General Motors Co (GM) yesterday said it would stop making cars and engines in Australia by the end of 2017, with nearly 2,900 jobs to be lost, because of high production costs and competition.
The decision could spell the end of car manufacturing in Australia, as the industry will be too small for supporting businesses such as parts makers to remain economic. Toyota Motor Corp has also said it is reassessing its future in Australia. A union said 50,000 jobs in the auto parts industry are also in jeopardy.
GM’s Australian subsidiary, Holden, once dominated Australian auto sales, but lost market share to imported cars. Ford Motor Co, once Holden’s major rival in Australia, announced in May that it was ending production in the country in 2016. Toyota is the only other auto manufacturer in Australia.
GM’s announcement has been anticipated for months. The Australian government has been under mounting political pressure to offer increased subsidies to the Detroit-based company to keep it manufacturing in Australia for the sake of the auto parts industry.
“The decision to end manufacturing in Australia reflects the perfect storm of negative influences the industry faces in the country including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” GM chief executive Dan Akerson said in a statement.
Holden, which has manufactured cars in Australia for 65 years, would become a sales company, he said.
Australian Treasurer Joe Hockey said the government would work closely with the state governments and unions to ensure Holden’s departure “does not lead to a significant economic downturn in South Australia or Victoria,” while Industry Minister Ian Macfarlane said he was disappointed that GM had made its decision before an inquiry had completed an analysis of government support of the auto industry.
Holden has received A$1.8 billion (US$1.6 billion) in federal government assistance in the past 11 years.
The government will consult with Toyota and the car components industry about the impact of GM’s decision, Macfarlane said in a statement.
Toyota said GM’s decision put its own ability to make Australian cars under “unprecedented pressure.”
“We will now work with our suppliers, key stakeholders and the government to determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia,” Toyota said in a statement.
The Australian Manufacturing Workers’ Union, which represents most of the auto industry’s workforce, predicted that Toyota would also shut its Australian plant.
“Toyota have told me that they won’t be able to survive in Australia because of the lack of volume in the component industry,” union vehicle division secretary Dave Smith told reporters.
“This will spell the end of 50,000 automotive jobs,” he said, blaming a lack of federal government support for GM’s decision.
The announcement was made the same day GM announced that Akerson will be replaced by Mary Barra on Jan. 15.
Barra, GM’s product development chief and a 33-year company veteran, will become the first woman to head any major car company.
The choice of Barra was unanimous, Akerson said, because of her breadth of experience, management and people skills and her understanding of GM’s operations. The GM board considered only internal candidates.
The change at the top comes a day after the US government sold the last of its stake in GM. The government got 912 million GM shares in exchange for a US$49.5 billion bailout. The government ended up getting US$39 billion of its money back, leaving taxpayers short by US$10.5 billion.