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Holden narrows 2007 losses

Break-even: GM Holden's Port Melbourne headquarters.

GM Holden posts a $6 million loss for 2007 as domestic and export sales slow

29 Jul 2008

GM HOLDEN has reported a $6 million after-tax operating loss for its 2007 financial year ending December 31, representing a substantial improvement on the hefty $146 million and $145 million losses it posted in 2006 and 2005 respectively.

Presenting his first financial report for GM Holden since becoming chairman and managing director in February , Mark Reuss said the result was a “good-news story” for Holden, describing it as a $140 million turnaround.

“It’s my pleasure to report for the first time in my new job… that Holden has improved from a loss position of $146 million last year (2006) to an almost break-even position in 2007 with a small $6 million loss – or, to put it another way, about a $140 million turnaround here over the last year,” he said.

Mr Reuss said that excluding restructuring costs of $77.5 million last year, when GM Holden continued its changeover from VZ Commodore derivatives to a full VE Commodore model line-up, the company would have made a pre-tax profit of $27.5 million.

GM Holden blamed its $146 million loss in 2006 mainly on its $1 billion investment in the VE Commodore, 57,300 examples of which were sold in Australia last year – nearly 10,000 more than the number of Falcons sold by Ford Australia – to retain its position as Australia’s top-selling vehicle for the 12th consecutive year, helped by record V8 sales.

GM Holden’s total Australian retail sales of 146,680 vehicles in 2007 was lineball with its sales performance in 2006 (146,511 units), despite being a record year for the Australian automotive industry. Some 1,049,982 new vehicles were sold in Australia in 2007, the VE Commodore sedan’s first full year on sale.

 center image Left: Mark Reuss, GM Holden chairman and managing director.

Its 2007 result is far better than that achieved by Ford Australia, which reported an $87.2 million operating loss last year, but is well down on the all-time record sales total reported last week by Toyota Australia, which sold a record 236,647 vehicles in Australia in 2007, representing a market share of 22.5 per cent.

GM Holden’s overall market share was down from 15.2 per cent in 2006 to just 14 per cent in 2007, a year in which it introduced the VE Ute, the Epica medium sedan, diesel versions of its Rodeo commercial and Captiva SUV, and the Hummer brand.

Revenue was slightly reduced at $6,143 million compared to $6,379 million in 2006, result Holden said was due to a market shift to smaller vehicles with lower revenue per vehicle, real-term reductions in vehicle pricing and increased competition from imported brands.

“While our revenue was down a little bit our gross profits were up due really to an improved product mix and reduced costs, on a structural and materials basis in the vehicle,” said Mr Reuss in a media teleconference following the release of Holden’s financial results at 3.00pm today.

GM Holden sold 104,848 passenger vehicles in 2007 for a 17 per cent market share, while its Elizabeth assembly plant in South Australia produced 107,795 vehicles - down on 2006 “due to market demand and end of previous generation models in preparation for all-new models”.

Mr Reuss would not say whether Holden’s manufacturing operations made a profit in 2007, revealing only that Elizabeth is “a significant source of our financial results”.

A total export figure of 36,534 vehicles was also down for Holden in 2007, despite the announcement of new export programs to the US and UK.

Holden said the production of the US-market’s Commodore SS-based Pontiac G8 sedan did not have a significant impact because they began in late 2007, and that lower Middle East exports constituted a “readjustment” following record levels in 2005.

“It’s really a readjustment,” said Mr Reuss. “We always have a pretty healthy outlook on the increase and decrease. We had a record level in ‘05 and you look at how much of that can be sustained and how much can’t and I wouldn’t say any of that’s a surprise. It’s really a readjustment,” he said.

GM Holden exported vehicles to Brazil, Middle East, New Zealand, UK, South Africa and the US in 2007, when it generated export revenue of $1,556 million including engines, components and engineering services.

The GM Holden Engine Operations in Victoria produced 269,421 four and six-cylinder engines in 2007, when the $400 million Global V6 engine plant at Port Melbourne delivered engines for Holden, Saab, Opel, and GM Daewoo. A 2007 total of 184,795 engines included a 12 per cent reduction in the number of the Family II four-cylinder engines built, and an 11 per cent increase in V6 production.

The company said its investment of $420 million in research and development in 2007 – a 37 per cent increase on the $307 million it spent in 2006 – continued to make it the leading private sector investor in R&D in Australia.

“Looking to the future you’ve probably read and seen that we’re aggressively reinvesting here with the announcement of the Family II (engine plant) closure and reinvesting in a range of alternative fuels and technologies to put us in a strong position to tackle the challenges here in the next decade,” said Mr Reuss.

Holden also continued its role as the “global centre of expertise for rear wheel drive vehicle development” for General Motors, with development, design and engineering work continuing on a number of projects in 2007, including the new Chevrolet Camaro.

“Our ’07 results show that GM Holden really recovered in a difficult market year,” said Mr Reuss.

“This is a time where we have introduced our new car, (it is the) full first year of having that online, and then the reinvestment for the future, unleveraging ourselves from a fossil fuel dependency and then utilising to a large extent GM’s highest-technology V6 plant located on site here at Fishermens Bend and ensuring that we pour all of the technology that we can back into that.

“This is a good-news story that I’m pleased to report, even in face of a continual rise in oil prices and a weak Yen and US dollar, making imports cheaper and exports more expensive.

“So it’s tough but we are reinvesting and very confident here in what we have as an outlook,” said Mr Reuss.

The federal minister for innovation, industry, science and research, senator Kim Carr, said GM Holden’s latest financial figures showed cause for optimism about Australia’s car manufacturing industry.

“GM Holden is in the process of reinventing itself under the leadership of CEO Mark Reuss,” he said.

“Today's results remind us that there is real reason for optimism about the future of the Australian automotive industry if the right decisions are made now.

“The international automotive industry is facing acute challenges. GM Holden is well positioned for the future and the Rudd government looks forward to working with them and their suppliers to continue transforming the Australian automotive industry,” said Mr Carr.

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