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GM Holden should be safe, says Reuss

Sitting tight: GM Holden chairman and managing director Mark Reuss says Holden will weather the GM storm.

Belt tightening helps to shield Holden from likely GM bankruptcy fallout

Holden logo21 May 2009

GM HOLDEN says local action to cut losses and improve cash flow has bolstered the company against potential fallout from parent company General Motors’ likely Chapter 11 bankruptcy filing in the US.

Holden also says that although the looming restructuring of GM will have at least some impact on Holden operations, plans for small-car production at Elizabeth from next year and an engineering evolution of Holden’s Commodore architecture remain on course.

Speaking to the Australian media launch of its crucial new Cruze small car, Holden chairman and managing director Mark Reuss said Holden had strived to improve its cash flow and cut losses before the global financial crisis hit last year, leaving it in a stronger position than outside observers might suspect.

He said Holden’s new local small car – to be built alongside the VE/WM large car in South Australia – would help to secure the company at both ends of a fast-changing market in which there had been a shift in buyer behaviour around operating costs of large cars.

“In addition to that we have invested very heavily in Commodore to bring operating costs and fuel efficiency and fuel diversity on line, and we’re going to do that with EcoLine right now,” he said.

“And none of those investments or technologies or capabilities or investments have been affected because we had a good plan, and we’re on track to do that.”

 center imageMr Reuss said Holden had gone on the offensive to improve its financial position in the face of tough economic conditions.

“You just can’t sit around and hope that the economy improves,” he said.

Mr Reuss conceded that Holden would be affected in some way by the outcome of GM’s June 1 deadline, but said that impact could not be predicted.

He also emphasised that while GM bankruptcy in the US “will probably happen”, he would “rather it not”.

“At the end of the day, each of the outside entities (GM outposts such as Holden) will be looked at, and we will go from there,” he said “But we feel very good about what we have done here, and where we are in the future.

“But there are no guarantees on any of these not at all. And we have treated it like that from day one.”

The restructuring of GM had been of “huge value internally”, helping Holden to focus on improving its local operations and not be so reliant on exports.

“To have any entity fully dependent on export markets in this world is probably not the right business model, so we are focussing very heavily on what we are doing today in Australia,” he said.

Mr Reuss said he was confident GM would call on Holden’s expertise in future.

“We are still one of the few places that do right-hand drive (in the world),” he said.

Mr Reuss admitted that Elizabeth plant shift cuts last year had been premised on the likelihood of GM axing its US brand Pontiac, although he denies having confirmation until “... around the time that happened”.

Holden has supplied the VE Commodore-based G8 for Pontiac since 2007.

“When we restructured Adelaide to two crews and a single shift, that was part of that decision, because you don’t make those decisions lightly,” he said.

“We didn’t’ have confirmation that (the Pontiac) brand was going away but because the US business was so dire in that market, we said ‘let’s build the business around zero Pontiac exports until we know what’s going to happen’ and that’s exactly what we did.”

Mr Reuss said that part of his job this month had been to allay dealer fears about the possible implications of a GM US bankruptcy filing.

He said Holden was planning for a successful outcome of the GM restructuring and that “the plan keeps its integrity”.

Mr Reuss is confident that GM may even regain its global number one ranking.

“If this is what it takes to get us to the place where we are generating profit and sales, without a lot of the legacy that has held us back from developing a lot of product the way we know we can and should, then I’m in,” he said. “I can’t wait.”

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