Australia’s General Motors Holden, which is the division of General Motors Co., informed that it would begin job cuts which would touch as many as 500 employees. The carmaker put blame for job cuts on the strong Australian dollar and weak sales as it became less competitive. The adversaries of government subsidies for car manufacturers will have, without a doubt, new arguments that the money was thrown down the drain as the financial help did not prevent from further reductions at General Motors Holden’s operations.
Decision to cut jobs
On the 8th of April, General Motors Holden informed that it made a difficult decision to axe as many as 500 positions, or nearly 20 percent of its workforce. The decision has been mainly imposed by the strength of the Australian dollar which has made the carmaker’s operations unprofitable. Indeed, General Motors Holden is not competitive enough against its foreign rivals. While the Australian dollar is getting stronger, the weak yen is making the Japanese cars more attractive to potential customers. Mike Devereux, managing director at Holden, commenting on the decision underlined: “I can’t control what central banks do. The value of the Australian dollar, and importantly the currency plays being made by other countries, mean that we are not competing on a level playing field.”
According to the findings of General Motors Holden, the carmaker saw its costs at Australian car factories climb as much as 60 percent compared to a decade ago. Therefore the operations at Australian plants of the company are believed to be the most expensive ones, thereby making its activities unprofitable. Even though the carmaker recorded substantial productivity increases, it still cannot compete with its foreign rivals due to the strength of the Australian dollar.
Apart from cutting as many as 500 positions in Australia, including 400 in Adelaide and 100 in Melbourne, General Motors Holden also announced that it had to downsize its production of the Cruze to 335 units per day due to sharply declining demand for the model.
Mike Devereux underlined that decisions to downsize were indeed very difficult, yet the company had to have the long-term future at heart, thus all reductions and cuts were essential. Just in 2012, the carmaker also reduced its labor force by 170 positions due to the strength of the Australian currency.
Government subsidies for Holden
Certainly, the news on the reduction at General Motors Holden’s operations was not welcomed by the government of Australia as just only in 2012, the carmaker was granted around US$285 million to avoid shutdowns. The government of Australia has to carefully watch all moves in the car manufacturing sector as around 250,000 people work in the sector and other related industries.
Undeniably, the government of Australia is well aware of the fact that the strength of the dollar has weakened the attractiveness of its products. But the authorities have been much determined to keep the sector afloat since 2008 when Mitsubishi decided to close its car factories. The determination has been big enough that the government has offered subsidies to carmakers.
The General Motors Holden’s decision to downsize is certainly a surprise for the government which has been dedicated to help the industry. South Australian Premier Jay Weatherill was outraged by the announcement of the reductions and he stated that the decision had violated the terms under which the carmaker was to be granted as much as $50 million in state government help.