Holden still pursuing US Commodore sales

DESPITE head office focus clearly elsewhere right now, Holden is still “actively discussing” further Commodore sales to GM in the US to boost profitability of the 'New GM'.

The closing of the Pontiac brand denies Holden valuable incremental export sales that can make the company a profit, and so Holden chairman and managing director Mark Reuss is doing his best to ensure that this potential seam of solid profit for the new GM is not lost on management in Detroit.

The Pontiac G8 version of the Commodore has been selling at nearly 3000 units a month in a market that has halved. This could, at a stretch, indicate a running rate of 72,000 cars a year in normal times.

Strong incentives offered to Pontiac buyers achieved increased sales in a market for GM that was down 50 per cent, showing the car is still touching a sweet spot with some Americans.

Now insiders at Holden are saying the Commodore is being considered for another brand and that Holden “is in active discussions” with that brand. It is most likely Chevrolet, for which Holden already builds cars sold in the Middle East.

The key here is that GM needs to start making money quickly. One way to contribute to that aspiration is to get Holden profitable and the way to do that is to get the Elizabeth plant running at capacity.

Holden was making money up to the introduction of the VE Commodore. Profit was $336 million in 2004.

After spending more than $1 billion in direct capital expenditure and R&D on the new VE Commodore, the company was off the pace by $145 million in 2005 and fell short by $147 million in 2006.

But Holden came close to making money in 2007 when the loss was $6 million.

I understand that Holden was internally projecting for a healthy profit for 2008 until the global financial crisis shredded the numbers – especially the loss of 80 per cent of export sales. I believe they were looking at more than $100 million in profit before the downturn set in and Holden now says that it traded profitably last month.

That is why Holden is so important to GM because it has a strong design and engineering base and it can make money when it gets export business at relatively small volumes by normal motor industry standards. That is one of Holden’s protections and why it is included in the new GM.

A niche model in the US can generate a bonanza on the bottom line at Holden where even 40,000 or 50,000 additional units would be great business for output from Elizabeth.

Holden's planned small car, built on the Delta II platform.

Production of the Delta platform is also spreading the risk in the Holden portfolio and export plans for that car are set at around 30,000 a year.

Importantly, there are significant short-term gains for the bottom line of Holden if Mr Reuss can get SSV sedans and utes as niche models in Chevrolet showrooms once the Pontiac stock is cleared.

And then they can sell with the good-looking Holden styling rather than that afterthought look of the Pontiac versions which failed to display the Australian cars in their best light.

Read more:

Cop this Commodore!

Holden still eyes US exports.

Holden export fright.