General Motors Co.’s Holden unit has made a convincing argument why it should continually receive subsidies and assistance from the Australian government. Holden managing director Mike Devereux told the government’s Productivity Commission that A$150 million of annual subsidies ($136 million) result in A$33 billion of economic activity.
“That is a very good return for the economy of this country,” Devereux said. He pointed out that GM has yet to decide on its future in Australia beyond 2016, noting that GM needs to receive a certain level of assistance to make a business case viable to continue building cars in Australia.
The domestic car manufacturing operations of GM, Ford and Toyota have been undermined by the appreciating Australian dollar that jumped almost 50 percent against the US dollar from 2009 to 2012. A strong Australian dollar lessens the value of exports and thus is counterproductive for any carmaker building vehicles in the country for export.
Due to the likely weakening budget position, the coalition government of Prime Minister Tony Abbott is planning to shave A$500 million off from subsidies to the car industry by 2015. Australia’s Acting Prime Minister Warren Truss has written to GM asking for an “immediate statement clarifying their intentions.”
Devereux remarked that Holden continues to make the case to GM that it intends to produce two types of vehicles in Australia, despite reports by the Australian Broadcasting Corp. and The Wall Street Journal that the unit will stop production as early as 2016. According to Devereux, building a car in Australia costs A$3,750 more than at other sites in Asia.