UPDATE: GM Holden Says Australia Jobs Safe In GM Bankruptcy
02 Juni 2009 - 4:31AM
Dow Jones News
GM Holden Chief Executive Mark Reuss said Tuesday the bankruptcy
of parent company General Motors Corp. (GM) is a positive
opportunity to restructure, and the Australian business is "safe",
with no job losses planned for now.
Reuss said GM Holden is well placed as one of GM's three key
subsidiaries in the Asia Pacific region and that the bankruptcy
will not affect the Australian unit's access to capital.
"We are a viable, sustainable business in the long term," he
told reporters.
"We are cashflow positive, we are liquid (and) on the verge of
turning a profit here this last month even in a down business."
GM filed for Chapter 11 bankruptcy protection in New York on
Monday. The prepackaged plan leaves the U.S. federal government in
control, with a 60% stake in the downsized auto maker, which is
faced with the weakest market conditions in a generation.
Reuss said that in Australia, GM Holden has moved quickly to
respond to the economic downturn, cutting shifts and freezing pay,
and is well placed competitively with the best selling car in
Australia in the Holden Commodore and new small car the Cruze on
the way.
"With all those things in place, with the right operating and
structural cost, we can be very profitable here," he said, adding
that the division may be in a position to make a return on
investment "in the first half of next year, if not sooner".
GM Holden has no plans to cut jobs at this stage and the company
does not have debts owing to its parent, Reuss said.
Australia's A$7.7 billion auto industry has faltered in recent
times as a rising Australian dollar exchange rate made imports more
attractive, and as escalating gasoline prices saw consumers shy
away from the mainly large vehicles auto makers produce
locally.
GM Holden's South Australia-based manufacturing plant is
currently running at only around two-thirds of capacity, at 66,000
units, according to Reuss.
The Australian division suffered a blow last year when GM
jettisoned its Pontiac brand, and with it a major export deal to
sell Holden Commodores under the Pontiac marque in the U.S.
Reuss said the company is working to replace lost exports and
has some export opportunities, but he declined to give any detail
on these at this stage.
"We are on the verge of bumping (capacity) up as we bring the
small car online and then we have some export opportunities that we
can't reveal today that will bring (capacity) back pretty quickly,"
he said.
Reuss downplayed suggestions that GM's decision to continue
manufacturing in Australia - despite the fact that the local
division has not turned a profit in five years - is due to generous
subsidies offered by the Australian government.
However, he did say that the confidence displayed by the federal
government in maintaining an auto industry in Australia was "very
important".
For his part, Australian Industry Minister Kim Carr was eager to
take credit Tuesday for the role played by the government in
ensuring GM Holden's ongoing viability in Australia - notably
through a recent decision to jointly invest with GM in producing
its new low-emission vehicle.
The Australian government announced in December that it will
contribute A$149 million over three years, from July 1, toward the
new small auto.
That deal is the first grant of funds since the launch of the
Australian government's new A$6.2 billion "clean car" plan last
year, under which the government will match industry investment in
low-emission cars on the basis of A$1 for every A$3 invested by
industry.
The front-wheel-drive, four-cylinder Holden will be manufactured
from the third quarter of 2010 at GM Holden's South Australia
plant, supporting up to 1,200 jobs.
"Australia, a high-waged country, an advanced manufacturing
country, is able to take advantage of the government's new car
plan, and as a result of the partnership that has developed between
(GM) and the government, we are now able to see the industry
transform itself and move forward with greater confidence to ensure
its sustainability," Carr told Australian Broadcasting Corp. radio
Tuesday.
GM's two other manufacturing operations in the Asia-Pacific
region are in low-wage countries South Korea and China.
Only three auto makers manufacture vehicles in Australia - GM
Holden, Ford Motor Co. (F) and Japan's Toyota Motor Corp. (TM) -
after Mitsubishi Corp. (8058.TO) closed its plant in Adelaide,
South Australia, in March last year.
-By Alex Wilson and Rachel Pannett, Dow Jones Newswires;
61-3-9292-2094; alex.wilson@dowjones.com