Tim O'Brien | Mar 22, 2012

At a media conference today, GM Holden and Federal and SA Governments have jointly announced a $275 million assistance package for GM Holden to keep it manufacturing cars in Australia.

“Holden will receive government co-investment of $275 million and directly invest well in excess of a billion dollars in (a) 10-year vehicle development and manufacturing program," Holden Managing Director Mike Devereux said.

“The investment will help Australia retain its capability to design, engineer and build cars with two all-new vehicles going into production at Elizabeth, South Australia, in the second half of this decade."

Today's announcement is not unexpected and follows some months of hard-headed negotiation with GM both in Australia and in Detroit.

Of the announced $275million in taxpayer support, $215million is coming from the Federal Government and $50million from the South Australian Government. The Victorian Government is tipping in a further $10million.

Since the scrapping of the $6.3billion Green Car Innovation Fund, originally planned to run over 13 years but dismantled after three, market conditions for our local munufacturers have been increasingly difficult.

Although local sales in overall numbers have remained strong for Holden, despite slipping market share, it is widely known that Holden exports have suffered heavily from the effects of the high Australian dollar - dropping from a high of 60,518 units in 2005, to be less than 7,000 today.

In replacing the GCIF, the Federal Government pledged continuing support for the industry on a project-by-project basis. There is a lot of money still on the table, $3.4 billion no less, available through the Automotive Transformation Fund, set to run until 2020.

Ford Australia announced a $34million Federal Government co-investment in January; Toyota however, at the launch of the new Camry Hybrid, announced that it had secured investment funding from within Toyota's global operation, and without Federal Government assistance, for the development of the new model.

“Government investment has been instrumental in reshaping Holden’s manufacturing operations and has enabled us to build the Cruze small car in Australia, rather than import it," Mr Devereux said.

“We are acutely aware that with government investment comes great responsibility. We are focused on continuously improving our efficiency and quality to help us be amongst the best in the GM world.

“It’s also important that people understand the economic benefits that flow from this public investment."

The reality is that taxpayer-funded assistance to the Australian vehicle manufacturing sector is very low by world standards; considerably less per head of population than the investment assistance provided by Germany to its car manufacturing sector, for instance.

It is also barely a fraction of the assistance given to the mining sector in the form of subsidies, concessions and rebates - not the least, a massive $2billion diesel fuel rebate.

Holden is also expected to soon announce that the replacement for the Commodore will be a US model - likely, we think, to be the Malibu or the upcoming next-gen Impala.

In effect, such an announcement will be nothing new. The VB Commodore of course was the local adaption of the German Opel Commodore when launched here to replace the Kingswood in 1978.

GM, like Ford, has adopted a global policy of shared platforms, shared product development, and shared drivetrains across its global operations.

As Mike Devereux said in a phone hook-up last month: pointing to the hundreds of millions of dollars of investment needed for the auto industry in this country, and the role of co-investment regimes in other vehicle manufacturing countries, "Australia has to play the game, or it (vehicle manufacturing) simply won’t exist.”

- Tim O'Brien
- TMR Managing Editor and Industry Analyst


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