Holden was “on a knife edge” – Devereux

[DanielXR8]

Interesting and very candid comments from GMH chairman about Holden and how it nearly closed manufacturing here in 2008. Also gives an insight into what quantity of cars you need to manufacture in Australia and what Holden executives felt about the closure of Mitsubishi production.

Cruze local manufacturing decision in 2008 sealed Holden’s Aus future, says MD
1 March 2011
By BYRON MATHIOUDAKIS
GM HOLDEN has revealed it was at a crossroads just two and a half years ago, when the threat of closure was a real possibility as it awaited financial support from the government to add the Cruze small car line alongside the VE Commodore and WM Caprice at its Elizabeth plant in South Australia.

“It was the worst time in our history no doubt,” GM Holden chairman and managing director Mike Devereux told GoAuto on the eve of this week’s unveiling of the Australian-made Cruze Series II small car – the model he says saved Holden manufacturing.

“If we didn’t have the backing that we did from the federal and South Australian state governments we would not even have come close to making the local Cruze happen.”

Holden accessed $149 million from the federal government’s Green Car Innovation Fund and another $30 million from the SA government to help bring the Australian-made Cruze to market next month.

The plan was formulated by ex-Holden boss Mark Reuss in 2008 as the end loomed for the company’s vital Pontiac G8 export program to North America, during the worst global economic downturn since the Great Depression and when oil prices were at an all-time high, scuppering demand for V8-powered performance vehicles worldwide.

Left: GM Holden chairman and managing director Mike Devereux. Bottom: Former Holden chief Mark Reuss.

Additionally, US parent General Motors was sliding into bankruptcy, effectively ruling it out as Holden’s financier.

“You have to remember that in late 2008 the world for General Motors was caving in. We were on a knife-edge.

“By building the Cruze in Adelaide, it makes it more viable for us to have Commodore. I can’t just conjure up 40,000 additional exports for Commodore and Holden can’t just survive on 60,000 Commodores every year.

“We lost between 35,000 and 40,000 US export Commodores as a result of the demise of the Pontiac G8 (announced in mid-2009).

“So to have stayed with just one car line is not viable. You have to be building over 100,000 cars to be viable – we tried to achieve that with the G8 Commodore but of course it went away.”

With General Motors attempting to shore up its own survival during 2008 with billion-dollar lines of credit from an at-times hostile US Congress, Mr Devereux admits Holden did not know if it was going to be sold off (as GM attempted with Opel and Saab) or shut down (like Pontiac, Saturn and Hummer eventually were).

“To be frank, nobody knew what the future held, for anybody who worked at GM at the time.

”We had no idea what the ‘New GM’ was going to look like either… we had already ditched four brands.”

It was not until December 22, 2008 that Holden could announce that local Cruze production would commence during late 2010 or early 2011.

Just one month later Mr Reuss revealed to GoAuto at the 2009 North American International Auto Show in Detroit that the then-secret hatchback version designed at Fishermens Bend in Melbourne would join the sedan down the line.

Mr Devereux went on to praise the Labor governments of the time – with Senator Kim Carr, then Prime Minister Kevin Rudd and the Mike Rann government of South Australia singled out in particular – for “understanding” Holden’s situation and the importance of adding a second vehicle line.

“Not just in order to ensure continuing production but to also help keep suppliers in South Australia, Victoria and elsewhere in business,” he said.

“For (local Cruze production) not to happen and go away, it would have been a tragedy.

“It is just remarkable that the federal and South Australian state governments reached the decision that they did when they did.”

For his part, premier Rann told the gathered dignitaries – including Prime Minister Julia Gillard – that he was not about to let yet another car factory close in South Australia on his watch.

“We saw what happened at Mitsubishi and we were not prepared to let that happen to Holden,” he said.

“And we saw what was happening in America and the rest of the world, and we didn’t want to see that happen to South Australia too.”

[jpd80]

As part of GM's world wide plans submitted to US treasury under Chaper 11,
Holden was only considered viable if Cruze production was added.

Not my words but the words of GM executives who fought to save Holden in the Asia pacific Region.

So what does that say about Commodore only production.....



Maybe Ford is in a different position because it has Falcon and Territory as well....

[Brazen]

More about the Cruze changing the way Holden operates...

http://www.goauto.com.au/mellor/mell...257845007BB6FB

1 March 2011

GM HOLDEN says it is happy for its Australian-made Cruze to outsell the Commodore if it means that the company can profitably achieve productivity targets of 100,000-plus units annually.

However, executives will not discuss volume expectations, except to say that Holden expects the Cruze to “comfortably outperform” the outgoing model’s 2010 (and first full-year) sales result of 28,334 units.

In contrast, Holden sold 45,956 Commodores, 1999 Statesman/Caprice models and about 10,000 Utes in Australia last year, while a further 8000 VE/WM vehicles were exported.

Speaking to the media at the launch of the newly Australianised Cruze (the existing model was built in South Korea for Holden), chairman and managing director Mike Devereux said that adding much-needed volume at the Elizabeth plant in South Australia to keep workers and suppliers busy is more important than which car wins the sales race.

“When we start selling the Cruze hatch (in October) our position in the marketplace will increase,” Mr Devereux said.

“People ask what happens when Commodore gets overtaken by Cruze and I’m happy to sell whatever cars Australians want to buy. They want to buy more Cruzes – then they can buy more Cruzes. I’m fine with that.”

From top: GM Holden chairman and managing director Mike Devereux, locally-made Cruze and Commodore, and a Cruze under production at the Elizabeth factory.

Mr Devereux added that producing small and large cars on the same assembly line gives Holden a two-way bet to increase or decrease production according to consumer demand.

There are also longer-term brand-building upshots that the consumer can benefit from due to the two-pronged policy, since Holden will be less likely to be stuck with excessive stock of either model, which should in turn reduce the need to discount at the expense of reduced residual values.

“The best thing about that is that we can flex production as the ebbs and flows of the market happen and not do stupid things on the pricing front to denigrate resale values down the road to try give away a bunch of cars – that’s not what we are about,” said Mr Devereux.

“We won’t start a price war because frankly it is more relevant for people who buy our cars two months on not to have their cars $2000 cheaper because of some market-share short-term goal that somebody who runs some other car company thinks about.”

Holden does not believe there is too much likelihood of sales cannibalisation between Cruze and Commodore, although the former may come out ahead as some fleet managers stick to a four-cylinder-only policy. Current fleet volume for Cruze sedan is about 30 per cent.

“I don’t think there’s too much interaction between the two cars – maybe with some fleets there might be but for private buyers… not at all.

“Will we get more government business perhaps with a highly fuel-efficient car like the Cruze? Maybe we would. Some of the local governments have four-cylinder policies, so that opens up nicely our four-cylinder car for those governments.

“But it’s simple… we make big ones and small ones, and as the markets change between the two we tune Adelaide to meet the demand.”

The Holden boss did acknowledge that there is more profit potential in a large car than a small one, but he believes that shoring up small car manufacturing at Elizabeth has already changed what Holden is.

“We are no longer the Commodore car company,” he said.

“In terms of product, the Cruze is a ‘C’ (class) car – the largest single segment in the country – and it wasn’t chosen stupidly or for nothing. I think we happen to have one of the better small cars (even though) there’s no hatch yet.

“Cruze is a global car that we get to make here. And I think that is the best possible outcome (for Holden) because you need to make a lot of things.

“You can opine about the sexiness of a Volt … but I think having a highly profitable large car that is the highest selling car for 15 years in Australia, and then picking the segment that is the highest-selling in the country and putting an award-winning small car, with Australian-tuned suspensions and engineering and styling (is the right decision).

“We have the sixth or seventh best-selling (small) car without a hatch in a segment that is 60 per cent hatch … and we outsold Falcon three times last year.”

Sales of the JG Series II Cruze commence in the last week of this month.

[vztrt]

Originally Posted by jpd80

Maybe Ford is in a different position because it has Falcon and Territory as well....

They both are building cars in growing segments. While the large cars are in decline. It will be interesting to see how this goes. Traditionally large cars make a bigger profit then small cars. But will it be able to cover the costs of production and justify the next upgrade?

[Brazen]

Originally Posted by jpd80

As part of GM's world wide plans submitted to US treasury under Chaper 11,
Holden was only considered viable if Cruze production was added.

Not my words but the words of GM executives who fought to save Holden in the Asia pacific Region.

So what does that say about Commodore only production.....



Maybe Ford is in a different position because it has Falcon and Territory as well....

I doubt it, the Falcon and Territory are orphan products with unique drivetrains, so development is costly. Unlike Commodore which can utilise global engines, export more vehicles, is the biggest selling car in the country and can share platform costs with the Camaro.

Coupled with the fact that Holden sell more higher-series Commodores and has double the amount of private buyers than Falcon, well I think Ford isnt in any better position.

If Ford ever closes I will blame the decision not to build Focus here, plants need volume and lots of it, an extra 40,000 Focuses a year for the local and Asian Pacific market would make Falcon and Terriotry more profitable. I still hope it means big export futures for Falcon or Territory, hence why Focus didnt come.

[jpd80]

We have to also remember why the I-6 was kept, it only cost Ford approx. $10 million to upgrade it to Euro 4 but
to close down Geelong engine and casting plant making workers redundant would have cost 20 times more.

Some times it is less costly to do nothing and let the original platform run its course....
Diesel Territory is years late but welcome all the same, it will reignite interest in the big SUV
and lift Broadmeadows out of the doldrums, later this year we get Ecoboost I-4 and EcoLPI
both of which promise to further lift Falcon sales.

Commodore's dedicated LPG and Cruze hatch are the next big things for Holden, I doubt Caprice PPV will work.

Maybe local manufacturing turns a corner for a while.

[SteveJH]

Originally Posted by jpd80

We have to also remember why the I-6 was kept, it only cost Ford approx. $10 million to upgrade it to Euro 4 but
to close down Geelong engine and casting plant making workers redundant would have cost 20 times more.

Some times it is less costly to do nothing and let the original platform run its course....

How much would it cost them to switch over to producing the Alloy block Duratec/Ecoboost V6? Would the government help fund it to keep the manufacturing capacity?

[galaxy xr8]

Originally Posted by Brazen

I doubt it, the Falcon and Territory are orphan products with unique drivetrains, so development is costly. Unlike Commodore which can utilise global engines, export more vehicles, is the biggest selling car in the country and can share platform costs with the Camaro.

Coupled with the fact that Holden sell more higher-series Commodores and has double the amount of private buyers than Falcon, well I think Ford isnt in any better position.

If Ford ever closes I will blame the decision not to build Focus here, plants need volume and lots of it, an extra 40,000 Focuses a year for the local and Asian Pacific market would make Falcon and Terriotry more profitable. I still hope it means big export futures for Falcon or Territory, hence why Focus didnt come.

IIRC the private buyer segment was won by the Falcon ahead of the Commodore and I do believe that the Corolla may have also pipped the Commodore in the number 1 individual Australian vehicle sales segment a few time's.
Then there is the actuall profit made by each sale, to which it is commonly known Ford Aus are in a better posistion now thank's to their ,High margin low turnover philosophy compared to Holden's low margin high turnover.
Holden was more interested in having that number 1 sale pitch on paper rather then actual sale's in the book's that reflect profit.

[BigAL_250]

Originally Posted by SteveJH

How much would it cost them to switch over to producing the Alloy block Duratec/Ecoboost V6? Would the government help fund it to keep the manufacturing capacity?

Not without the Green Car Innovation Fund that they just canned.

[vztrt]

Originally Posted by galaxy xr8

IIRC the private buyer segment was won by the Falcon ahead of the Commodore and I do believe that the Corolla may have also pipped the Commodore in the number 1 individual Australian vehicle sales segment a few time's.
Then there is the actuall profit made by each sale, to which it is commonly known Ford Aus are in a better posistion now thank's to their ,High margin low turnover philosophy compared to Holden's low margin high turnover.
Holden was more interested in having that number 1 sale pitch on paper rather then actual sale's in the book's that reflect profit.

Commodore still sold more private then Falcon (mind you would like to see for all Aussie built cars). Rolla has beaten Commodore as they do a lot of fleet sales. Most private sales goes to the Mazda 3 and has for a while now.

[SSD-85]

Funny how this never got out at the time, but the moment someone farts the wrong way at Broadmeadows its the well publicised death of Ford in Australia.

[galaxy xr8]

Originally Posted by vztrt

Commodore still sold more private then Falcon (mind you would like to see for all Aussie built cars). Rolla has beaten Commodore as they do a lot of fleet sales. Most private sales goes to the Mazda 3 and has for a while now.

I am sure I seen a segment posted not long ago from someone that the private segment was won by Falcon but overall sales were won by Commodore ?.

[In Focus]

Old tactic. Tell the government on the quiet you'll go under without (insert "tax break" or "cash handout" or "cheap loan"), and if you're a suitably large employer - or iconic brand - you just need to open your pockets so they can get filled.

[irish2]

Originally Posted by Brazen

I doubt it, the Falcon and Territory are orphan products with unique drivetrains, so development is costly. Unlike Commodore which can utilise global engines, export more vehicles, is the biggest selling car in the country and can share platform costs with the Camaro.

Coupled with the fact that Holden sell more higher-series Commodores and has double the amount of private buyers than Falcon, well I think Ford isnt in any better position.

If Ford ever closes I will blame the decision not to build Focus here, plants need volume and lots of it, an extra 40,000 Focuses a year for the local and Asian Pacific market would make Falcon and Terriotry more profitable. I still hope it means big export futures for Falcon or Territory, hence why Focus didnt come.

It is interesting then that GMH never made a profit whilst comfortably making more than 100,000 cars. 2005, 06, 07, and 08 were years in which export of the G8 was underway. The same years are also years in the red.

[Ford17]

If $30 million from the SA Government means so much to Holden; then how can they justify the millions and millions of dollars they spend each year on V8 Supercar racing?

[naddis01]

Originally Posted by galaxy xr8

I am sure I seen a segment posted not long ago from someone that the private segment was won by Falcon but overall sales were won by Commodore ?.

I posted these YTD figures back in Nov in the Oct 2010 Vfacts thread.

Ford Falcon - 25,209

XR6 - 11,470
XT - 3,449
BASE - 2,917
G6 - 2,516
G6E - 1,656
XR6T - 1,453
G6ET - 941
XR8 - 319
F6 - 271
GT - 139
F6-E - 38
GT-E - 18
GT-P - 22

Holden Commodore - 38,407

OMEGA - 15,645
SV6 - 10,968
SS V - 3,269
SS - 2,258
CALAIS V - 2,024
BERLINA - 1,705
CLUBSPORT - 1,016
CALAIS - 788
GTS - 490
SENATOR - 138
HSV TOURER - 103
W427 - 3

Mazda Mazda6 - 6,534

CLASSIC - 3,300
LUXURY SPORTS - 1,395
LIMITED - 581
TOURING - 463
DIESEL - 384
LUXURY - 214
DIESEL SPORTS - 115
SPORTS - 82

And for those interested, here is the buyer type split betweem Falcon, Commodore and Mazda6...

Ford Falcon

6,254 or 25% - Fleet
5,654 or 23% - Rental
4,893 or 19% - Private
3,686 or 15% - Large fleet
2,863 or 11% - Government
1,054 or 4% - Other
805 or 3% - Not for profit

Holden Commodore

12,474 or 32% - Fleet
9,947 or 26% - Private
5,719 or 15% - Government
4,317 or 11% - Rental
3,065 or 8% - Other
2,574 or 7% - Large fleet
311 or 1% - Not for profit

Mazda Mazda6

4,202 or 64% - Private
1,872 or 28% - Fleet
238 or 4% - Other
114 or 2% - Government
108 or 2% - Large fleet

[jpd80]

Originally Posted by SteveJH

How much would it cost them to switch over to producing the Alloy block Duratec/Ecoboost V6? Would the government help fund it to keep the manufacturing capacity?

They wouldn't bother producing the engines here, just import fully built up from USA.

[jpd80]

Originally Posted by irish2

It is interesting then that GMH never made a profit whilst comfortably making more than 100,000 cars. 2005, 06, 07, and 08 were years in which export of the G8 was underway. The same years are also years in the red.

Don't forget to add 2009 when they made a whopping loss on cancellation of Pontiac G8.
Ford Australia chalked up quite a few losses in that same period but 2009 was a small profit of $16 million.

[bobthebilda]

Commodore wasnt making a profit for Holden when they were making 200,000 of them a year. Deveraux himself says they arent viable on less than 105,000 a year. 45,000 commodores and 28000 cruzes (last year) plus utes etc dont come anywhere near 105,000. Plus I think when Deveraux says 105000, he would be talking commodores. A cruze is basically half a commodore. Everyone should be a little concerned that the government was quite prepared to give a foreign company (near bankruptcy), $180 million, whose offshoot now admits they were in quite a dodgy situation in 2008.

Import tariff rates were 10% in 2008, now 5%, petrol prices are proceeding upwards faster than 2008. Holden arent anymore viable now than they were in 2008. Just compare what they were saying in 2008, to what they are now saying about 2008

[vztrt]

Hey Naddis you wouldn't have the Terri figures??

[naddis01]

I think I did have them for around that period as well. I will see if I can find them, otherwise I will ask if I can get current ones.

[Bossxr8]

Originally Posted by jpd80

We have to also remember why the I-6 was kept, it only cost Ford approx. $10 million to upgrade it to Euro 4 but
to close down Geelong engine and casting plant making workers redundant would have cost 20 times more.

From memory the final redundancy payout figure was around the $50 million mark.


With Holden selling Cruze for the same price as the Korean built version i'm still wondering how they are going to make any profit on it at all.

[bobthebilda]

Originally Posted by Bossxr8

With Holden selling Cruze for the same price as the Korean built version i'm still wondering how they are going to make any profit on it at all.

The Holden website now has the base model cruze at $21490 (although i thought i read somewhere that they were offering them at $20990). When they first come out they were $20990 plus on road costs (pricing wasnt inclusive then). So they have had to knock quite a few thousand (i reckon 3.5 to 4 thousand) just to keep up with the likes of Lancer, Corolla and Mazda 3.

So if you take into account the volumes being achieved by the others (in factory), and the appreciation of $Oz compared to countries of origins for those cars, Holden will find it hard to make money on the cruze.

I think its the reason why Lancer has dropped $2000 in the last few months, and Toyota has been offering the low finance on corolla's, to try and put alot of pressure on a locally made cruze.

[jpd80]

Originally Posted by Bossxr8

From memory the final redundancy payout figure was around the $50 million mark.


With Holden selling Cruze for the same price as the Korean built version i'm still wondering how they are going to make any profit on it at all.

Holden were given a total of $179 million by federal and state governments,
that usually smooths the way considerably......

[Brazen]

Originally Posted by jpd80

Holden were given a total of $179 million by federal and state governments,
that usually smooths the way considerably......

Yeah people often forget that...

[1TUFFUTE]

it allseems a bit unresponsable to me. Anyone know what hand outs ford has taken compared to holden in the last decade??????

[jpd80]

Originally Posted by 1TUFFUTE

it allseems a bit unresponsable to me. Anyone know what hand outs ford has taken compared to holden in the last decade??????

Much less and one of the reasons why Focus production was shelved here,
I get the distinct feeling that Ford were "promised" more cash at inception
than was actually on offer. Governments have a way of changing their minds.

[jpd80]

Originally Posted by Bossxr8

From memory the final redundancy payout figure was around the $50 million mark.

In any case, $50 million redundancy payout in 2010 would have meant another loss...
Ford instead opted for government assistance in meeting Euro 4 costs, it was half the cost

With Holden selling Cruze for the same price as the Korean built version i'm still wondering how they are going to make any profit on it at all.

I am too but, are they importing base models and building higher series versions here?

[vztrt]

Originally Posted by 1TUFFUTE

it allseems a bit unresponsable to me. Anyone know what hand outs ford has taken compared to holden in the last decade??????

There was the 50 million one to convert falcon to LHD (which was then diverted to another area), there was the money to go to developing the I4T. I believe they also got cash for getting the I6 emmission compliant (funny enough the Alloytec was rejected cause it wasn't deemed aussie enough) & then there was the money to save the engine plant and now to build brake rotors their.

[naddis01]

Originally Posted by vztrt

Hey Naddis you wouldn't have the Terri figures??

Hey Dan, here are some figures for the Terri, CX7 and CX9. I hope it is legible as I am posting this on my phone.

There figures are YTD figures for Feb. Notice CX7 has outsold Territory so far this year.

Territory
Private - 703
Fleet - 439
Large fleet - 137
Government - 108
Other - 65

Total - 1452


CX7
Private - 1173
Fleet - 310
Large fleet - 4
Government - 15
Other - 16

Total - 1518


CX9
Private - 343
Fleet - 196
Large fleet - 6
Government - 6
Other - 5

Total - 556