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Holden on the brink?

Wednesday, 1 May 2013
Author: John Spoehr, The Adelaide Review

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It would be wise for us to hope for the best and plan for the worst as we reassess the future of the automotive industry in Australia. We should assumen that General Motors in Detroit is very likely to be considering winding down its Australian operations and consolidating in China, Thailand or India. This means that we must urgently explore how government assistance to the automotive industry in Australia can help to diversify component suppliers and reduce their dependence on the major car producers, so that they don't sink along with the automotive ship.

So, do the recent job and production cuts at Holden mark the beginning of the end for South Australia's remaining automotive manufacturer? Former Ford Australia Chief Executive, Jack Nasser, thinks so. He recently said that it "could be inevitable". Late last year ex-head of Mitsubishi motors Graham Spurling bluntly claimed that the industry assistance package provided to GMH (General Motors Holden) was like, "continuing life support for a patient that is dying". It is hard to be optimistic when those in the know are pronouncing the imminent death of the industry.

While I share their view to a large extent the reality seems to be that GMH will continue its operations in Australia over the short term, so long as government financial assistance remains attractive and available. The question that government is forced to face in all of this is whether the benefits of government assistance to the industry outweigh the costs. Many people feel outraged that soon after it received a multi-million assitance package, GMH announced it would cut 500 jobs from its workforce. Attention soon turned to whether the agreement in place between GMH and the federal and state governments contained any commitments to employment levels. Not surprisingly there were no binding commitments. Few companies agree to exclude the possibility of job cuts but they often play up the prospect of higher levels of employment in exchange for assistance.

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Associate Professor John Spoehr (email)
Executive Director
Australian Workplace Innovation and Social Research Centre (WISeR)
The University of Adelaide
Business: (08) 8313 3350