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Holden Out On Cuts For The Long Term

Today’s (June 18, 2013) announcement from Holden has sent another collective shiver through the automotive fraternity; with the feeling from many that the request for staff (and, allegedly, not including management) to cop a pay cut to reduce costs is a prelude to Holden announcing it will, like Ford, cease local manufacturing. Holden’s chief honcho, Mike Devereux, is quoted as saying that it costs, in Australia, $3750 more to build a car, than anywhere else in the world. The cut for workers, in the two plants Holden operates (Elizabeth in South Australia and Port Melbourne, Victoria), is said to be in the order of up to $200 per week, a substantial dent. It’s in order to continue and reinforce the building base Holden has, but it is more far reaching than that. Should Holden up stumps, it effectively condemns Toyota to do the same, as one local manufacturer simply cannot sustain Australia’s part supply industries. Devereux also said that some workers aren’t being paid what they’re worth, with many at management level not receiving a pay rise for over three years.

As always, there’s two sides to every story; it’s rumoured that some Holden execs that have been with the company for less than two years are said to be on wages of over four hundred thousand dollars. That’s a fair bit of coin, considering Australia’s Prime Minister isn’t being paid much more. Having said that, if an average worker is being asked to cop a pretty decent pay cut and the subsequent adjustment to their living conditions, one would think it’s only fair that a commensurate reduction in wages and lifestyle adjustment be applied to the higher end of the ladder.

Bundled in with all of this is more human cost; around 400 workers at Elizabeth and 100 at Port Melbourne are scheduled to be made redundant, with the company hoping most will be from a voluntary basis. To add to the dilemma is the mooted reduction of automotive manufacturing support, by a half billion dollars, should the current Tony Abbott led Coalition win, as expected, the September Federal election. All politics aside, any reduction in support is a ludicrous idea; what should be scrutinised is Holden’s and the government’s business model. Coming off a loss of $152 million for 2012, it’s all well and good to look at the simplest form of saving money. Holden’s operation structure, its operating costs and just WHY it appears  that Australia’s manufacturing costs are so comparatively high would, on the face of it, bear some deeper investigating.

Some of the blame for this may, in truth, lay within General Motors and Holden; with the rise of Hyundai and Korea, plus the dominance of brands such as Mazda, is it possible that Holden hasn’t reacted quickly enough to change the cars that people once bought to be the cars that people WANT to buy? Is it a form of hubris; Australia’s own, immortalised in the jingle “Football, meat pies, kangaroos and Holden cars” felt that people would buy a Holden BECAUSE it was a Holden? Advertising a car as world quality doesn’t necessarily mean that it is world class. The Cruze, as good a car as it is, does fall short against some of its opposition such as the Mazda3 or Hyundai’s i30, for example, and the Commodore can be said to have failed to match the Mazda6 or the i40. Large car sales have fallen, too, leading to Mitsubishi and Nissan closing their doors for local manufacturing, in part. Ford’s recent decision, although not unexpected, has the potential for Holden to  mirror that. Regardless, today’s announcement is something Australia’s struggling car industry both needs…..and doesn’t.