Holden’s secret new-model plan

GM HOLDEN has told the federal government which two new future models it intends to build at its Elizabeth plant in South Australia over the next decade and when they expect them to roll off the production line.

Company chairman and managing director Mike Devereux has told GoAuto that documents recently delivered to Canberra to support Holden’s $275 million co-investment agreement with the federal government include not only a timeline of the development and rollout of the proposed locally built products but specifics of the cars themselves.

The plan is top secret, kept under wraps by federal officials and ministers under a commercial-in-confidence agreement with Holden and its General Motors parent in Detroit.

The plan holds the key to the much-speculated replacement for the locally built Commodore large car late in the decade, as well as the current Cruze small car that most pundits expect to be replaced with an all-new Cruze on fresh third-generation Delta architecture in about 2016.

Mr Devereux is tight-lipped on the identities of the two new models that will carry Holden production to at least 2022 under the terms of the agreement thrashed out since then industry minister Kim Carr flew to Detroit for “brutally honest” talks with GM chairman and CEO Dan Akerson at the Detroit motor show.

From top: Holden managing director Mike Devereux Holden Cruze Commodore.

Mr Akerson warned Senator Carr and SA premier Jay Weatherill that GM could not continue to invest in Australia manufacturing without government assistance.

The overall terms of the co-investment deal with the Australian, South Australian and Victorian governments was announced in March, with Holden committing to a billion-dollar new-model program based on two new global platforms.

Since then, Holden and the federal government have drawn up the plan in detail, outlining the nitty-gritty of the model development and production facility upgrades, while also setting “milestones” for Holden investment over the next decade.

Once Holden has made the various investments according to these milestones, the agreed government money will flow.

The plan spells the end of the road for the Holden-developed rear-drive Zeta architecture that underpins the current VE Commodore and its 2013 replacement, the VF, that will see out the locally built large car until about 2018-19.

A left-hand-drive version of the VF Commodore will be spun off as the Chevrolet SS, to be exported to the United States and sold across North America as a high-performance sports sedan from next year.

Asked if he knew which model Holden would build late in the decade, Mr Devereux said: “I do.” He said the federal government also knew, saying: “They know at this exact moment what we are proposing to do.

“We have gone through the contracting process. After you make an announcement, then you have to go through the more detailed covenants with the government, which we have done, which includes investment milestones and timing triggers.

“So, as we invest against milestones in plant preparation, engineering investments, powertrain investments and what-not, then there is a schedule of co-investments payments from the government that are triggered off us meeting certain milestones.” Mr Devereux said some people in Canberra would like to publicly announce the plan, as a good news story for Australian manufacturing.

He said Holden, on the other hand, needed to keep the plan private for competitive reasons.

“If you were to read it, you would know why,” he said. “There is a lot of stuff in that document.

“There are specifics about engineering investment, there are specifics about our vehicle development timelines, there are absolutely specifics on our future products that we are putting into the plant, and the timelines associated with it.” Mr Devereux cautioned that despite the government support, Holden faced a tough challenge to make the manufacturing plan work.

He said any local vehicle manufacturer needed to produce two top 10-selling vehicles to get the economies of scale to survive.

He said “picking winners” was easier said than done, with the Australian market splintering into smaller segments by the year.

He said that while locally built models such as the Commodore and its derivatives had once dominated the market with mass local sales of more than 100,000 units – plus major export contracts to places such as the Middle East and Brazil, current top sellers in Australia were heading down to only about 40,000 units a year.

“If you don’t have two models selling around that number, then you are not going to survive,” he said.

Mr Devereux said he did not know if Holden’s two local rivals, Ford and Toyota, would continue in local manufacturing.

He said that if one or both of them did decide to pull out, it would cause a major headache for Holden by disrupting the local parts supply industry.

Mr Devereux revealed that Holden was already helping parts suppliers that hit financial turbulence.

“Almost every week we are discussing some supplier who has cash-flow problems or something,” he said.

Mr Devereux said Holden was running profitably this year, despite the unfavourable exchange rate that had thrown a spanner in the works of Holden exports, including the Caprice-based police car program for North America.

He said all Holden plans were now based on an assumption of Australian dollar parity with the US dollar, instead of the previous 70 cents.

Asked if Holden could make a go of local manufacturing at a parity exchange rate, he said: “We made $90 million in 2011, and I expect we will make good money this year, and going forward, that is the plan.”