News - Holden
Holden praying for currency realignment
A softer dollar would see a harder export program, Holden MD Devereux says
8 May 2013
By IAN PORTER
GM Holden would adopt a much more aggressive export policy for its Commodore model if the value of the Australian currency dropped against the US dollar.
And the company renewed its call for “globally competitive policy settings” to ensure the Australian car manufacturing industry had a future.
On the currency issue, GMH chairman Mike Devereux applauded the Reserve Bank’s decision to cut its cash interest rate to 50–year lows, a move that is expected to reduce the attraction for foreigners to buy Australian dollars.
Mr Devereux was releasing GMH’s financial results, which showed a loss of $152.8 million for 2012. This was a sharp reversal from the 2011 profit of $89.7 million.
However, the 2012 result included an asset write-down of $226 million to reflect the reduced value of the company’s Elizabeth manufacturing plant at current production volumes.
Without the write-down, GMH would have reported a profit of $73.2 million.
The write-down and the 500 redundancies signaled last year were part of a strategy to set GMH up for a “solid, long term future manufacturing in Australia”.
Mr Devereux said the plan assumed that the exchange rate with the US dollar would stay above parity.
“We can’t complain and whine and moan about the currency. It’s not something that (finance director) George (Kapitelli) and myself and dealers and employees can control. “Yes, if the dollar was weaker, one of the main consequences of that would be a much more aggressive export stance from us.
“Having said that, we increased our level of exports last year and we plan to increase our exports again this year.
“A dollar at a weaker rate helps that, but I can’t complain about that because it is not something I can control.”
GMH’s main export hope at present is the Chevy SS V8 sports sedan, which the company will soon start shipping to the US. It also exports the long wheelbase Caprice luxury model to the Middle East and a police version to the US.
Mr Devereux again made the point that Australia offers the car industry the lowest level of assistance of any country that still makes cars.
There are no tariffs (to speak of) and no import quotas, tools that are used by many other automotive countries, including the US and countries like Germany in the European Union.
“We have to make sure that the government, whichever government it happens to be, sets us clear, consistent and globally competitive policy settings,” Mr Devereux said.
“And, let’s be honest, it means government assistance.”
Mr Devereux said the current economic settings showed what a challenging environment it was for the car-makers, with the dollar at historic highs – making imports cheap – and the Reserve Bank cash rate at historic lows – meaning economic activity has slumped to low levels.
“The country has to take a look at what 5 years from now (Australia) looks like, what 10 years from now looks like and what does Australia want to look like in 5 or 10 years.
“These are pretty big questions. Automotive seems to be on the front page a lot because it is a big business. We do employ a lot of people. We do have a huge multiplier effect.
“Just at Holden, $32.7 billion of economic activity in the last 12 years. Yes, we do get government assistance, but we do think the return on investment to the broader economy is a very solid one and I don’t think it’s one that the country wants to walk away from.”
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