General Motors’ Australian subsidiary, Holden, has reported a before-tax loss of A$361 million for the fiscal year of 2014 on revenue of $3.62 billion. On an after-tax level, the loss comes out to $255.2 million.
Having sold 106,092 units in calendar year 2014, Holden is the second most-popular automotive brand in Australia, with Toyota currently being first.
The financial performance represents an improvement over the A$553.8 million loss reported for fiscal 2013, and comes as no surprise to Holden’s CFO Jeff Rolfs, who forecasted during fiscal 2013 earnings that the automaker would likely post another loss in 2014 and continue doing so through 2017.
Digging deeper into the results shows that Holden recorded a A$345.9 million charge for ’employee separation costs’ as well as a A$9.4 million ‘impairment charge’, payable once for property, plant and equipment. Together, these two charges contributed the most to the loss. In fact, had Holden not incurred the charges, its loss would have only been as little as $5.6 million. By contrast, the 2014 fiscal year results are a significant improvement on the $70.3 million figure calculated the same way for 2013.
As one would expect, the majority of the costs are associated with GM-Holden’s decision to shutter manufacturing operations in Australia.
“It’s obvious that there are major costs associated with our decision to cease domestic manufacturing of vehicles in Australia by the end of 2017, chief among them being employee separations and entitlements. We’re committed to supporting our people and treating them with the respect and dignity they deserve during this transition; clearly there are significant costs associated with that,” Rolfs said today of the 2014 result.
“We are working with all levels of government and the rest of the industry to deliver support, training and links to future opportunities for Holden employees impacted by our decision. This is evidenced by Holden’s $15 million contribution to the Australian Government’s Growth Fund for the transition and re-skilling of Holden employees, along with the Holden transition centres we have established at all of our sites.
“We are always mindful of the impact on our employees and our financial results, however these are expected and foreshadowed costs that are well within our forecasts. As we announced in 2013 and again last year, there are substantial costs involved in the orderly wind-down of local manufacturing. This is a difficult path to tread but we’re committed to our long-term plan.”
There is, however, some upside to Holden’s loss: the A$345.9 million for employee separation accounts for all employee entitlements though the end of 2017 calendar year. As such, Holden has now accounted for the majority of costs — separation and asset write-downs — associated with its ceasing manufacturing operations in the country.
Holden says it has implemented initiatives to reduce operating costs and improve business efficiency during the course of the year as it continues to adapt to its evolving business model.
“Our operations and business model will continue to evolve, what won’t change is Holden remaining a significant part of Australia and its communities through both our National Sales Company and our 230-strong dealer network, employing more than 14,000 people combined. Holden also continues to contribute to the Australian economy, spending $123.7 million in research and development in 2014 alone,” Rolfs said.
“Holden is focused on executing our long-term plan to grow sales and revenue and manage our other costs very closely. We continue to face stiff challenges and there is no quick fix but we are building a sustainable future step by step.