While fronting the Productivity Commission earlier today Mike Devereux, GM Holden Managing Director, was asked if the company had already decided to close down its local manufacturing as soon as 2016. His reply: “No decision has been made.”
He went on to compare government subsidies with other sectors, suggesting the cost of losing the automotive sector in Australia would have ramifications well beyond the outlay of any subsidies received: “The $3 billion a year that goes into mining companies … I’m not criticising that … or $5 billion in subsidies for negative gearing. But the budgetary cost of losing this industry would dwarf the cost of losing it.”
Devereux claims it costs Holden around $3750 more per car to manufacture in Australia, which equates to around $300 million each year. The magic number reported to keep Holden happy to keep making cars in Australia is an extra $150 million per year in government support.
There are many very sound arguments for fighting to keep the automotive manufacturers in this country, and keeping some form of subsidies, by any rational measure, seems to be a no-brainer. And yet, the question still remains, are there enough people in Australia who want to buy locally made cars in sufficient numbers to keep the industry viable?
Component manufacturers need local contracts to stay afloat. Economies of scale will increase if, or should that be when, Holden ends local production. As well as the Commodore and the Cruze, it’s easy to predict Toyota would cease local manufacturing of its Aurion and Camry models should Holden follow Ford off-shore.
One thing is clear, we’re a long way from Devereux’s tweet from March 2012 responding to a Federal Government funding boost which said: “Today’s announcement secures Holden manufacturing in Australia for at least the next 10 years…out till 2022.”
For their part the Victorian Automobile Chamber of Commerce unsurprisingly supports continuing government subsidies to help keep Holden making cars in Australia. The VACC issued a statement early this morning, which has been made available below.