The decision by the world's second-largest auto maker to close its
Holden plants in South Australia and Victoria states is the latest
blow to Australia's manufacturing industry and the auto sector in
"No matter which way we apply the numbers, our long term business
case to make and assemble cars in this country is simply not
viable," General Manager Mike Devereux told reporters at GM's car
plant in Adelaide on Wednesday.
The decision to halt domestic production of Holden cars, long a
source of national pride, will pile more pressure on Prime Minister
Tony Abbott's conservative government, which is seeking to manage a
slowdown in the $1.5 trillion economy as a decade-long mining
investment boom slows.
GM Chairman and CEO Dan Akerson said the decision reflected a
"perfect storm" of negative influences facing the Australian
automotive industry including the sustained strength of the
Australian dollar, high cost of production, and a small, fragmented
and highly competitive domestic market.
In May, Ford Motor Co said it would shut its two Australian auto
plants in October 2016, blaming similar factors.
There have been widespread concerns that an exit by GM Holden would
be followed by the sole remaining producer, Toyota, threatening
around 150 parts and component suppliers directly employing more
than 40,000 people.
"You need two manufacturers to get that critical mass," said
influential independent Senator Nick Xenophon. "You lose that
critical mass, they fall like dominos."
Australian Manufacturing Workers Union national vehicles division
secretary Dave Smith said it was "almost certain" Toyota would
follow suit and leave Australia.
STRONG DOLLAR WEIGHS
Toyota said it would work with suppliers and the government to
determine its next steps and whether it could continue operating in
Australia, where it employs 4,000 people and produced almost 100,000
vehicles last year.
"This will place unprecedented pressure on the local supplier
network and our ability to build cars in Australia," Toyota
Australia said in a statement.
The world's largest automaker is currently negotiating changes to
its workplace agreement as it seeks to improve productivity and cut
costs. A worker vote is due on Friday.
"A no vote is going to send a very strong message to our parent
company that we are not serious about transforming our business,"
Beck Angel, spokeswoman for Toyota Australia, told Reuters before
the GM announcement.
Deputy Prime Minister Warren Truss said it was important that Toyota
was given "every opportunity to survive these difficult times".
[to top of second column]
Australian manufacturing employs around 921,000 people, having
declined by more than 10 percent in the past decade as the strong
Australian dollar and high costs make imports more competitive.
"If the automotive sector leaves then that's a sector of
manufacturing in Australia that has been a source of innovation and
skills that has spilled over to other forms of manufacturing in
Australia," said Stephen Clibborn, a lecturer in work and
organisational studies at the University of Sydney Business School.
Holden traces its roots in Australia to a saddle maker in 1856 and
is part of the Australian psyche, fuelled by a fierce rivalry with
Ford in showrooms around the country and on racetracks such as Mt
Panorama at Bathurst.
GM may look at shipping more South Korean-made cars to Australia as
part of a global production restructuring, a source told Reuters
Devereux declined to comment on where it would source imported cars.
Wednesday's announcement came only one day after Devereux said the
company needed more assistance from the Australian government to
survive long term.
Abbott's government had earlier ruled out providing the industry
further additional assistance, saying it needed to stand on its own
The government has also come under pressure to support flag carrier
Qantas Airways Ltd, which is shedding 1,000 jobs in an attempt to
stem mounting losses.
Australia has annual sales of around 1.1 million new vehicles, but
sales of locally manufactured vehicles have fallen to less than a
quarter of that, from almost 389,000 in 2005.
GM said it expects to record pre-tax charges of $400 million to $600
million in the fourth quarter of 2013 due to the closure.
(Additional reporting by Jackie Range and Wayne Cole in Sydney,
Kevin Krolicki and Tim Kelly in Tokyo; Writing by Lincoln Feast;
editing by Jeremy Laurence)
[© 2013 Thomson Reuters. All rights
Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.