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Holden happy for Cruze to outsell Commodore

Factory line: GM Holden says it doesn't mind Cruze outselling Commodore.

Profit targets not chartbusting bragging rights is key for Cruze, says Holden

1 Mar 2011

GM HOLDEN says it is happy for its Australian-made Cruze to outsell the Commodore if it means that the company can profitably achieve productivity targets of 100,000-plus units annually.

However, executives will not discuss volume expectations, except to say that Holden expects the Cruze to “comfortably outperform” the outgoing model’s 2010 (and first full-year) sales result of 28,334 units.

In contrast, Holden sold 45,956 Commodores, 1999 Statesman/Caprice models and about 10,000 Utes in Australia last year, while a further 8000 VE/WM vehicles were exported.

Speaking to the media at the launch of the newly Australianised Cruze (the existing model was built in South Korea for Holden), chairman and managing director Mike Devereux said that adding much-needed volume at the Elizabeth plant in South Australia to keep workers and suppliers busy is more important than which car wins the sales race.

“When we start selling the Cruze hatch (in October) our position in the marketplace will increase,” Mr Devereux said.

“People ask what happens when Commodore gets overtaken by Cruze and I’m happy to sell whatever cars Australians want to buy. They want to buy more Cruzes – then they can buy more Cruzes. I’m fine with that.”

13 center imageFrom top: GM Holden chairman and managing director Mike Devereux, locally-made Cruze and Commodore, and a Cruze under production at the Elizabeth factory.

Mr Devereux added that producing small and large cars on the same assembly line gives Holden a two-way bet to increase or decrease production according to consumer demand.

There are also longer-term brand-building upshots that the consumer can benefit from due to the two-pronged policy, since Holden will be less likely to be stuck with excessive stock of either model, which should in turn reduce the need to discount at the expense of reduced residual values.

“The best thing about that is that we can flex production as the ebbs and flows of the market happen and not do stupid things on the pricing front to denigrate resale values down the road to try give away a bunch of cars – that’s not what we are about,” said Mr Devereux.

“We won’t start a price war because frankly it is more relevant for people who buy our cars two months on not to have their cars $2000 cheaper because of some market-share short-term goal that somebody who runs some other car company thinks about.”

Holden does not believe there is too much likelihood of sales cannibalisation between Cruze and Commodore, although the former may come out ahead as some fleet managers stick to a four-cylinder-only policy. Current fleet volume for Cruze sedan is about 30 per cent.

“I don’t think there’s too much interaction between the two cars – maybe with some fleets there might be but for private buyers… not at all.

“Will we get more government business perhaps with a highly fuel-efficient car like the Cruze? Maybe we would. Some of the local governments have four-cylinder policies, so that opens up nicely our four-cylinder car for those governments.

“But it’s simple… we make big ones and small ones, and as the markets change between the two we tune Adelaide to meet the demand.” The Holden boss did acknowledge that there is more profit potential in a large car than a small one, but he believes that shoring up small car manufacturing at Elizabeth has already changed what Holden is.

“We are no longer the Commodore car company,” he said.

“In terms of product, the Cruze is a ‘C’ (class) car – the largest single segment in the country – and it wasn’t chosen stupidly or for nothing. I think we happen to have one of the better small cars (even though) there’s no hatch yet.

“Cruze is a global car that we get to make here. And I think that is the best possible outcome (for Holden) because you need to make a lot of things.

“You can opine about the sexiness of a Volt … but I think having a highly profitable large car that is the highest selling car for 15 years in Australia, and then picking the segment that is the highest-selling in the country and putting an award-winning small car, with Australian-tuned suspensions and engineering and styling (is the right decision).

“We have the sixth or seventh best-selling (small) car without a hatch in a segment that is 60 per cent hatch … and we outsold Falcon three times last year.”

Sales of the JG Series II Cruze commence in the last week of this month.

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