Holden closure

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Originally Posted by csv8

Holden in a global perspective...too long too post.
http://www.brisbanetimes.com.au/busi...213-2zcyb.html

A good article. I’ll post it so it forms part of the thread.

Holden: Numbers tell the story for the small fry of General Motors' ecosystem

Date: December 14, 2013
Mark Hawthorne is Senior Editor at The Age.



The story of Holden and its demise needs to be viewed through a global lens if it's to be fully understood.

Debate over the sad demise of Holden this week has been dogged by equal parts myth, spin and subterfuge. Pity, because it was always the numbers that would tell this story in the end.

The big fact of Australia's car industry is this: the International Organisation of Motor Vehicle Manufacturers records the world made 84 million passenger cars last year. Australia's share was 209,730 - less than a quarter of 1 per cent.

Author Gideon Haigh describes it in his book End of the Road?: ''In a global sense, car production in Australia is of a magnitude smaller than a rounding error.''



After a fortnight of background briefing and rumour-mongering by a federal cabinet determined to flush out a decision by General Motors before Christmas, it was those numbers, and a $3750 shortfall on every car the company made here, that played a part in determining the day.

Even more important, however, GM needed to get its house in order on a global scale. That meant fringe outposts of its ''manufacturing ecosystem'', as the company's Harvard Business School-educated executives like to call it, needed to give way.

For GM, Australia is one of those fringe outposts.



In a simplistic sense, the great myths of the history of Australian car manufacturing are that the industry is Australian, and it manufactures.

All three of the country's remaining car makers are foreign-owned, and to an increasing extent assemble global platforms from mainly imported parts.

The current Falcon may be an exception, but when Ford started assembling that car in Australia in 1960, the local company was in fact owned by Ford of Canada, and the car was a rebadged North American model.

Toyota makes almost half the cars in Australia each year, but its Altona plant is one of nine where the Camry is made. The Altona-made Camry is about 70 per cent local content, but almost identical cars are pumped out of factories around the world cheaper than the Australian version.

At Holden, the ''all Aussie'' Commodore contains about 50 per cent local content. The Cruze fares even worse, at 25 per cent, and is basically bolted together in Adelaide from imported parts.

Even that much-loved and jingoistic advertising jingle, ''Football, meat pies, kangaroos and Holden cars'' was rebadged from America. The original version, penned by Madison Avenue ad agency Campbell Ewald and released in 1974, went: ''Baseball, hot dogs, apple pie and Chevrolet.''

It demonstrates how the story of Holden, and its demise as a local car maker, needs to be viewed through a global lens if it is to be understood.

The signposts on the road to Holden's departure have been evident for all to see.



In August, at the direction of Detroit, General Motors Holden general manager Mike Devereux pulled the pin on the Opel brand in Australia, just a year after it was launched in this country.

It was a small but significant decision for the company, and the first domino to fall in a chain of events that would lead to GM's decision to close Holden's factories.



Behind the scenes, GM in Detroit was working on a complete reorganisation of the company's troubled global operations - a restructure that has been unveiled in a flurry of announcements over the past week.

At the same time, Mr Devereux was working on a deal with the federal government, and on October 2 he met with federal Industry Minister Ian Macfarlane, South Australian Premier Jay Weatherill and his Manufacturing Minister Tom Kenyon.

In order to keep making cars at Elizabeth in Adelaide until 2022, GM wanted $80 million a year in addition to $275 million already pledged for seven years by the federal and state governments, and $40 million it was set to receive from the Automotive Transformation Scheme. All up, it would have given Holden $1.1 billion over seven years, or an average of $160 million a year, to remain here.

GM agreed that if it shut Holden before 2023, it would have had to repay the money.

For a new government that had won the federal election on a platform of fiscal prudence, it was big ask.



By the end of the month, it seemed GM's mind was made up. In late October, General Motors made a brief, three-sentence announcement. ''Effective November 1, Mike Devereux, director of GMH, will be taking on the roll of GM CIO vice-president - sales, marketing and aftersales,'' it read. ''Devereux will retain his responsibilities of managing Holden until the end of the year, as a replacement for his position is found.''

Many regarded the transfer of the local boss to Asia as the final straw for Holden in Australia, but not cabinet. Weeks after that announcement, Treasurer Joe Hockey was briefing far and wide that there was no rush for Holden to make a decision. He was telling stakeholders to wait for the results of the Productivity Commission's interim report on the industry.



As Mr Devereux evaluated GM's options in Australia, even bigger moves were taking place on a global scale.

On Monday, the US government's bailout of General Motors finally ended, with the Treasury Department's announcement that it had sold its final GM shares.

For GM, gone at last was the stigma of being known as ''Government Motors'', but it still rankles company management that cross-town rival Ford did not need the same bailout to get through the global financial crisis.

In North America, Ford has picked up market share and now has double the profit margin of GM.

With GM's bailout behind it, on Tuesday chief executive Dan Akerson announced he will depart on January 15, and hand over the reins to Mary Barra, the first woman to lead a major global car company.



Of even more importance to Australia, however, was the announcement of a restructure of GM's operations in Europe and Korea.

In Europe, GM's Opel and Vauxhall brands, despite having 6.8 per cent market share, lost the company $US1.8 billion in 2012.

GM's venture into the EU with its Korean-built Chevrolet cars - to take on Hyundai and Kia - has also been a disaster. Chevrolet might be as American as baseball, hot dogs and apple pie, but in Europe it picked up just more than 1 per cent market share and was losing money.

''Chevy was likely cannibalising Opel's sales and also possibly damaging Opel's brand and pricing,'' International Strategy and Investment analyst Arndt Ellinghorst said. ''Model by model, we found Chevy was effectively selling the same product at a 10-15 per cent discount to Opel.''

The game plan from GM was simple. It would shut down Chevrolet in Europe, and hope to pick up that market share with Opel and Vauxhall.



To put the size and scale of that writeoff in perspective, GM has signed a $US559 million, seven-year deal to put the Chevrolet name on Manchester United's shirt. The first year of that deal - the biggest endorsement in European football - is next season, by which time GM won't actually be selling Chevrolet cars in Europe.

Manchester United announced the deal on a Friday and GM announced the resignation of chief marketing officer Joel Ewanick the following Sunday night. ''Mr Ewanick failed to meet the expectations the company set for its employees,'' was GM's statement.



Aside from one of biggest marketing white elephants in corporate history, GM has been stuck with another issue arising from Chevy's departure from Europe - the latent capacity at the old Daewoo plant in Korea.

Korea built 90 per cent of all the Chevrolets sold in Europe, which accounted for one-fifth of GM's production from that country.

It did not take long for the motor industry's best analysts to see the answer.

''The next logical thing for GM would be to transfer the Chevys produced in South Korea to other markets like Australia if it decides to shut its Holden unit down,'' Shin Chung-kwan of KB Investment & Securities in Seoul said.



While all this was going on in Detroit, Mr Devereux had his own ongoing concerns. The first was a public Productivity Commission hearing in Melbourne, at 8.30am on Tuesday.

The second was a federal government that had decided there was no chance of Holden remaining, and was desperate to get the bad news out.

Tuesday turned out to be the day when GM's worlds in Korea, Europe and Australia would collide.

Mr Devereux could not escape it. He was greeted that morning by a front-page headline in The Age declaring ''D-Day for Holden'', and a story that stated a decision to close down manufacturing in Australia would be made that day.



In the lift up to the Productivity Commission offices, a news screen headline declared: ''Holden wants $150 million to stay.''

The opening questions from the commission's deputy chairman Mike Woods are the only ones that will ever matter: ''I would wish to ask at the outset for the record, has General Motors made a decision regarding the future of its Holden operations in Australia?''

''No decision has been made,'' Mr Devereux replied.

''Thank you. Do you know a time frame for such a decision?'' Mr Woods then asked.

''I wouldn't speculate on it in this forum,'' Mr Devereux said.



For an hour, the Holden boss cooly, calmly and eloquently put forward the same case that he had made to Ian Macfarlane on October 2, and the commissioners made notes.

But after an hour, Mr Devereux had had enough.

''We need a public-private partnership over the long term to be able to be relatively competitive and to have GM be able to do what it wants to do, which is to build where we sell,'' he told the commissioners.

''Now, unless you guys have more questions, I need to move.''

The desire to ''move'' was driven by the time in Detroit, where it was by then approaching 6pm. Mr Devereux had an important call to make.



It is now a matter of record that, while acting prime minister Warren Truss and Treasurer Hockey were ripping the car maker to shreds to ''come clean'' and be ''fair dinkum'' with the Australian people in Parliament, GM's decision was being finalised.

''Either you're here or you're not,'' Mr Hockey bellowed at GM in Parliament. Mr Truss chimed in with: ''They owe it to the workers of General Motors not to go into the Christmas period without making a clear commitment to manufacturing in this country.''

It was a remarkable outburst.



Inside the Holden camp, an insider sent a text message that sounded a death knell for Holden. ''Are you seeing this question time attack on Holden?'' it read. ''Taunting [Holden] to leave. It's extraordinary.''

Opposition Leader Bill Shorten would later ponder if the government had ''bullied, hectored and backgrounded Holden out of this country''.

But at the end of the day, it was more myth, spin and subterfuge.



Over in Korea, Mr Shin Chung-kwan can't see what all the fuss is about.

''GM's decision is to raise the utilisation of large plants - in this case in the EU - to maximise its profitability, and close the smaller ones,'' he said. ''Australia is among the smaller ones.''



The numbers have been run, and the result is Australia no longer fits into GM's ''manufacturing ecosystem''.

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http://www.smh.com.au/business/holde...213-2zcyb.html



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