Holden posts $255.2 million loss for 2014

GM HOLDEN has recorded a $255.2 million net loss after tax for 2014, marking its third year in the red and another result blamed squarely on General Motors’ decision to cease vehicle and engine manufacturing in Australia in 2017.

It is a shallower loss than the previous year’s record $553.8 million plunge – a figure that included a $500.4 million one-off asset write-down on property, plant and equipment – but this year’s consolidated revenue of $3.62 billion was also down from 2013’s $4.05 billion.

This reflects a fall in Holden’s new car sales last year, with registrations down 5.3 per cent to 106,092 units after a serious slump in the second half.

At the end of June last year, Holden’s first-half sales were up 10.1 per cent on the same period in 2013 but in the back half of the year it posted six straight double-digit monthly sales downturns to be 18.5 per cent in arrears compared to the second half of 2013.

After the first half of trading this year, Holden’s sales are down 8.9 per cent, and the company has moved to address reduced demand for its locally built cars, lowering the daily line rate at its factory in Elizabeth, South Australia, at the end of May from 290 to 240 cars and cutting 270 jobs as a result.

In announcing its 2014 financial results today, the company reported that its net loss before tax was $361.0 million and that the “significant financial loss” was a direct consequence of it continuing its “orderly wind-down of local manufacturing by the end of 2017”.

Included in the results were a $345.9 million charge for employee separation costs, and a $9.4m one-off asset impairment charge.

The company said the negative outcome was partly offset by a reduction in operating costs and improved efficiencies across the business during 2014. Excluding costs associated with transitioning to a national sales company, Holden says its operating performance improved from a $70.3m loss in 2013 to a $5.6m loss last year.

The loss comes despite receiving $80.8 million in taxpayer assistance last year. The previous year it received $86.2m, while in 2012 it received $79.9m.

Holden’s chief financial officer Jeff Rolfs, who led the company from October last year until earlier this month after Gerry Dorizas’ shock resignation after just seven months at the helm – Mark Bernhard is now in charge – said the financial results “were expected and well within forecasts” and that the move to close its manufacturing operations “was the right decision to return Holden to sustainable profitability in the future”.

“It’s obvious that there are major costs associated with our decision to cease domestic manufacturing of vehicles in Australia by the end of 2017, chief among them being employee separations and entitlements,” he said.

“We are always mindful of the impact on our employees and our financial results, however these are expected and foreshadowed costs that are well within our forecasts. As we announced in 2013 and again last year, there are substantial costs involved in the orderly wind-down of local manufacturing.

“This is a difficult path to tread but we’re committed to our long-term plan.” Mr Rolfs said Holden was “committed to supporting our people and treating them with the respect and dignity they deserve during this transition”.

“Clearly there are significant costs associated with that,” he said.

“We are working with all levels of government and the rest of the industry to deliver support, training and links to future opportunities for Holden employees impacted by our decision.

“This is evidenced by Holden’s $15 million contribution to the Australian government’s ‘growth fund’ for the transition and re-skilling of Holden employees, along with the Holden transition centres we have established at all of our sites.” Ford Australia, which is pulling out of manufacturing next year, posted a $190.7 million loss for 2014, while Toyota Australia, which is likewise closing its production facilities in 2017, returned to the black for its financial year ending March 31, 2015, posting a $194 million profit.

Mr Rolfs said the decision to cease manufacturing would stem the “significant fixed costs” which had impacted its financial performance over several years.

“Addressing our high fixed cost base is certainly key to returning Holden to sustainable profitability into the future,” he said.

“Holden remains one of the most iconic brands in Australia and we’re committed to our customers and the automotive industry in Australia and New Zealand for the long term.

“Our operations and business model will continue to evolve what won’t change is Holden remaining a significant part of Australia and its communities through both our national sales company and our 230-strong dealer network, employing more than 14,000 people combined.” He also highlighted the company’s ongoing contribution to the Australian economy, pointing to $123.7 million spent in research and development last year – although this was down from $145.2m in 2013 and $197m in 2012.

“Holden is focused on executing our long-term plan to grow sales and revenue and manage our other costs very closely. We continue to face stiff challenges and there is no quick fix but we are building a sustainable future step by step,” he said.

“We will continue with the orderly delivery of key changes to our business to ensure that the Holden customer experience is second to none and that we build a successful future for Holden that honours our brand and our heritage.” The company says it paid combined taxes of $170.7 million last year – down from $190.9m in 2013 – and that it has “a strong and healthy balance sheet with zero debt, appropriate cash reserves and a very healthy pension fund which is conservatively invested”.

As well as pulling out of vehicle and engine manufacturing, Holden will scale back heavily on its engineering operations, maintaining a small team and keeping open the Lang Lang proving ground in South Gippsland, Victoria, for the foreseeable future.

It will also keep its Port Melbourne-based design centre running, working on international programs as well as the localisation of its imported range.

As previously reported, Holden will stage two dozen major new-vehicle launches over the next five years, with at least a third of these models to be sourced from GM Europe.

It will bring an all-new SUV to market, a dedicated sportscar and a fully imported new-generation large car which will retain the Commodore nameplate.

The all-new Spark light car will be one of its next key launches, due for release in the first quarter of next year.