GM warns it could end production of the Holden Cruze without financial aid from the Australian government.
General Motors’ long-standing manufacturing base in Australia could be in jeopardy, the maker warned, unless the government comes up with substantial new financial incentives.
If that happens GM would follow a long list of makers that have ruled it too expensive to continue automotive production in the island nation. The U.S. maker previously abandoned efforts to ship products from Australia to North America.
“We’ve just starting building Cruze here and over the next 12 months or so we’ll have to make a decision on the next generation of that product,” Mike Devereux, managing director of GM Holden, told the newspaper The Australian.
The current version of the Cruze was approved by GM’s Holden subsidiary only after the government approved a $149 million package of incentives from its Green Car Innovation Fund. But that program is being phased out, a government official telling the paper it has “run its course.”
But that raises questions about whether any automotive manufacturing will continue in the sparsely populated country. Even with the Green Car funds the Cruze – sold in the U.S. through Chevrolet – reportedly generates only the slimmest of profit margins. In the past, the product was assembled in South Korea and Holden may return to that strategy for the next-generation model.
But pulling the Cruze would have broader implications. The car fills up the Holden plant in Adelaide that also assembles Holden’s big Commodore model. Sales are not strong enough to support the factory if it were to build the Commodore alone.
Devereux’s warning suggests that Holden could become yet the next manufacturer to pull out of Australia, a list that now includes most of the major automotive manufacturers.
“The business case would certainly not be as positive without any co-investment,” for the next Cruze, said the GM executive. “Doing the investment in this country would have less positive financial outcomes than doing it in other low-cost places.”
GM has tried to find other ways to better utilize its Australian assets, such as producing the last-generation Pontiac GTO. But demand for the reborn muscle car was limited and shifting exchange rates didn’t justify shifting to another product for export to the U.S., GM officials explain.