Sydney / Melbourne - General Motors (GM) would stop making cars in Australia by 2017 due to high costs and a cripplingly strong currency, the vehicle manufacturer said yesterday, fuelling fears that rival Toyota Motor would follow suit and put the entire local motor industry at risk.
The decision by the world’s second-largest car maker to close its Holden plants in South Australia and Victoria states is the latest blow to Australia’s manufacturing industry and the motor sector in particular.
“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,” GM Holden general manager Mike Devereux said.
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 (R15.5 trillion) economy as a decade-long mining investment boom slows.
GM chairman and chief executive 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 said it would shut its two Australian vehicle 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 about 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.
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 employed 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.
The Japanese-based top car maker is currently negotiating changes to its workplace agreement as it seeks to improve productivity and cut costs. A worker vote is due tomorrow.
“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, the spokeswoman for Toyota Australia, said before the GM announcement.
Deputy Prime Minister Warren Truss said it was important that Toyota was given “every opportunity to survive these difficult times”.
Australian manufacturing employs about 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.
GM might look at shipping more South Korean-made cars to Australia as part of a global production restructuring, a source said last week. Devereux declined to comment on where it would source imported cars.
Australia has annual sales of about 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.
Yesterday’s announcement came only a day after Devereux said the company needed more assistance from the Australian government to survive in the long term. Abbott’s government had earlier ruled out providing additional assistance to the industry, saying it needed to stand on its own feet.
GM expected to take pre-tax charges of between $400 million and $600m in the fourth quarter of this year due to the closure of the plants. – Reuters