October 30, 2012

Horse 1390 - The Sword of Damocles - Falls on Holden?

BUENOS ARIES, Argentina – General Motors will invest $450 million between 2013 and 2015 to expand its Rosario Automotive Complex to build an all-new global Chevrolet vehicle, Chairman and CEO Dan Akerson said Wednesday.
Akerson was joined by Argentina President Cristina Fernández de Kirchner; GM South America President Jaime Ardila; and GM Argentina President Isela Costantini.
“This new model to be based on a global platform will run in addition to the models we are currently manufacturing in our plant and will allow us to supply the regional and domestic market with even more high-quality, high value Chevrolet products,” Costantini said.  “It is a huge vote of confidence for the entire GM Argentina team and the country.”
- GM Media Release, 24th October 2012.

A wiser man than me said that where one's treasure lies, there their heart would be also. If you want to follow the intentions of someone, merely follow the money. This announcement by General Motors is a signal of intent, which should put the Australian arm on notice because the Australian arm are probably surplus to requirements.

Because "this new model" is "to be based on a global platform", we need to look at which global platform is logical and eligible  The only global platform not currently tied up in 2014 is the Zeta which underpins the Holden Commodore and the Chevrolet Camaro.
This announcement ties in perfectly with the end of the model cycle of the Holden Commodore and due to the scale of the investment, it can be assumed will be the end of GM manufacturing in Australia.
This announcement is basically a death warrant for the Australian car industry, because without GM and Ford who are hesitant to continue the Falcon, there will be no underlying service and parts industry.

Given that the Commodore was already suffering from flagging sales and lost its top spot quite some time ago (the Falcon isn't even in the top ten anymore), there really isn't any point renewing the model cycle when average earnings of a full-time worker in Australia are about A$69,000 a year but in Argentina it's about 78,000 Pesos or about A$15,900 a year.

“Local car makers face tough economic conditions with the high Australian dollar, higher prices and disruption in the local supply base and increasing competition and segmentation in the market,” 
- George Kapitelli, GM Media release, 7th May 2012.

The fact that wages are higher in Australia and that the dollar itself is being propped up by the "dig stuff out of the ground" sector, the idea that manufacturing anything in Australia is fast becoming both a pipe dream and a hazy memory. Manufacturing cars is a very capital intensive occupation and the decision to invest not quite half a billion dollars should not be seen as a mistake; it is quite deliberate. Like any other firm, General Motors is looking to cut input costs and it would appear that the attractiveness of lower wages and probably a greater degree of funding assistance from the Argentine Government, makes this decision a no brainer.

It should be noted that the Australian Government pumped $275 million into the Australian arm of General Motors and to be honest, I don't think anything close to that has even been returned in taxation let alone any attempt made to pay any of it back.
In my opinion, I think that the Australian people have been shafted by Detroit again and I'd like to see the Australian Government sue the company for every cent.

As it is, every single car apart from the Commodore and Combo Van are Chevrolets with the bow-tie removed and a lion tacked in its place. There is no real reason for Holden to even exist anymore apart from cultural reasons and the fact that the Commodore which is still built here, holds some sort of place in the nation's psyche. Holden never can seem to guarantee that they are going to continue for more than a few years and this announcement by GM, I'd suggest with almost absolute certainty is an end to the mystification.

Mene, mene, tekel, upharsin...

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