Detroit gave up on Holden

[Bossxr8]

Sorry if it's a repost, but I thought it was a good article. Certainly better written than rubbish by Dowling.


17 December 2013

By JOHN MELLOR

IN THE fallout from the General Motors withdrawal from manufacturing cars in Australia, it is now quite clear that no amount of government money was going to save Holden.

In the tens of thousands of words that have been written on the subject, attempting to pinpoint the factors that were at play to bring about the so-called “perfect storm” of circumstances that ended up in the demise of the car-maker in Australia, the fact is that GM did not have its heart in Australian manufacturing any more.

Basically the sales dominance General Motors once enjoyed in Australia, which delivered very large profits in its most recent unbroken run from 1993 to 2004, had slipped through its fingers over the past decade.

GM was looking at years of more struggle, years of more handouts and ongoing relentless political fallout to the point where it was clear that many in the mainstream media, which lost sight of the wider benefit of continuing to make cars in Australia, and posturing economic ‘dries’, were going to turn Holden into the most hated car brand in Australia.

Think: The taxpayers’ pariah. Think: The corporation raking in billions of dollars in profits each quarter internationally but dipping its hands into the public purse Down Under.

It was not always so, and the turning point was the global financial crisis.

In the lead-up to the GFC, as exports to the Middle East fired (especially the Caprice) and Pontiac exports were gaining steady traction in the United States, Holden was looking at a scenario where every second car made in Adelaide would be exported.

Toyota had already reached the position where for every four Camrys made in the Altona plant in Melbourne, three of them were exported. That figure now sits at 30 per cent local sales to 70 per cent exports.

But the GFC swept all that achievement away for GM. The effect on Holden was dramatic as its Middle East demand sagged and the Pontiac division was closed.

It has been Struggle Street ever since. Recent profits were probably more a reflection of the $1.2 billion that Canberra was injecting into the company than of commercial success.

And, in post-chapter 11 GM, loss-making divisions and strategies become orphans very quickly indeed.

Holden boss Mike Devereux talked up the local car performance by saying that Commodore and Cruze were among the top five sellers in Australia. But that is not enough anymore because the fragmentation of the market has been so dramatic.

Between 2000 and 2012, 20 brands were introduced to the Australian market. But the fragmentation and competition is so fierce that nine brands have also departed between 2000 and this year. Four of them were GM brands – Cadillac, Saab, Hummer and Opel.

Still, there remain more than 50 non-truck brands on sale in this country, factoring in a quarter of newly launched Chinese brands not present on the VFACTS list of manufacturers.

The number of core models available has increased from 283 in 2000 to 362 today – an increase of some 75 models. In the GoAuto.com.au new-car catalogue there are 2225 model variants listed.

Within this crowded house there are 33 brands which sell fewer than 10,000 units a year and of these, astonishingly, 25 sell fewer than 2000 units a year. Getting volume sales from each model on sale is becoming impossible.

The best performer in this area is Toyota which in 2012 mean-averaged 12,100 sales per model entrant. Mazda was next with 11,500 sales per core model fielded. Holden, Hyundai and Ford managed between 8300 and 9000 sales per each model fielded.

But they continue on and this has a Swiss cheese effect on the established market entrants to the point where once great sales leads are gone and will never return.

The top-selling cars in Australia, the Corolla and Mazda3, will only be able to achieve volumes somewhere north of 40,000 units this year. That is not enough to sustain a plant and a far cry from the 100,000-plus Commodores and derivatives sold here 10 years ago.

With local sales prospects for any single car entrant so low, only an export program was going to make the Elizabeth plant viable, and the only true pathway for that to happen was to sell Commodores in America which still has a taste for that kind of car.

As a niche premium car in Chevrolet showrooms, the Commodore should have had a bright future, given that volumes across the Chevrolet network did not have to be large by US standards. Three Aussie cars per dealer per month would not seem to be a big ask, and that would have produced about 110,000 export sales to add to the local production.

As niche cars, the range could have been filled out by the Sportwagon and the Ute, the latter already destined to be a Pontiac before the division was closed.

As it is, the Commodore-based Chevrolet SS has just gone on sale in the US to positive reviews in which some US motoring writers have generously aligned it favourably with the BMW 5 Series.

But too many people inside the Renaissance Centre in Detroit, for whatever reason, do not want Holden cars selling in America as Chevrolets in anything other than niche numbers.

We have been hearing the mantra from Holden in recent years that it has to make money in Australia and cannot rely on exports for profits. Definitely a storm warning.

And then, former managing director of GM Holden Alan Batey, while in charge of Chevrolet earlier this year, said that Chevrolet would only ever take cars from Australia in very limited numbers.

Currency could have been an issue, but as far back as Denny Mooney’s time at the helm in Australia Holden had embarked on a policy of hedging the dollar by importing, mostly from the US, key elements and a significant proportion of parts built into the US-bound cars out of Adelaide.

An increase in the value of the Australian dollar would make the sourcing of those parts cheaper – V8 engines and gearboxes, for example – thus taking much of the sting out of the dollar’s movement in either direction.

GoAuto has been told that also preying on the minds of GM executives are the more stringent corporate average fuel economy regulations which were brought in last year. This means that the more Commodores sold in the US each year, the harder it is for GM to meet the average required across its entire range. This is effectively a non-tariff barrier against the Commodore.

The message was clear. Detroit did not want Australian cars to sell in the home market in any numbers. Without that, no matter what car Holden built, Elizabeth was always going to be surplus to requirements.

It is also true that GM must have been greatly encouraged by the successfully smooth departure of Mitsubishi Motors from making cars in Adelaide, and additionally delighted by the way Ford is going to exit Australia and still import cars to our market as though nothing had happened.

From Detroit, Australia’s come-one, come-all open door for importers must have looked very appealing indeed.



My comment. You can blame a succession of previous governments for letting this happen, letting all and sundry in to rot away sales of locally made cars. 25 brands that sell less than 2000 cars a year is a glaring statistic even if you do subtract the mega dollar stuff that sells in small volumes, it still leaves a lot of small time bit players stealing sales away.

[Nikked]

Should have been more action after the Mitsubishi closure, it was simply wiped off as "you can't have 4 manufactures here", there was not a real lot of concern back then...

[Syndrome]

Once Ford went GM was always destined to follow.

[Dr Smith]

Originally Posted by Syndrome

Once Ford went GM was always destined to follow.

And Ford took all the bulk of the heat by being first and honest. Then add the extraordinary way the Politicians got stuck into Holden as well and it made it very easy for Holden to do the same as Ford but suffer far, far less negative press.

[Perko]

Once again it comes down to US protecting their own. This is why the Falcon wasn't sold there even though it received great local reviews, the Ranger won't be sold there as it will take away from F-Truck sales and now Commodore won't be sold there either.

Bottom line, we make great cars but the Yanks call the shots and we get shafted each time. Quality has nothing to do with it, just head office ignorance.

[Nikked]

Originally Posted by Perko

Once again it comes down to US protecting their own. This is why the Falcon wasn't sold there even though it received great local reviews, the Ranger won't be sold there as it will take away from F-Truck sales and now Commodore won't be sold there either.

Bottom line, we make great cars but the Yanks call the shots and we get shafted each time. Quality has nothing to do with it, just head office ignorance.

Keep in mind that American employers are going to look after American employees...and they also have the "chicken tax" that prevents the Ranger from being imported into the US, previous models were built there...current how ever is of similar size and is subject to the said tax.

[XR8putts]

I've been following all of the related threads with interest and great sadness.

One thing I'm starting to notice is a massive axe to grind with an American company looking after American interests. I mean, how ridiculous of them!

I assume Ford Aus get their alloy wheels for the Falcon and the Terri made in some Asian country, lets call it country X. If a new country, country Z, offered to do the same job but for less money, Ford Aus would switch without a second thought and none of you would bat an eyelid. Infact you'd praise Ford Aus for making a great business decision.

I'm sad to see Ford and Holden go, trust me, but the Americans are not your enemies. Ford is an American company, they should put Americans first. Holden is owned by an American company, and they too should and have put themselves first.

[Cobra]

No matter who you want to attribute blame for the demise of the Australian Automotive Industry, one thing is certain, right now there's nothing anyone could have done to save Holden. The industry is too far gone, and has been for some time. Tony Abbott saw the writing on the wall and knew that there was absolutely zero point in investing money in Holden for the purposes of saving them.

I have seen and read a lot of negativity in relation to GM and Ford with regard to their decision to pull their Australian operations. What do people seriously expect a multinational company to do when a subsidiary or division can not sustainably produce products - indigenous products at that - whose popularity has been steadily declining for close to a decade?

These companies have boards and CEO's who are personally answerable to shareholders. Shareholders entrust companies to best invest their money, in order to obtain the maximum return for their investment. Even if Holden were turning a profit sans government handouts, they were still never safe from globalisation. It's not about keeping your head above water, let alone sink - it's about maximising profits, pure and simple.

Australia for a multitude of reasons is not a viable market for which to manufacturer. The goal posts have shifted big time, and some of the emerging markets have proved to be a viable alternative to Australia (and other western countries mind you). Why would you bother building cars that no one is buying in a fragmented market where labour costs are soaring? You just simply wouldn't.

Turning a profit for example of say $50 million, one would think that it'd be enough to keep Holden and Ford in Australia right? Wrong! If GM/Ford's market research suggests that the fallout from pulling out of manufacturing in Australia in order to become a full import company would only have a short term impact on their sales, but project that medium to long term sales wouldn't be affected, they would be negligent to not explore other avenues for which they can invest R&D into new products.

If GM/Ford had done their due diligence, and their projected profit margins suggest that investing that money into, say Thailand for example, would garner a total profit of $250 million, then the decision is already made. Despite Holden's $50 million profit, it's still an over all net loss of $200 million. Tell me again how a board justifies to its shareholders that it is investing their money correctly?

[GASWAGON]

What we are witnessing is massive 'offshoring' or in other words jobs being exported to much much cheaper countries to manufacture......This is a world wide phenomenon that is happening NOW.... Soon the Asian countries will rule!

Only way to survive is learn new skills in another industry and move on before the closures actually happen.

[ivorya]

I'll be watching with Great Interest, for the rest of my lifetime with what happens next with all this rubbish.

I mean, they keep transferring their factories/business around the world where they have cheaper work rates. I can't wait for the people of these countries to stand up to them.
When these companies are finished raping the low economic countries for all their worth, where to from then? There OWN countries have lost 50-100yrs of manufacturing expertise which they'll have to import from these other countries.

Like most things in life, short term gain................ long term pain..

[zilo]

Just like the banks they tried playing the

"Taxpayers should prop us up cause we are too big to fail"


well stuff them, let them fail

Originally Posted by ivorya

I'll be watching with Great Interest, for the rest of my lifetime with what happens next with all this rubbish.

I mean, they keep transferring their factories/business around the world where they have cheaper work rates. I can't wait for the people of these countries to stand up to them.
When these companies are finished raping the low economic countries for all their worth, where to from then? There OWN countries have lost 50-100yrs of manufacturing expertise which they'll have to import from these other countries.

Like most things in life, short term gain................ long term pain..

Guess who is Chinas biggest debtor?

The country that buys most of their "stuff" ...the US

Cheap manufacturers reliant on production will soon see a perfect storm if their markets are unemployed and cant afford their goods...at ANY price

[Road_Warrior]

Originally Posted by Dr Smith

And Ford took all the bulk of the heat by being first and honest. Then add the extraordinary way the Politicians got stuck into Holden as well and it made it very easy for Holden to do the same as Ford but suffer far, far less negative press.

I wouldn't know about that. Some of the vitriol I've seen in the past week in the press directed at Holden moreso than Ford has been astounding. Some of the things being said about Holden quite frankly shock me.

[CyberWasp]

It is funny how when GM hit the wall, they were gone for all money. They were given a second chance to address their ways and have taken it.
Here no second chance. Their attitude in not wanting to buy our cars also stinks.
You would hope the buying public will remember this when buying cars from them in the future........but I bet they don't.

[Express]

Originally Posted by ivorya

I'll be watching with Great Interest, for the rest of my lifetime with what happens next with all this rubbish.

I mean, they keep transferring their factories/business around the world where they have cheaper work rates. I can't wait for the people of these countries to stand up to them.
When these companies are finished raping the low economic countries for all their worth, where to from then? There OWN countries have lost 50-100yrs of manufacturing expertise which they'll have to import from these other countries.

Like most things in life, short term gain................ long term pain..

As far as business is concerned if you don’t join the other manufacturers in these counties you can’t compete.
If you can’t compete you’re out of business. Not much of a choice really unless consumers start telling companies they’d be happy to paid higher prices for local products.

Originally Posted by CyberWasp

It is funny how when GM hit the wall, they were gone for all money. They were given a second chance to address their ways and have taken it.
Here no second chance. Their attitude in not wanting to buy our cars also stinks.
You would hope the buying public will remember this when buying cars from them in the future........but I bet they don't.

I agree they won’t.

Most people have short memories and buy on price in a category that suits their needs.
They don’t give a stuff who makes them and the more people buy them the more comfortable they feel with their purchase.

If GM fronts up with the right vehicles at the right price people will buy them, if they don’t, adios.



.

[happy1]

I wonder how much the announcement of the shutdown will affect the VF Commodore sales? Probably even less people will buy one now when there is an end date in sight.

It is a shame that so few Australians seems to care about supporting the 'buy Australian products' campaigns. It's not only cars, but all other China 'cr*p' household products and tools etc. brought in.

Every Aussie made product contributes to keep the workforce employed, and contributes with many good side effects.

Rather than the Government giving direct support to the car manufacturers, I can't understand why not instead put more taxes on imports. Best example would probably be Brazil. Brazilian authorities put sky high taxes on imported assembled products. Locally assembly and manufacturing is thereby much more popular or simply 'required'. This way Brazil has all types of manufacturing industry in country, and they are also exporting products to the rest of the world. Australia on the other hand has 'free trade' agreements with a lot of countries. Personally I don't see how it is in Australia's interest to have free trade agreements with China and others. Cheers

[1TUFFUTE]

Originally Posted by puts99

I've been following all of the related threads with interest and great sadness.

One thing I'm starting to notice is a massive axe to grind with an American company looking after American interests. I mean, how ridiculous of them!

I assume Ford Aus get their alloy wheels for the Falcon and the Terri made in some Asian country, lets call it country X. If a new country, country Z, offered to do the same job but for less money, Ford Aus would switch without a second thought and none of you would bat an eyelid. Infact you'd praise Ford Aus for making a great business decision.

I'm sad to see Ford and Holden go, trust me, but the Americans are not your enemies. Ford is an American company, they should put Americans first. Holden is owned by an American company, and they too should and have put themselves first.

I too have been following closely and what I pick up in this article is the extremes GMH seem to go to so their interests are looked after. It's fine that due to tax and emission numbers they never wanted the Holden ss to sell well....but all they needed was 3 a MONTH each dealer. I mean that's such small fry and in the scheme of things not that far of the miserable figures sold to date....not much over 100 off the 900 sent so far.
Doesn't make sense to allow it....then sabotage it in a way......despite still being very small numbers.

[Struggo]

Originally Posted by puts99

I'm sad to see Ford and Holden go, trust me, but the Americans are not your enemies. Ford is an American company, they should put Americans first. Holden is owned by an American company, and they too should and have put themselves first.

And so it begins,

GM to invest $1.45 billion in US manufacturing

General Motors will invest just shy of US$1.3 billion ($1.45 billion) across five of its US manufacturing sites, with funding going towards production of a new V6 engine, an all-new 10-speed automatic transmission and an existing six-speed automatic transmission.

Directed towards assembly plants in Detroit and Flint, a Romulus engine plant in Michigan, a transmission factory in Toledo, Ohio, and a casting plant in Bedford, Indiana, GM says the investment will create or retain about 1000 jobs and takes its 2013 plant upgrade spending to US$2.8 billion ($3.1 billion).

http://www.caradvice.com.au/264535/g...manufacturing/

Ford reveals 2014 growth plans: 23 new models, three new plants

Ford will launch 23 new models around the world in 2014 – its most aggressive global vehicle launch year in its history – with production set to be spread across several new production facilities.

The 23 new Ford models – including the Mustang, a revamped Transit range, and a new Ford Kuga-based Lincoln model – will coincide with the opening of the new manufacturing bases for the Blue Oval, two in Asia and one in South America.

http://www.caradvice.com.au/264364/f...ee-new-plants/

[XWGT]

And the key for our suppliers is to be supplying into those Asia factories.

[PepeLePew]

Originally Posted by happy1

I wonder how much the announcement of the shutdown will affect the VF Commodore sales? Probably even less people will buy one now when there is an end date in sight.

Cheers

Most predictions I've seen say a sales spike followed by decline....

Guess it'll be a interesting indicator of Joe Q Publics knowledge of what's REALLY gone on here, or whether they buy the whole whitewash.

I was driving past the Eliz plant yesterday and just for fun peeked in the carpark. I thought to myself if these heavily entitled workers with their massive paychecks and even generous employee purchase schemes were as painted, it'd be mostly full of pretty new Holdens. Instead just the average carpark mix of brands including some shiny new XR's and a helluva lot of old 'drive to work' hacks of all sorts. I don't get it.

[buggerlugs]

ONLY $150 million a year will save Holden? Rubbish. The Holden Enterprise Agreement is the document that has utterly sunk Holden's prospects. It defies belief that someone in the company isn't being held to account for it.


Holden's management masks a union culture beyond most people's comprehension. Employment costs spiralled way beyond community standards long ago. Neither "pay freezes" nor more money will save Holden, but getting the Fair Work Commission to dissolve the agreement and put all workers on the award wage might be a start.


In 1991, the pre-enterprise bargaining award wage of a Holden entry level process worker was $462.80 a week. In 1992, Holden began enterprise bargaining and now a worker at that same classification level has a base rate of $1194.50 a week, a 158 per cent increase, or a compound increase of 4.4 per cent year on year for 22 years. Right now, base wage rates for process workers in the Holden enterprise agreement are in the $60,000 to $80,000 per year range and in recent times, "hardship payments" of $3750 were given to each worker.


The modern award for such workers mandates base rates in the $37,000 to $42,000 range. This means that before we add any of the shift penalties, loadings, 26 allowances and the added cost of productivity restrictions, Holden begins each working day paying its workforce almost double what it should. After you add in the other employment costs, I estimate Holden's workforce costs it somewhere close to triple the amount it should.


Many people who work at Holden don't actually work for Holden; they work for the union. Occupational health and safety people are given 10 days' paid time off a year to be trained by the union. Most companies do not allow unions to train their OH&S people because the knowledge is used to control the workplace to the benefit of the union.


Union delegates are also allowed up to 10 paid days a year for union training in how to be effective union delegates and two of these delegates are entitled to an extra Holden sponsorship of one paid month off to "further their industrial and/or leadership development".


Holden's rules on hiring casuals are shocking and unheard of in today's market. The agreement forbids Holden from hiring casuals except when a "short-term increase in workload, or other unusual circumstances occurs". If this situation arises Holden has to "consult and reach agreement" with the union. Further, "Engagement of the agreed number of casual personnel will be for the agreed specified tasks and the agreed specified periods." If any of this changes, Holden must get union agreement again. After three months of continuous full-time work a casual must be made permanent. It is impossible to run a business like this.


An ex-employee from Adelaide, on condition of anonymity, consented to an interview yesterday. He described the workforce as "over-managed", with one team leader for every six workers on the production line, when one for every 25 workers would suffice.


He said "some of us workers felt it wasn't necessary to get paid what we were getting paid to do the jobs we were doing", adding that their work is probably worth about "20 bucks an hour". A few years back, mates took redundancy packages in the order of "$280k plus". Workers are "like sheep" that blindly follow the union leadership. At induction, new workers are ushered into one-on-one meetings with the union rep who heavies them into joining. "It is made clear that if you don't join the union you will be sacked," he said. Union representatives "don't actually do any work for Holden", but rather make themselves full-time enforcers of union control.


He says workers are drug tested before hiring, but "only have to stay off it for a few weeks, get in the door and then you'll be right". Workers caught taking drugs or being drug-affected at work are allegedly put on a fully paid rehabilitation program, with special paid time off of about four weeks duration, before being let back into the workforce.


Australian workplaces have a zero tolerance for drug use, with instant dismissal the remedy, but at Holden "the union won't let the company sack" any workers caught dealing, taking or being on drugs. "If they did a random drug test tomorrow they'd probably have to sack 40 per cent of the workforce," he adds.


If the Holden scenario were playing out in a privately owned business, proper cost-cutting strategies would be used. If you have the will and can hire the skill, there are many ways to cut labour costs. The workers can be given a couple of years notice of significant wage drops and can receive lump sum payouts of entitlements to help bring down family debt.


Of course, these strategies are only ever used by business people who have no one else to bail them out. It seems Holden would rather leave the country than dissolve its enterprise agreement. The union thinks members are better off jobless than on award wages. Holden's fate seems sealed.


If Holden does leave, workers will receive the most generous redundancy benefits around. Holden says leaving will cost $600m. Most of this will go to staff payouts. The fellow interviewed agrees with my calculation: the average production-line worker will walk away with a redundancy package of between $300k-500k.
This was just e-mailed to me by a mate.............

[Road_Warrior]

That looks like a press article from one of the motoring media outlets.

[Road_Warrior]

If all the above was true, why didn't the union here do the same as their "comrades" in the US and renegotiated with the car maker in order to save their jobs??

[Bowser22]

buggerlugs, did you just copy/paste that from another thread?

[buggerlugs]

Originally Posted by Bowser22

buggerlugs, did you just copy/paste that from another thread?

No, a mate who is a Holden lover e-mailed it to me this arvo............. is it in another thread ? A thousand apologies if it's a repost...........

[MethodX]

Originally Posted by monte.b

Holden gone .Gees what are the bogans going to drive now ,maybe with a bit of luck toyotoes

Fords... like they always have.

[40RDT]

Originally Posted by monte.b

Holden gone .Gees what are the bogans going to drive now ,maybe with a bit of luck toyotoes

Probably the same thing they have always been driving, old 2nd hand commodores and falcons haha

[fte50]

Yeah, as the title suggests Detroit gave up on Holden, and so did our Federal Govt.

Abbott & Co. did not come to the table quick enough, could not justify $150million to secure local Australian production to 2022 thus securing upto 50,000 local jobs for close to a decade, yet this fiscally responsible govt. CAN justify a $100million assistance package for Holden's displaced workers...... to sit on the scrap heap. Whats wrong with this picture.

[Wretched]

Hi buggerlugs, that email you posted sounds very similar to that of ex Holden engineer who called up the ABC and pretty much said a similar thing.
He had left years ago and added that when GM sent US management to run Holden things started to go bad, there wasn't that "family" culture anymore.

[Adamz Ghia]

Originally Posted by fte50

Yeah, as the title suggests Detroit gave up on Holden, and so did our Federal Govt.

Abbott & Co. did not come to the table quick enough, could not justify $150million to secure local Australian production to 2022 thus securing upto 50,000 local jobs for close to a decade, yet this fiscally responsible govt. CAN justify a $100million assistance package for Holden's displaced workers...... to sit on the scrap heap. Whats wrong with this picture.

That was $150 million per year, this is $100 million now and that's it, and I doubt with the way things are that full amount will be delivered...

[jpd80]

Originally Posted by Nikked

Keep in mind that American employers are going to look after American employees...and they also have the "chicken tax" that prevents the Ranger from being imported into the US, previous models were built there...current how ever is of similar size and is subject to the said tax.

Instead of Ranger, Ford is replacing E series vans with a new RWD Transit complete with V6, EBV6 and 3.2 diesel.
Now, thinking laterally here, the investment into a Transit plant makes more sense than chasing a relatively small mid sized truck market.