GM deal set to save Holden

“BRUTALLY honest” talks in Detroit between General Motors and Australian manufacturing minister Kim Carr are said to be near to shoring up the long-term future of GM Holden manufacturing and thousands of jobs in Australia.

GM had told government representatives that one of its options was to close its Australian factories.

The American giant is seeking financial assistance in the form of co-investment grants and other commitments from federal and state governments to support two model lines at Holden’s Elizabeth factory in South Australia.

However, it seems increasingly unlikely that one of those models will include another rear-drive, Australian-developed Commodore large car after the life of the next model, the VF, that hits the showrooms in 2014.

Federal manufacturing minister Kim Carr, who went face to face with GM bosses including GM chairman and CEO Dan Akerson in a backroom meeting at the Detroit motor show today, raised the spectre of the demise of the home-grown breed when he later described the current Commodore as an orphan in GM’s model line-up and said that global platforms were a reality for the car industry.

“This is not the 1950s any more,” said Senator Carr. “The fact remains that global platforms are a reality.”

Holden chairman and managing director Mike Devereux, who also attended the meeting, went further by describing the Australian large-car segment as “niche”, adding that Holden wanted to build cars in mass-selling segments.

From left: Mike Devereux, Dan Akerson, Kim Carr and Jay Weatherill.

Sales of vehicles in the traditional large-car segment plunged more than 21 per cent last year – the latest decline in a steady sales collapse of the once-dominant car class that now comprises just seven per cent of the overall market.

Although Holden’s Commodore made up more than half of the segment, it too slipped 11.6 per cent in 2011, bringing to a close its 15-year run as Australia’s most popular car when it was beaten by the Mazda3 small car.

Mr Devereux described today’s discussions as “brutally honest on both sides”.

He indicated that the first of the Holden models to benefit from any future car agreement with the federal and state governments would go into production in late 2015, with a second model to follow in the second half of the decade.

The VF Commodore is safe, and will retain the rear-drive format when it arrives in about 2014.

But it is increasingly likely that GM is planning to bin that Australian format in favour of one of its global front-drive architectures when the VF’s life is up around 2018-20.

None of the parties would discuss the size of the co-investment assistance being sought by Holden, saying the details were still to be finalised.

Senator Carr pointed to the $3.5 billion car industry transformation fund, carbon tax compensation fund and research and development assistance grants as being the likely source of any support.

South Australian premier Jay Weatherill, who was also involved in the talks, disclosed the parlous state of the local car industry when he said GM had indicated that one of its possible scenarios was to close the Elizabeth plant.

“We are, of course, urging GM not to pursue this course,” he said.

Mr Weatherill said important progress had been made, and the deal was expected to be concluded “in coming weeks”.

He said both he and Senator Carr were not interested in just a rescue package for the car industry, but “a sustainable future”.

One of the cars slated for local production will almost certainly be the next generation of the Cruze small car that is already assembled for local consumption alongside the Commodore at Elizabeth.

Holden designers penned the hatch version of the Cruze, but it remains to be seen what part they and their Melbourne-based engineering counterparts will play in any new model.

Both Senator Carr and Mr Devereux were at pains to say they wanted Holden to retain its strong design and engineering force in Australia, but said that would not necessarily be committed to a next-generation local large car.

Speaking at a joint media conference after the talks, the parties revealed that GM had opened its books on the Australian operation during the discussions.

They spelled out the need for government assistance in Holden’s battle to secure investment from GM head office to sustain the Australian operation in the face of severe competition from other arms of GM keen to grow their own production bases in other countries.

Mr Devereux described the competition for a share of the GM capital investment for manufacturing and product investment as unprecedented.

“Car-makers are investing billions of dollars to develop future vehicles, so it’s critical for Australia to have consistent and competitive long-term policies that make this country an attractive place for General Motors and other companies to continue to invest,” he said.

“The discussions with the minister and the premier have been very positive and productive.

“We’re making good progress in developing a new co-investment plan to help secure a long-term future for Holden and the automotive and manufacturing industry more broadly.

“Holden and GM look forward to working with the governments of Australia on policies and programs to ensure Australia continues to be one of 13 countries in the world that has the ability to design, engineer and build cars.”

Mr Devereux did not rule out another large car to replace the Commodore at Elizabeth, saying Holden could develop and build a fuel-efficient large car.

He said the models in question had not been decided yet and the discussions with the government were about determining the commitment of the local authorities to the Australian car industry.

However, his remarks about wanting to manufacture vehicles in mass-selling market segments – which in Australian terms most likely means the small-car, light-car and compact SUV classes – would indicate a new Commodore is unlikely.

Mr Devereux said Holden was determined to continue the current two-model manufacturing set-up at Elizabeth, saying that if Holden had not cut a deal to produce the Cruze alongside the Commodore and thus increase factory input the whole manufacturing operation would have closed its doors.

Neither of the future locally made Holden vehicles is likely to have an export focus, with Mr Devereux saying the new products would have to be able to survive and be profitable on local sales alone.

Mr Devereux said Holden’s manufacturing operations were currently profitable, and that the company would report a “big profit” for the latest GM financial year, which ended December 31.

The Victorian government was not represented at today’s talks, even though Holden has a major presence in that state, not only with its head office and engineering and design centres, but also a V6 engine factory in Port Melbourne.

Senator Carr resisted the temptation to stick the boots into the Victorian Liberal government, saying all the governments were working together to try to secure the future of the Australian car industry.

He warned that, if the industry was allowed to die, it would be irretrievable, as the cost of re-establishing it would be prohibitive.

He said the loss of the industry would have a devastating affect on manufacturing in general, as the motor industry was at the heart of it.

Senator Carr, who was recently demoted to the manufacturing portfolio, losing his seat in the cabinet, showed he had lost none of his passion for the motor industry in his chat with journalists, saying he wanted the industry to not just survive but to expand once the current exchange rates returned to more normal levels.

“If the exchange rate was about 10 to 15 per cent less, we would be having a totally different discussion,” he said.

Ironically, prime minister Julie Gillard – who booted Mr Carr out of cabinet – was quoted at the head of the official press release.

“We know our economy is transforming, which is why we made manufacturing a key focus of the Tax Forum and Future Jobs Forum and why the PM’s manufacturing taskforce was created,” she was quoted as saying.

“We have our sleeves rolled up, ready to build on this work with industry to ensure manufacturing remains a staple of our economy.”

Senator Carr said the governments were in the process of setting up a working group with GM to pursue more export opportunities for component makers.