GM Weighs Options With Holden Ahead of Australia Exit
As the Australian government envisions a doomsday scenario for the country’s auto industry, General Motors (NYSE:GM) may have options with its Holden brand prior to exiting operations Down Under. The Australian Associated Press reports government officials may try to persuade the automaker to part with Holden in hopes of saving automobile production in Australia for the time being. GM is trying to tie up loose ends in the region as part of a more efficient global strategy.
GM announced in December 2013 that its operations in Australia would cease by 2017, joining Ford (NYSE:F) in abandoning production in a country where business conditions — exacerbated by the strength of the national currency — have proven unmanageable for global automakers. Government subsidies for the industry are drying up, which leaves automakers in Australia with the prospect of facing heavy losses or closing up shop.
The top elected official of South Australia, where one of the two GM plants is located, broached the idea of parlaying the Holden brand in hope of bringing another automaker to the table. It’s unclear whether that move would be considered by General Motors and if there is an automaker willing to take on the associated risks. For GM, cutting losses in the region has become central to the company’s strategy.
On top of ending Australian production, GM has decided to slow production volumes in South Korea, where labor disputes have interrupted operations in the past. However, the automaker’s decision to end sales of Chevrolet in Europe corresponds to lighter demand from South Korean plants that produce Chevy vehicles exported to EU markets. Booming sales for GM in China and the United States have been dragged down by declining profits in several global markets.
Following Ford’s announcement that it would exit Australia, few in the auto industry were surprised by GM’s decision to close its Holden plants. Among foreign automakers, only Toyota (NYSE:TM) has ongoing operations in Australia. The Japanese automaker made it clear that its own operations were at risk due to the pressure on the supply chain in Australia following GM’s departure, Reuters reported in December.
Australian government officials might see value in the Holden brand, but there may be little incentive for GM to part with it on its way out of the country. Furthermore, the prospect of jumping into a sinking ship is unlikely to appeal to any automaker.