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Holden blames 2017 exit for its biggest-ever loss

on May 13 2014 | in Industry news, Latest news | by | with Comments Off

Confirmation late last year that it would stop building cars in Australia in 2017 is behind GM Holden’s biggest annual loss of just over NZ$600 million.

The carmaker’s financial figures for 2013 included a one-off NZ$544 million write-down on property, plant and equipment and a NZ$133 million charge for employee redundancy and settlement costs, both allied to the manufacturing exit.

The loss is considerably heavier than the NZ$166 million Holden dropped in 2012, after profitable years in 2010-11. But it did not come as a surprise to the company, which expected heavy losses after the asset write-downs.

Also affecting the bottom line was a 2.3 per cent drop in overall 2013 sales, the carmaker’s lowest point in almost 20 years. Sales of Commodore and Cruze (both built in Adelaide) were down 9.1 per cent and 16.3 per cent respectively.

Down also was Holden’s share of the overall Australian market – at 9.9 per cent reportedly the lowest in living memory. The carmaker’s consolidated revenue was up slightly from NZ$4.3 billion in 2012 to NZ$4.4 billion in 2013.

GM Holden chief financial officer Jeff Rolfs says sales were hamstrung by its decision to cease manufacturing. ”Clearly there are significant costs associated with our decision to cease domestic manufacturing of vehicles in Australia by the end of 2017,” he said. ”These costs drove the financial loss for Holden in 2013.

“We are mindful of the impact on our employees and our financial results, but it was the right decision – manufacturing vehicles in Australia is, unfortunately, unsustainable.”

Holden’s announcement in December last year that it would end manufacturing in Australia in 2017 followed Ford’s earlier decision to exit in 2016. Toyota decided last February that it too would stop making cars in Australia.

Said Rolfs: “All three domestic OEMs (original equipment manufacturers) have now announced they will cease domestic vehicle manufacturing as auto manufacturing in Australia faces a perfect storm of negative influences: a persistently high Australian dollar, one of the most fragmented and competitive markets in the world, and higher costs compared to other manufacturing source countries.”

But Rolfs says the company can be profitable after 2017 with imported cars such as the Captiva SUV, Barina hatch and Colorado ute.  ”We are profitable on our imported portfolio and Holden is focused on taking the right decisions to grow sales and revenue in the immediate term and manage our other costs very closely,” Rolfs said. ”Addressing our high fixed-cost base is certainly a key to returning Holden to sustainable profitability into the future.”

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