Holden lifeline details emerge

DETAILS of GM Holden’s previously secret $200 million line of credit from the Australian government’s Export Finance and Insurance Corporation (EFIC) are starting to emerge.

EFIC released a statement late last Friday (August 7) confirming the credit facility was established at Holden’s request to “provide support for GMH exports of vehicles, parts and engineering services to Europe, the Middle East, Africa and Asia as the Australian manufacturer establishes stronger market links under the newly created General Motors Company”.

The line of credit has been on the table since before June 26, when GM Holden released its 2008 financial report, which mentioned a $200 million working capital facility.

When asked about this reference last week, GM Holden managing director Mark Reuss said: “I’m not going to comment on that. That is our own business. That is part of making this business right.”

While the line of credit has been officially earmarked to provide funding for export activities, GM Holden says the money will not be used for any particular export deal.

Left: Holden's Mark Reuss.

Holden spokesman Scott Whiffin said the money is “not tied to anything specific”.

“It is an unused line of credit and our intention is not to use it at all,” he said. “In terms of export – and I’m not saying there are any connections at all – yes, we are looking at all opportunities on that front.”

Holden is working on export deals for its Port Melbourne-built V6 engine, Commodore police cars to the US and left-hand drive export programs for the small car family that will commence production at its Elizabeth plant next year.

Media reports have suggested the $200 million line of credit was requested after long-term Holden financier, the Commonwealth Bank, threatened to end its 50-year association with the struggling car-maker during a difficult credit-sourcing environment.

Holden has not posted a profit since 2004, and Deloitte, which did Holden’s 2008 audit, said the company was subject to “material uncertainty regarding continuation as a going concern”.

Mr Reuss maintains the company is on track to make money in the 2010 calendar year.

Federal industry minister Senator Kim Carr told ABC radio on Monday that the line of credit was a form of insurance to underwrite 200,000 Australian jobs. He would not comment on the details of the assistance program.

“It’s not the customary practice to provide the details of commercial discussions between companies and the government on matters such as this,” he said.

GoAuto understands the funding is outside the framework of the $1.3 billion Green Car Innovation Scheme.

Last December it was announced that Holden would receive $179 million in federal and South Australian state funding to assist with the small-car project on a one-to-three basis from the third quarter of next year.

That government commitment and its role in securing a second vehicle line for Holden has been acknowledged as having guaranteed the company’s local production future amid the uncertainty of GM’s bankruptcy in the US.

The EFIC press release confirming the credit facility, which followed a News Limited investigation, was posted late on a Friday night after TV and many newspaper deadlines, indicating an attempt to keep media coverage to a minimum.

Now the $200 million line of credit has been made public, Holden is unlikely to continue with its position that it has not yet received any new financial assistance from the government.

On June 2, almost four weeks before his company’s annual financial report noted the $200 million credit option, Mr Reuss fronted reporters in Canberra the morning after GM officially declared bankruptcy in the US to reassure the media that Holden was safe and had a bright future.

When asked to clarify a statement he made on radio stating that Holden had not yet received any financial assistance from the federal government, he replied: “We have not had any monetary assistance from the Australian government until we begin producing our new car in Adelaide in the third quarter of next year.”

Critics argue Holden has now received monetary assistance from the government, even if it is in the form of a loan guarantee rather than direct funding.

Holden announced a $70.2 million loss for the 2008 financial year, following losses of $6 million in 2007, $146 million in 2006 and $144 million in 2005.