Holden To Axe 500 Jobs; Currency Woes Hit Local Manufacturing Photo:
Tim O'Brien | Apr, 08 2013 | 12 Comments

Holden Chairman Mike Devereux has blamed "a perfect storm" of unfavourable economic conditions in announcing today that the company is to axe 500 jobs from its Australian operations.

South Australia is to lose 400 production line positions while a further 100 'hourly rate' positions are to be cut from Holden's Victorian product development operations.

All affected employees are to be offered 'separation packages'. How it fares with the union, we'll need to wait and see at this point.

"We [...] are witnessing a structural shift in the Australian market which favors importers due to a sustained high Australian dollar and extremely low tariffs," Mr Devereux said.

Declining sales for the Cruze and Commodore in a fiercely competitive local market have forced Holden's hand.

Last month, VFACTS showed Cruze sales topped 2335 sales for March - a drop of 18.9 percent over March in 2012 (2880). The Commodore managed just 1606 sales, falling a huge 49.6 percent compared to March last year (3187 sales).

To align production with this reduced demand, Holden's manufacturing facility in SA is to be scaled back from 400 cars a day to 335.

The operational changes are expected to be fully in place by August 1st.

This has it falling under the 100,000 cars annually which Mr Devereux had previously commented maintained the facility at world's best practice.

What this means for the future is anyone's guess at this stage.

"A workforce reduction is always the last resort and Holden has taken every possible step to address our challenges over the past 12 months, including market response days, aggressive marketing campaigns with significantly upgraded products and reduced pricing," Mr Devereux said.

“Since we launched the Cruze small car in 2009, our pricing has been reduced by up to $2500 in some instances for exactly the same vehicle in order to compete with imported brands.

"Meanwhile the cost of doing business and building cars in Australia has continued to rise.”

He is right of course in his summation of the market.

As we pointed out in an analysis of March VFACTS last week, by not intervening in Australia's artificially high currency, the Reserve Bank is creating a 'reverse tariff' - one that punishes local manufacturing while favouring importers.

Those 400 lost jobs are just a small part of the collateral damage of a mismanaged currency.

Australians may be excused for wondering how much more damage this country's manufacturing sector will have to absorb before we see some more sensible policy settings in managing the Australian dollar.

We're seeing too many good companies like Holden sacrificed. It's time the Reserve Bank reversed its hands-off approach to the Aussie dollar.

Tim O'Brien
TMR Managing Editor

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