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.
Despite not turning a profit for the past five years, the
Australian division survived a vigorous companywide audit that will
see it continue to receive capital as one of three key GM
subsidiaries in the Asia Pacific region, Reuss said.
The other two regional manufacturing hubs are in the relatively
low-wage economies of South Korea and China.
"We are a viable, sustainable business in the long term. We are
cash-flow positive, we are liquid (and) on the verge of turning a
profit here this last month even in a down business," Reuss told
reporters.
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
facing the weakest market conditions in a generation.
In Australia, Reuss said GM Holden has moved quickly to respond
to the economic downturn, cutting shifts and freezing pay.
And, in a market where none of the three remaining local auto
makers - GM Holden, Ford Motor Co. (F), and Japan's Toyota Motor
Corp. (TM) - are currently making any money, GM Holden is
relatively well placed with the top selling car in Australia, the
Holden Commodore, and a new small car, the Cruze, on the way, he
said.
"With all those things in place, with the right operating and
structural cost, we can be very profitable here," Reuss 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.
Mitsubishi Corp. (8058.TO) closed its plant in Adelaide, South
Australia, in March last year, raising questions about the
prospects for other auto makers in Australia.
GM Holden's manufacturing plant in Adelaide, in South Australia
state, is currently running at only around two-thirds of capacity,
at 66,000 units, according to Reuss.
The plant 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.
Previously, around 50% of manufacturing at the Adelaide plant
was for the export market - with the G8 Pontiac deal with the U.S.
making up a large share of that, 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,"
Reuss said.
GM Holden hopes to produce around 30% of GM's global supply base
of new small autos, to be sold under the Cruze marque, in Adelaide,
he added.
Reuss downplayed suggestions that GM's decision to continue
manufacturing in Australia is due to generous subsidies offered by
the Australian government.
But he did say that the confidence displayed by the federal
government in maintaining an auto industry in Australia was "very
important".
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 its new low-emission vehicle,
set to roll off the production line from the third quarter of next
year.
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 Australian
government launched a 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.
"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 said.
-By Alex Wilson and Rachel Pannett, Dow Jones Newswires;
61-3-9292-2094; alex.wilson@dowjones.com