Holden tells suppliers to think big

GM HOLDEN and the Australian government are working with local component suppliers to increase their capability – and chances of survival – as the Lion brand prepares to build the next-generation Cruze and mystery second model at the Elizabeth plant in South Australia.

The move from locally developed vehicles such as the Commodore to those based on global platforms present opportunities for parts-bin sharing with factories across the General Motors empire, putting Australian suppliers under pressure.

On the other hand, the switch to global platforms provides opportunities for local suppliers to manufacture components that can be shipped to General Motors factories elsewhere in the Asia-Pacific region.

Speaking to media at the Australian International Motor Show in Sydney last week, Holden chairman and managing director Mike Devereux said suppliers “can’t just do things for this country”.

“If you can be a really good supplier and are able to make it, you have to plug in to the growth in Asia,” he said.

“I think we need to get much more integrated with GM globally, rather than being an island, and that has to be extended to our supply base.”

Left: Holden managing director Mike Devereux.

Mr Devereux gave the example of Diver Consolidated, which produces transmission cover heat shields for the Commodore and ships similar components to Oshawa in Canada for the Australian-engineered and VE Commodore-based Chevrolet Camaro.

“That’s really helped their business and they got the opportunity to do that by association with Holden during Camaro’s engineering,” he said.

Mr Devereux admitted that some suppliers could fall by the wayside in the transition, but said part of the government co-investment that secured Holden’s local manufacturing future until 2022 included a plan to help suppliers either boost their capability or move out of the automotive business and produce parts for alternative industries.

“The government has also put aside some funding, around $30-35 million dollars, for supplier development,” he said.

“It is going to do a couple of things. It will again help suppliers increase their capability, and in some cases transition suppliers out of the auto industry to use the things they are good at in other parts of the economy.

“There are some suppliers that probably won’t make it in terms of maybe even knowing what Six Sigma (quality management) is, maybe not having the financial wherewithal.

“But there are two things which are very, very important for suppliers: One of them is scale and the other is capability.”

Mr Devereux said Holden will be taking a “pretty pragmatic” approach to local suppliers but has always worked closely with them, sometimes putting suppliers ahead of its own financial interests to keep them going through tough times.

“In some cases we take a higher price to keep a supplier local, and that is happening in the last two to three months as we have seen some suppliers in distress.

“We don’t just say, ‘have a nice day, see you later’ in some cases we will grant a price increase and try to find offsets somewhere else because we understand the importance of the ecosystem with the supply base – it is something I am personally very involved with on a weekly basis.”

The Australian-built Cruze is assembled from knock-down kits shipped in from South Korea, but is said to have at least 50 per cent Australian content by retail value.

GoAuto understands local content will increase for the next Cruze, but Mr Devereux declined to comment on specific components.

“We haven’t sourced those components yet.

“We are in negotiations on the global architecture with the (Cruze development) homeroom and then on the things that we can localise here, and that's going to come down to not just price but capability.”

There has been good news for Holden as an engine supplier, as Mr Devereux revealed V6 petrol engines built at Port Melbourne are now being exported to Thailand for installation in Colorado 7 SUVs bound for the Middle East.