Holden’s tie-in with Korea still strong, says Devereux

SOUTH KOREA will live on as an important source of cars for Holden’s showrooms, despite the potential for significant changes to future production in the east Asian country.

Holden managing director Mike Devereux told GoAuto the Korean peninsula would continue to supply the Australian market despite the efforts of its parent company, General Motors, to rely less on the zone for its fleet of global vehicles.

“Our current plan is to continue to get quite a few products from our operations in Korea,” Mr Devereux said at last week’s launch of Holden’s latest product to come from the country, the Barina-based Trax compact soft-roader.

As well as Trax, Holden currently sources the Barina Spark and larger Barina city cars and the Captiva 5 and 7 soft-roaders from Korea, making it a “fairly important supplier” to the Australian car-maker, Mr Devereux said.

However, GM has flagged that Korea will not make the next-generation Holden Cruze due in 2016, and instead will continue to make the current-generation Cruze for emerging markets.

The move leaves the door open for Australia to build the next-generation Cruze in Australia if it can get the level of support it needs from government beyond the September 7 federal election.

“We’re planning to make the (next-generation) Cruze here,” Mr Devereux said.

“Currently the Korean market makes the wagon (version of the Cruze) for us – it’s Korean supplied – and if we’re able to get the right kind of business case up post-election we will build the next-gen Delta (Cruze platform) here.”“There isn’t a current plan to build the next-generation Delta in Korea, which has been publicly disclosed.”

Mr Devereux said the plan was for Korea to keep building the Cruze based on its current shape “for some period of time”.

Holden still has a loose tie-in with Daewoo dating back to its decision in 2008 to bail out a significant part of the bankrupt Korean car-maker.

Mr Devereux confirmed Holden’s stake in what has since evolved into GM Korea and an important source of small cars for GM’s global markets – one in five of the US car-maker’s worldwide sales come out of GM Korea – was now held by an Australian-based sister company to Holden known as GM Investments, which falls under a wider umbrella known as GM Australia.

Mr Devereux said GM Korea now supplied cars to Holden “at a fixed price”, with the Australian car-maker setting its own retail margins before the vehicles were delivered to showrooms.

Korea’s car-making business has much in common with Australia, with GM considering the east Asian peninsula’s estimated $1133 in labour costs per vehicle on the border of what it defines as a high-cost base in which to make cars.

By comparison, Holden said earlier this year that its labour cost per vehicle had blown out to $3750 per vehicle, compared with a GM average across all its international operations of just $667 a vehicle.

Salaries in the country’s manufacturing sector have risen by an average of 7.4 per cent a year to 2008, the most recent OECD data shows. By comparison, Australian wages have risen by an average of only 3.3 percent a year.

However, Mr Devereux refused to comment on the way the deeply linked relationship between GM’s Australian and South Korean operations would shape itself in the future.

“One of the things I think is smart about how we run our businesses globally is that we expect that I would comment on stuff about GM Australia, and we’d expect Sergio Rocha who runs GM Korea would comment on his business there,” Mr Devereux said.

“We generally don’t make news about each other’s business,” he said.

“Our plan is to continue to source Sparks, Barinas, Captivas (and) Trax from Korea, and Cruze wagons for the current generation of our (Cruze) program.

“All the stuff that’s happening in Korea ... not only am I not intimately aware of it, but if I was I would let Sergio comment on it in any case.

“There’s so much inference and subtlety about this business because of how complex it is.

“I wouldn’t expect many executives outside of Australia to understand everything that I’m dealing with here, and therefore it is probably not the best to make comments about stuff you don’t know about,” he said.

Mr Devereux said the supposition that Australian vehicle production could move to either Thailand or Korea if a post-election government did not support the industry was not relevant to his plans.

“My plan is for us to continue to source Colorado from Thailand, and a suite of products from Korea, and also to augment that with a couple of products that we make here,” he said.

“That’s our plan.”