating its own set of problems.

“There are logistical cost differences because of how far we are,” he said.

“When you’re shipping components on boats rather than shipping a fully made car, it is less efficient to ship a component than a car – it is quite efficiently packaged.

“You don’t have boxes, you don’t have wood, you don’t have crates. You just have every part already assembled into a car.” Mr Devereux said the difference in labour costs between Australia and South-East Asia, and even parts of Europe.

“There’s also the cost impost that buying parts from local parts makers in Australia than equivalent parts purchased overseas,” he said. “These are the things that add up to that ($3750 figure).

“I think that the costs to make every single part of the car have to go down in order for the manufacturing business to be viable in this country,” Mr Devereux said.

“It just can’t sustain at the cost per car that we have.”

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