After months of reported investments, reassurances, negotiations, and general indication that it would not pull manufacturing out of Australia, GM has just confirmed that it will, in fact, discontinue manufacturing operations in Australia by 2017 — well before its initial promise of staying until at least 2022, and, in turn, letting everyone down.
The primary reason for the move revolves around the fact that manufacturing costs in Australia have risen 65 percent compared to just a decade ago, as the Australian dollar strengthened from just $0.50 USD to as high as $1.10 USD. In laymen’s terms, things are just too expensive to make a business case. Yet it’s going to cost GM A$400 million to A$600 million in the fourth quarter of 2013 alone to begin the wind-down process, with the automaker stating that it will incur “approximately $300 million to $500 million AUD for non-cash asset impairment charges including property, plant and equipment and approximately $100 million AUD for cash payment of exit-related costs including certain employee severance related costs.”
GM expects even more charges on top of the aforementioned costs through 2017, which makes us wonder how/when this move will end up paying for itself. There’s also the factor of customer blowback, considering that ending manufacturing in the country doesn’t seem like the most efective way to attract customers to Holden dealerships to buy cars.
GM indicates that 2,900 Australian jobs will be compromised as a result of this decision. We’re no strangers to what happens when manufacturing leaves a city or region, and plants close for good. Cities like Pontiac, Flint, and even Detroit, Michigan all come to mind. Hopefully the cities in New South Wales and Victoria can avoid a similar fate.
GM notes that the sale and service of Holden vehicles will be unaffected by this announcement, and warranties and spare parts availability will remain unchanged. GM will supposedly continue to sell Holden vehicles in the region beyond 2017 — meaning that they will have to be imported from somewhere such as Asia (South Korea or China), South America, or even North America. And the global design studio will also remain open.