Tim O'Brien | Dec 22, 2008

ADELAIDE, 22 December 2008. GM Holden today announced the production of a new locally-built four cylinder addition to the Holden line-up to be produced at its Elizabeth plant in South Australia. Prime Minister Kevin Rudd, South Australian Premier Mike Rann, and Federal Industry Minister Kim Carr were on hand to underscore the importance of the announcement to the Australian automotive manufacturing sector.

Production is expected to begin in 2010, alongside Commodores manufactured there, on a second production line at the Elizabeth plant. The SA Government is to tip in $30 million over four years to support the project.

Holden's new small car will be based on the Chevrolet Cruze platform and powered by an efficient diesel or direct injection petrol engine.

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Rumours had been rife for some time that Holden has been making plans for new 'greener' models to add to its locally-built range. With sales of large cars in decline in the Australian market, and following Ford's announcment of its intent to begin manufacture of the Focus, this announcement from Holden has been expected by industry watchers. Holden is also to produce ethanol-fueled Commodores for the Australian market, like those already made at the Elizabeth plant for export.

In making this announcement today, Holden, of course, has its eyes on the $6.2 billion assistance package announced by the Rudd Government on November 10 for 'green car funding'. A $150 million slice is to come from this fund to assist with development of the new small Holden (in addition to the $30 million from the SA Government).

While good news for the 3000-plus workforce at the Elizabeth plant, there are still challenges ahead for Holden. With its US parent wobbling around on three wheels, and likely to continue to do so for some time yet (despite the recent $17 billion short-term loan bail-out package announced by the Bush Administration), Holden will have been having some nervous moments over the past months. Each day of bad news from GM US makes the long-term future of its G8 export program more uncertain.

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While the G8 has not achieved the projected sales targets, it has outperformed the accumulated sales results for the Pontiac stable (down an astonishing 53 percent in November). A total of 13,500 G8s have been sold since its introduction in March. The looming problem is that there is growing speculation that the Pontiac brand may not survive the GM restructure as part of its "plan for long-term profitability".

Clearly, for Holden, the announcement today is an important one for its future.

Meanwhile, the Canadian Government and the province of Ontario (just over the border from Detroit and Michigan State), has agreed to provide $C4 billion (AUD$4.9 billion) in government loans to General Motors and Chrysler. As a sign of the desperation (panic?) of Governments faced with the prospect of collapse of their automotive manufacturing sectors, these loans amount to nearly AUD$1 billion more than the $C2.4 billion GM Canada requested. Canadian Prime Minister, Stephen Harper, has also not ruled out further aid to GM and Chrylser.

"We will not allow a catastrophic failure of the Canadian auto industry," Mr Harper said (NY Times).

Of the total loan package, the Canadian Government is to stump up $C2.7 billion, the Ontario contribution being $C1.3 billion.

According to sources The Motor Report has spoken to, GM US despatched a directive to all of its subsidiary arms and global brands - Holden, Saab, Opel, Vauxhall among them - directing them to approach each of their governments for financial help, with the threat that without it, "they would shut them down".

That's what happens when you're too big, and too ugly, to let fail without catastrophic social and economic consequences. You can flex your muscles and get help no matter how little deserving.

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