Holden Boss Mike Devereux: Business Model Based On Domestic Production Photo:
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Tim O'Brien | Feb, 02 2012 | 0 Comments

In a wide-ranging media teleconference today, Holden boss Mike Devereux explained the announced shift changes at Holden's Adelaide vehicle assembly plant as a strategy to shore-up profitability through increased efficiencies, and to "de-risk (the export program) from the value of the Aussie dollar".

"We are not seeing the export growth we were anticipating ... We are making shift changes to improve productivity, mostly it is in response to the high currency," he said.

The strategy, which will bring the Adelaide plant in line with best-practice high-volume plants in other markets, is to take the line speed from 104 seconds per cycle to 60 seconds per cycle.

Working at its optimum efficiency, this will bring production capacity to around 100,000 units annually.

To do this, Holden is moving afternoon shift workers to the day shift: putting "more people on the one line, doing fewer things per car".

In line with Holden's reported utterances yesterday, this will not involve forced or voluntary redundancies for permanent employees, but will see some natural attrition and the non-renewal of casual contracts with some temporary staff - expected to number less than 100.

"(Our) workforce numbers 2400 right now ... all who want to work on the day shift, will have a job on the day shift."

The focus for Holden, in achieving these workforce reductions, is, Mr Devereux said, to be "respectful of people's livelihood ... (and) impact on people's lives".


Export programs and the high dollar

Holden last year was gearing up to increase capacity for export volumes. With production coming to an end for Ford's Crown Victoria, it had anticipated increased sales of the Caprice in its Middle East export markets.

The high dollar, however, and subsequent price increases has stymied further growth in Caprice export sales, which are likely to remain at three to four thousand annually there.

The Middle East market has effectively collapsed for Holden - as has the Brazil, South Africa and US export programs, falling from a high of 60,518 cars exported in 2005 to around 8000 last year.

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The police car export program to the US however remains "alive and well" Mr Devereux said.

Sales of the Caprice PPV are currently in the thousands (although Mr Devereux is tight-lipped as to the exact number), but falling short of the five-figure volumes anticipated. "I just wish we were selling more of them, (but) we have to make money on them."

Despite the difficult export environment, Holden expects to sell some thousands of police cars across a number of US jurisdictions this year on the strength of the product.

"We have the best police car, (but) it is a little more expensive than we'd like it to be," Mr Devereux said.

When asked where the dollar needs to reside for Holden's export program for the Commodore to be viable in the long term, Mr Devereux said:

"We'd obviously like to see the dollar starting with an eight or a nine ... but I've got a plan that can cope with a high dollar."

A key part of this plan is clearly the home market - Holden, he said, manufactures two of the top five best-selling cars in Australia, Commodore and Cruze.

The business model for the immediate future is to be based on domestic production and domestic volumes.

The strategy in driving efficiences in the Adelaide plant is to put the benefit to the bottom line. "We're in the business to make money, and de-risk the business model," Mr Devereux said.

"Exports are the icing on the cake for us," he said.


Government Assistance For Manufacturing

Mr Devereux also affirmed the role of government in the future of vehicle manufacturing in Australia.

Holden, it is well known, is currently in negotiations for co-investment by the Federal Government to assist it to attract capital for the longer term future of its manufacturing programs.

"I don't think Australia is going to play the intervention game (with the value of the currency)," he said.

But, while saying "we can't go back to protectionism", in response to a question about the Federal Opposition's promise to cut $500 million from the Government's Automotive Transformation Scheme, Mr Devereux said that with no tariffs and no co-investment, "we have a flawed strategy".

Where the Opposition will eventually stand on this issue however is uncertain. Following a review of its manufacturing policy last year, some are clearly wavering in Opposition ranks.

Mr Devereux said he has met with Opposition Leader Tony Abbot, Industry Spokeswoman Sophie Mirabella, Finance Spokesman Andrew Robb, and Resources Spokesman Ian Macfarlane and "explained the realities of the world as it is".

"All of us want to see a thriving auto industry here," he said.

In laying it on the line, Mr Devereux told ABC radio this morning, "We will not be able to do business in Australia without the Australian Government's investing along with the auto industry."

It can't be much clearer than that.

- Tim O'Brien
TMR Managing Editor

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