Holden Expected To Announce Shift Reductions At Adelaide Vehicle Plant

Holden Chairman and Managing Director Mike Devereux will be speaking to the media tomorrow morning to announce changes to Holden's vehicle manufacturing operations.

Although unconfirmed, Mr Devereux is expected to announce shift reductions at Holden's Adelaide vehicle plant where both the Commodore and Cruze are manufactured.

If confirmed, the announcement will come as a blow to the Federal Government.

Manufacturing Minister Senator Kim Carr has recently returned from talks in Detroit with GM US management where a range of assistance measures were reportedly discussed aimed at shoring up Holden's manufacturing operations in Australia.

The issue for Holden however is declining export sales for the Commodore (sold in Middle East markets as the Chevrolet Lumina), thanks in part to the high Aussie dollar, and softening sales at home.

While the Cruze is travelling reasonably well, up 19.2 percent on 2010 sales, the Commodore sedan lost top spot in passenger car sales in 2011, with 40,617 sales, compared to 45,956 sales for 2010 - a decline of 11.6 percent, and trending downward.

And, unlike the onset of the global financial crisis, when Holden was able to contain the damage by working with unions and its employees to reduce shifts and overtime to align production to sales, there is an air of permanence about the current unfavourable headwinds for the Commodore.

Despite the petitioning of Senator Carr, there is also, as we have commented before, little likelihood that any Australian Government will have a pocket deep enough to divert the US GM Board from the strategy it announced across its global operations when emerging from bankruptcy.

In a nutshell - fewer brands and less models, sharing more platforms and technologies across more markets.

GM US, like Ford, is working hard to consolidate its model platforms across its global operations to reduce development, tooling and production costs.

That spells danger for both the Falcon and Commodore. Both Ford Australia and Holden will need to be well-advanced into the development of their replacements if the unique Australian badges are to continue.

In a context of declining sales, it is increasingly uncertain where the hundreds of millions for that development will be found.

While tomorrow's announcement, expected at 10:00am, may shed light on those broader issues, TMR understands that forced redundancies will be unlikely.

As it showed with the onset of the GFC, Holden has a very good record in its dealings with unions and employees in tough times.