If Mike Rann is really “not worried about possible effects on the Holden car plant at Elizabeth in Adelaide” if General Motors goes into bankruptcy in the United States, he’s either developed a sudden case of free-market purity, he is completely incompetent in his job, or he is indulging in lily-gilding.
Robert Gottliebsen explains a bit more here about Holden’s short-term situation. Apparently Holden is structured as an unlisted public company (which GM of course owns in its entirety), and is currently cash-flow positive, so there’s no reason to think that GM new owners – the United Auto Workers and the US government – would have any reason to shut it down immediately.
However, the long-term situation is completely different. Holden’s product offerings depend on GM’s global supply chain, which is likely to get completely upended in the upcoming restructure. Ironically, the carve-up of GM comes just as they were finally doing what Toyota managed decades ago and globalizing their product architectures. The Commodore platform, Zeta, is the basis of the Chevrolet Camaro and was likely to be adopted by other GM divisions. The small car planned to be manufactured in Australia was largely engineered in Germany, based on the Delta platform. The Chevrolet Volt, GM’s plug-in beacon of advanced environmental technology, is also based on Delta. GM’s European divisions, Opel and Vauxhall, will be split off from GM and sold, most probably to Fiat, who have also gobbled up the rusting hulk that is Chrysler. So GM’s small-car engineering division will soon be owned by an ambitious competitor.
In the short term, Opel’s new owner, and what remains of GM, will undoubtedly come to some arrangement regarding product-sharing. But you’d have to wonder about how a cash-strapped GM shorn of its small-car design expertise, and no longer operating in the world’s most sophisticated and competitive small-car markets (Europe and Japan), is going to continue to develop its small-car line. Small cars are, of course, by far the fastest-growing area of the Australian market.
The idea that Holden can carve out an “independent future” is a nonsense. Its future is intimately tied to its corporate parent. And you have to wonder whether that corporate parent will be able to supply competitive designs into the medium term, given the hollowing-out of corporate expertise, and a new corporate management whose only concern will be the survival of GM’s American operations.
Yes, various Australian governments can and probably will continue to throw money at Holden. But there’s essentially nothing that they can do if its owners can’t supply them with competitive vehicle designs.
Robert,
It is sad that it has got to this, but it was probably inevitable after the deals and decisions made in the 1970s at GM. Poor product decisions, poor management decision and poor labour relations – in this case agreeing to too much – have all combined to sink it.
The fact it was losing money in the good periods meant that a disaste was inevitable in the bad times.
.
Valé GM. I have owned and driven a few of your products, and I will be sad to see you go, but go you must. I hope that some good cars come out of the rubble.
“it was probably inevitable after the deals and decisions made in the 1970s at GM”
There’s been plenty of time to undo bad decisions made in the 1970s. The most recent generation of GM management is to blame. They bet the house that gas guzzlers, in particular SUVs, would be the future. They were wrong.
Sam @ 2
In fairness the recently departed management of GM did give the Chevrolet Volt high priority within the company.
Sam,
The bulk of the agreements to do with health care and pensions, two of the main things to bring it down, were made in the 1970s. GM did not have the guts to reverse the decisions subsequently.
Andrew – looking after their workers might not have been such a problem had they built cars that people wanted to buy.
Conversely, had they not caved in to these ridiculous demands for health care and pensions, do you think their cunning “let’s build whatever we like and not do any market research” business plan would have worked?
The sooner the Australian car industry becomes unprotected the better off the majority of Australians will be through being able to purchase cheaper cars.
I own a Holden Commodore and love it to death, but I would have preferred a better European car for the same price, which I could have done if the protection wasn’t in place.
“would have preferred a better European car for the same price”
What comparable European car (size, power, features) would there be for a price of a Commodore if there were no tariffs (which are coming down to a trivial 5% in any event)?
Andrew @ 4,
I don’t know for a fact, but I’ll bet Toyota looks after its workers at least as well as GM does. The difference is, Toyota is good at identifying cars that people want to buy, and good at making them.
Sam – depends on what comparisons you want to make. Their aren’t many 5.7 ltr V8′s coming out of Europe, but I would be happy to have a smaller turbo charged Audi or very quick BMW. That said if the lotto numbers come off in the near future the Audoi RS6 would be lovely although a blown Walkinshaw Clubsport might just get in the garage first.
Sam @7 – most of the assistance to the domestic car industry isn’t in the form of tariffs but is less transparent.
A lot of it is in “adjustment assistance”, government fleet purchasing policy and the export program boondoggle – these hurt us as taxpayers rather than car buyers. But some of the non-tariff stuff does raise the price of cars – notably the ADRs which don’t conform to other countries’, and the ban on secondhand car imports to boost new car sales (in New Zealand a 3 year old secondhand car sells for about half of what the same car in Australia would command). Both of these certainly reduce the variety of cars available.
Robert..the Delta platform will obviously figure large in any future decisions regarding Holden, but should it fail are there any prospects for Holden going it alone in the manner of Vauxhall and Opel which you state will be sold off?
Commentators on PBS Newshour suggested GM, or rather the 70% US Government stake, will be chasing another $50 billion to keep the business going. In relation to my question about Holden’s future, any idea what sort of money they would be seeking from Rudd or Rann or private backers?
Razor, you are kidding yourself if you think you could get any of those cars for the price of a commodore, even with no tariffs on imports, or any other thing that is now putting up the price of imports.
DD -For many years the biggest and most subtle barrier was the low octane rating of local fuel. The 91 octane unleaded hamstrung small engines throughout the 80s and 90s, essentially shutting out the reasonably priced European cars. The local engines were buffered by big displacements.
@10, is there really that much support for buying local in government fleets? I only have experience with QFleet, who have a lot of Toyota Priuses alongside the usual Fords and Holdens. The truck part of the fleet tends to be frequently non-domestic too, AFAIK.
Andrew is partly right – the deals done with the UAW back in the 70s have left GM, Ford, and Chrysler at a serious cost disadvantage compared to the non-unionized American work forces of foreign car manufacturers. Most of these relate to retiree benefits, not the wages of current workers. In retrospect, it’s illustrates the limitations of union deals with individual companies – ultimately, the kinds of social goals that the UAW had can really only be achieved through universal national schemes, or at the very least mandated industry-wide protections.
But the Big Three’s contractual woes also extend to their incredibly bloated dealer networks (which are apparently protected by a patchwork of state and local laws, and never get mentioned by Republicans).
And, yes, the current GM management deserves a large whack of blame, but again there was a passel of insane government regulation (CAFE, differential tariff scales that protected SUVs and utes but not cars, tax deductions that only kicked in on SUVs and monster trucks) which aided and abetted GM’s decision to build gargantuan vehicles.
There are no prospects whatsoever of Holden surviving as an independent entity. It has no distribution channels to sell cars overseas without GM. It lacks the cash flow to develop the Zeta platform without GM. All its engines are – you guessed it – GM designs, and the engine block of the Commodore V6 is imported these days. Most importantly, it does not have the resources to design and build a complete range of other vehicles, and there’s no obvious alternative source at the moment – five years from now, China might be an option, but not yet.
Not even Porsche – a specialty producer of luxury sports cars with global cachet – could survive without access to VW’s parts bin (in a case of the minnow swallowing the whale, Porsche AG bought out VW recently). How in the heck is Holden supposed to survive without close relations with a global car company, and what plausible candidates are out there?
Robert,
Thanks – I would agree. As I said originally it is just part of the mix. Again, I would agree that, if they still produced a majority of cars in the US, and/ or were growing, this woulf not have been an issue. The simple fact is, though, that the agreement did not foresee a time when contractions to production would occur – the long lead times of pension and healthcare agreements meant that they were bound to increase the impact of any adverse movement in business (or industry) size.
In the longer term though, I am a bit more optimistic. Chapter 11 will allow GM to shed some of the egregious errors of the past and may even allow them to swap pension and health obligations for shares. It would largely wipe out current shareholders, but that is the risk you always have when you invest in equity. A huge reduction in debt and other overhangs may allow a rejuvinated son of GM to start growing again.
Chrysler I have less hope for. They have always been a problem child. I do not see Fiat’s management as having the time or ability to sort out that particular mess.
RM:
This is undoubtedly true.
It is also probably true to say that in future cars produced for the North American market by GM will tend to look more like cars produced by GM subsidiaries for the European (and Australian) markets.
Arising out of this major restructure and corporate cultural revolution may wall be greater rather than less synergy between North American and other markets.
GM Holden may therefore survive in the medium term.
Katz: that’s the problem – GM Europe (the Opel and Vauxhall brands) are being spun off into a separate company.
With it goes pretty much all GM’s small-car expertise, and – almost as important – exposure to the toughest small-car markets in the world. GM USA hasn’t been able to build a decent small car yet. Korea is improving, slowly, but they’re still a fair way from Japanese and European standards.
“With it goes pretty much all GM’s small-car expertise”
Is (or was) there ever such a thing as GM’s small-car expertise?
“so there’s no reason to think that GM new owners – the United Auto Workers and the US government – would have any reason to shut it down…”
Heh heh. You just used the word ‘reason’ twice in this mad context. As Captain Willard famously said, “I don’t see… *any* method… sir.”
AR: “Chrysler I have less hope for.”
Well, que sera sera, as long as we get to keep the Chrysler Building. That’s about the only thing they’ve done right for a long time, anyway.
Oh, and speaking of Chrysler…
http://classyclassical.blogspot.com/2005/11/robert-schumanns-kreisleriana-8.html
I think they’re pretty close now Robert
http://www.caradvice.com.au/6719/2008-hyundai-i30-first-steer/
I’ve driven both the Peugot and Hyundai 1.6 turbodiesels, and for what its worth, I think the Pug is fragile and less well built, with an overly complicated design. (It has all these bits of superfluous plastic trim which tend to fall off.)
(With a design studio-Russelsheim- in Germany, it’s a strong indicator of Hyundai’s better quality product–possibly there’ll be a lot of engineers from Opel looking for work there soon!)
Good point Peter. However, GM Daewoo hasn’t exactly had a stellar track record; the small and medium-size “Holdens” sold here are generally regarded as dreck.
Yep, its all looking pretty grim for Holden. Any chance of some big multinational taking them over? Probably not, given all their expertise is in building lard-arse RWD sedans, hardly the hot ticket item in most markets.
I reckon Kim il Carr will put them on life support for a few years, because Rudd wants a country that makes things. The sad truth is though, Australian manufacturing is in terminal decline, and the death of Holden will be another nail in the coffin.
Roll on Quarry Australia.
Mike Rann: “We all know that the automotive industry internationally is going through difficult times but what’s happening in America right now actually is about General Motors continuing rather than stopping.”
translation: “It wont shut before March 2010, so..*shrugs*….who cares!”.
I think the closure of the Holden plant is inevitable regardless of what happens to GM.
Rann tried to keep Mitsubishi alive, and failed, if he tries to keep Holden alive he’ll get the same outcome, surely he knows that? It will be about how to come out of the situation in the best shape politically and my guess is it won’t be Mike Rann who has to worry about it. If it’s Kevin Foley, I think I’ll take a long holiday to avoid the bombast.
The only thing that can keep Holden alive is some fast-tracked, homegrown innovation and I also don’t think they have it in them.
That’s a horrid thought, furious – Kevin fuken Foley running SA. I think I’d almost prefer Martin Two-Fathers. Almost.
Holden is not in the position to do “fast-tracked, homegrown innovation”. It’s a tiny branch office of the GM empire that takes what it can get from the corporate parent.
What kind of innovation do you expect? A plug-in hybrid Commodore? A 400 kg minicar? Even if GM had the money for such research, it wouldn’t go to Holden.
Robert, you’re spot-on. Mitsubishi Australia went out of business because they built the car head office told them to (even though the locals knew it wouldn’t sell), and Holden is doomed to suffer pretty much the same fate.
“Holden is not in the position to do “fast-tracked, homegrown innovation”. ”
which is exactly my point. ffs.
I’m pretty sure Holden always wanted to build a full-sized RWD family sedan. Its not like the local office wanted to build a smaller, lighter, more efficient car and Detroit told them no.
When it was released the local media lavished praise on the VE Commodore, and threw COTY awards at it. This for a car that was heavier and used no less fuel than its predecessor.
If Holden goes under it only has itself to blame.
carbonsink, I don’t think management at Holden’s is quite as bright as it was at Mitsubishi Australia.
They’ll cheerfully keep making the same cars as they always have until they fold.
Carbonsink: Holden presmably has a long corporate memory of what happened last time they downsized their full-sized sedan – the original VB Commodore, in fact.
Carbonsink,
To get sufficient volume in Australia a car company needs to be able to offer a full sized, 6 cylinder car for a very simple reason – most fleet operators demand one. From memory, every single government department (for example) has purchasing guidelines that say that you need a 6 cylinder car if you are going to drive out of the cities and many civil servants (from time to time) actually do get out of the city. Additionally, the more senior management are given a 6 cylinder car as part of their elevation to senior management. Holden, Ford, Toyota and Mitsubishi know this – it is why Mitsubishi built the 380 to try to hold on to this market and why Toyota produce the 6 cylinder Camry.
Add in the police markets (V8, please – or a 6 with forced induction if we have to) and you have a decent market share.
If you do not get enough volume through the fleet market (as Mitsubishi failed to do with the 380) then you are doomed to picking up the dregs.
That is why Holden widened the Opel Omega/Commodore (starting with the VN) and spent all the money to get the US specced Buick V6 turned around from a front-wheel drive to a rear drive. Not because they deliberately wanted to destroy the planet, but because they knew that they would not be able to sell enough if they did not have a car as big as the Falcon.
Robert Merkel wrote:
It had already done the innovation, but chose to ignore it. Dumb.
There’s a very big difference between one prototype and a production car.
They would have had to actually produce one for us to know that for sure. Alas….