Why the Holden Factory Really Closed

There’s a tremendous amount of uninformed speculation about why Holden closed its factory - you’ll see that on the news today. If you want to know the truth … keep reading

Car manufacturing died a long time ago in Australia - but the final plug on life support was pulled today

Car manufacturing died a long time ago in Australia - but the final plug on life support was pulled today

Holden announced its death in Australia, officially, in December 2013. But doctors will turn off the life support today - October 20, 2017.

Holden announced its factory closure - that means the factory that made the cars (in Adelaide) and the factory that made the engines (in Melbourne) roughly seven months after Ford announced that it was pulling the pin.

Ford’s last factory closed a year ago, and change, on October 7, 2016. After today, however, there will be no more car manufacturing in Australia.

It's impossible to see this industry returning.

This is the new Holden Commodore - the only problem with which is: Nobody really gives a toss

This is the new Holden Commodore - the only problem with which is: Nobody really gives a toss

THE INDUSTRY CRUMBLES

When Ford Australia announced its closure, the company went immediately into freefall in Australia. Sales flatlined, and Ford roughly doubled its financial losses - from $141 million in fiscal 2012 to $267 million in the red in 2013.

Three months later, in February 2014, Toyota announced that it too was pulling the pin, leaving Australia bereft of a car manufacturing industry. Thousands of people directly and tens of thousands indirectly have lost their jobs, and despite the (frankly bullshit) supportive promises from the manufacturers and government - many of them will not get re-employed. And this will be a burden on the welfare system, as well as a tragedy on many personal levels.

Toyota's manufacturing in Australia was a terminal casualty of Ford and Holden

Toyota's manufacturing in Australia was a terminal casualty of Ford and Holden

TOYOTA TAKEDOWN

I have some sympathy for Toyota in all of this. Toyota was the only manufacturer with a viable export plan - ironically surpassing the one million locally made Camry mark, exported to the Middle East, in September 2013. That milestone was surpassed just five months before announcing the wind-up.

There is not a shred of doubt in my mind that Toyota was committed to Australian manufacturing, and its closure is merely what the military would call collateral damage. Actually ‘collateral drowning’ would be more apt - Toyota was dragged under by how badly Ford and Holden botched their operations.

Shrinking economies of scale caused by Holden and Ford are what dragged Toyota down.

 
“Together with one of the most open and fragmented automotive markets in the world and increased competitiveness due to current and future free trade agreements, it is not viable to continue building cars in Australia.” - Toyota announcing its factory closure in Australia, 10 Feb 2014
 
If you want to know what went wrong, listen to what the local manufacturers don't say. (Hint: They don't say 'we got this wrong'...)

If you want to know what went wrong, listen to what the local manufacturers don't say. (Hint: They don't say 'we got this wrong'...)

BLAME GAME

The politicians will blame each other. Carmakers will blame the politicians, and us, and the local market, the high cost of labour (and on this point I’d say: they make cars successfully in Germany, don’t they?) They’ll blame the unions. Whatever.

But if you want to know the truth, you have to listen very hard for what Ford and Holden do not say on this. Because this is such a powerful tell for the delivery of weapons-grade bullshit. The bullshitter will use any convenient facts to hide their agenda. It’s a smokescreen.

Obviously government funding, the cost of labour, industrial relations and market dynamics are all key considerations for a car-making industry. It makes the bullshit excuses sound plausible. But what’s not being said here - by neither Ford nor Holden - what they will not say - is that they got their manufacturing operations, staggeringly, horribly wrong.

Ford and Holden stopped building the cars that Australians wanted to drive. Therefore, they bought elsewhere. It’s that simple. This process happened over many years. It was identifiable and the operations were salvageable - for a long time. But Ford and Holden luxuriated through a decade of the worst ever product planning decisions, floating on a sea of public money - taxpayer funds. We paid them to get this wrong.

Holden managed to score twice the billions despite building far fewer cars...

Holden managed to score twice the billions despite building far fewer cars...

STAGGERING SUMS

And we did pay them rather a lot.

Holden got $2.17 billion of your taxpayer funds from 2001 to 2012 inclusive.

That’s an average of $180 million dollars a year. And that means, if you drove past a Holden dealer in 2012 and you saw in the corner of your eye, just one shiny new Holden Commodore on the lot - there was about $2000 of your money built into that car.

It makes me wonder what else could have been accomplished with these vast sums.

 
Holden gets twice as much government funding as Australia's two other car manufacturers - even though it does not build as many cars as market leader Toyota. - News Limited, April 4, 2013
 

The information on the size of the public funding was kept confidential for as long as possible because it served the government’s agenda (that’s both sides of government) and the carmakers’ agendas too - for you not to know how much you were donating. They wrapped the confidentiality up in the bullshit euphemism known as commercially in confidence, which certainly was convenient.

Amazingly no 'longevity' guarantees were part and parcel of the vast taxpayer funded government grants

Amazingly no 'longevity' guarantees were part and parcel of the vast taxpayer funded government grants

CO-INVESTMENT, MAFIA-STYLE

Here’s how this worked: This was the Mafia’s business model, Detroit-style. It’s a money-for-jobs extortion-style deal, with some faceless Ford and GM bigwigs as the mafia, and the relevant Australian Federal Industry Minister as the poor bastard gaffer-taped to the chair.

If you have ever wondered how flippantly the government of the day regards the money that you work so hard for, and which you pay in tax, look no further than the fact that no guarantees were secured by these donations. Such as: This $200 million secures the operation of the factory for ‘X’ years with a minimum of ‘Y’ Australians employed.

It simply did not work this way. In October 2013 - just two months before pulling the pin - Holden went ‘Mafia 2.0’ on the Australian Government. They have never revealed the size of the additional extortionate demand on the table, to keep the factory open. Reports at the time suggested sums ranging from $150 million to $265 million, which sounds plausible.

Treasurer Joe Hockey outrageously requested an honest answer from Holden...

Treasurer Joe Hockey outrageously requested an honest answer from Holden...

JOE'S ULTIMATUM

Remember - this was five months after Ford announced it was out. There was a great deal of uncertainty about the future of the industry, and a new Government was steering the ship. The new Federal Treasurer at the time - Joe Hockey - famously said, rhetorically, to Holden, in Parliament:

“Either you’re here or you’re not." - Federal Treasurer Joe Hockey, Parliament House, 2013

It was a demand for Holden to reveal its long-term intentions for manufacturing and jobs. Then-Prime Minister Tony Abbott flat-out refused to up the ante, saying:

 
"There's not going to be any extra money over and above the generous support the taxpayers have been giving the motor industry for a long time." - Australian Prime Minister Tony Abbott, 2013
 
The Productivity Commission agreed that publicly subsidising the car industry was poor value for our money

The Productivity Commission agreed that publicly subsidising the car industry was poor value for our money

AUDIT & TANTRUM

And of course the Government had commissioned the Productivity Commission to examine the public funding of local carmakers. Imagine that: The Government actually had the balls, the audacity, to audit what Australians got in return for for their generosity towards Holden and Ford.

The draft report from the Productivity Commission, released just days later, recommended phasing out all financial support. The report said the actual amount of subsidies was more like $30 billion in the five years to 2012.

All I’m going to say there is: if you split $6 billion a year equally three ways you get $2 billion per carmaker per year. There is no problem that these sums do not solve, if used wisely. In the case of the 85,000 cars Holden built here in 2012, that’s about $23,500 per cer. Absurd.

And the Productivity Commission agreed - saying the policy rationale for car industry support was weak. Stefan Jacoby, GM VP of International Relations had quite the knee-jerk reaction back in Detroit following Mr Hockey’s comments, and he decided to pull the pin.

That’s what really happened - he admitted making that call, to Australian journalists in 2015 at the Detroit Motor Show.

 
“I was the one who decided to stop production in Australia.”
- Stefan Jacoby, GM vice president of international relations
 

THE BOGUS ANNOUNCEMENTS

Bogus title for a 'factory closure' announcement...

Bogus title for a 'factory closure' announcement...

But GM could not even announce the decision to shut Holden down with integrity. Holden’s official factory closure announcement was titled “GM to Transition to a National Sales Company in Australia and New Zealand”. Such evasive bullshitters. That announcement is accessible online today - loaded with indefensible weasel words. It’s an advertisement for how not to communicate with authenticity and integrity.

Ford and Toyota were, of course, just as pathetic here.

Ford called its closure announcement “Important Announcement from Ford Australia”. Mum, Dad, I’ve got an important announcement: I’m pregnant. Spare me. Toyota’s announcement title: “Toyota Australia Announces Future Plan for Local Manufacturing”. That’s actually the one I like the best - just like when Kim Jong Un announcing future plan for his half-brother… Remember that?

Killing the factory meant a four-year slide to obscurity ... and it doesn't get better for Holden after today

Killing the factory meant a four-year slide to obscurity ... and it doesn't get better for Holden after today

SUDDEN IMPACT

Holden is, of course, only now starting to feel the full impact of the factory closure and bogus product plans. It’s a company in freefall, on the fast track to obscurity. Fat lady, on in five. Sales at the turn of the century were 150,000 cars (that’s for the year 2000). 85,000 of those were Commodores, which you and I subsidised very heavily. Last year, sales were down to to 94,000, and only 26,000 of those were Commodores. Kinda says it all really.

Without the factory, Holden can’t hide behind the ‘Football, Meat Pies, Kangaroos and Holden cars’ jingoistic rhetoric. Even that iconic ad was a rip-off, of an earlier Chevrolet ad extolling the virtues of baseball, hot dogs, apple pie and Chevrolet. How utterly disingenuous.

Tragic, but true. Holden’s pants are down, around its ankles, the stage lights have come up, and we can all see it’s about as Australian as McDonald’s. And that’s why it’s just not relevant to mainstream Australians any more.

Holden boss Mark Bernhard has quite possibly one of the worst jobs in Australia from today forward

Holden boss Mark Bernhard has quite possibly one of the worst jobs in Australia from today forward

THE LAST DAY

Holden Boss Mark Bernhard has called for (quote) “dignity and respect” today. He said:

“We don’t want a circus.”
- Holden Boss Mark Bernhard

Indeed. Let’s depart from normal Holden operations and not have a circus on this last solemn day, shall we?

Make no mistake, if you are a Holden worker, or if you were a Holden worker, or a worker at one of the component suppliers, or the other two carmakers, then my heart goes out to you, and you have my complete, unreserved respect and sympathy. I don’t think anyone seriously believes the failure of these operations was in any way abetted by the work you did, which was in my view excellent.

You are in this position because of (in my view) shady decisions taken over many years in Detroit, by senior executives far too clever to burden themselves with tailoring the product to suit the market, especially as it was so much fun to float on a sea in life-rafts stuffed with Australian taxpayer’s funds. Your money.

KICKING THE TAXPAYER

Perhaps you think I’m joking. The pool party in Detroit is still on. On the 29th of January this year the Australian Financial Review published an obscure story entitled:

 
“Holden sends $150 million back to General Motors in Detroit as closure looms” - Australian Financial Review, 29 January 2017
 
GM pocketed a $150 million Holden windfall at the start of the year. I wonder how the newly unemployed workers feel about that today?

GM pocketed a $150 million Holden windfall at the start of the year. I wonder how the newly unemployed workers feel about that today?

The reason for sending the $150 Big Ones back to GM Central, according to documents lodged with the Australian Securities and Investments Commission was (quote): “to provide a return of capital”. Excellent bullshit euphemism in my view.

That sum equates to $1.5 million returned for each of the 100 shares issued in Holden. In my view, there’s your absolute commitment to Australia, right there. Mark Bernhard wants dignity and respect today - and I agree in relation to the workers and their plight. Personally, however, I find Holden’s behaviour absolutely undignified, and worthy of no respect whatsoever.

If you are a patriotic Australian, I would suggest you take this on board and make an informed decision when the time is right to buy your next new car. A solemn, tragic day today. It would be a far greater tragedy, however, if we do not learn from it.

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