The unexpected strength of the Australian dollar has made Holden, the Australian unit of General Motors, incapable of competing with foreign automakers. That’s why it has been forced to lay off 18% of its workforce, or about 500 of its employees. Holden chairman and managing director, Mike Devereux, said that the company is faced with a structural shift in the market.
He said that to cope with demand better, Holden will need to reduce the output of its Cruze model by nearly one-fifth to 335 cars each day. Devereux said that since the release of the Cruze model in 2009, its price had been slashed by A$2,500 ($2,600) so that it could be competitive against foreign automakers.
For over two years, the Australian dollar has traded above parity with the U.S. dollar. It has grown stronger against the Japanese yen, making Australian producers less able to compete with Japanese companies.
Because of declining sales and exports, jobs have been cut at GM Holden as well as at the Australian divisions of Toyota Motor Corp and Ford Motor Co. These automakers pointed the blame on the worldwide crisis and the strengthening Australian dollar.
On the other hand, automakers such as Mazda Motor Corp and Hyundai Corp benefited from a stronger dollar, helping to lower the import costs. Mazda and Hyundai posted higher sales for their fuel-efficient small cars and SUVs, allowing them to raise their market share. However, the Australian government has continued to provide subsidies to automakers and has been intent on sustaining the industry and guarding jobs.
In 2008, the Australian car plants of Mitsubishi Motors Corp were shut down. The Australian government has set aside A$5.4 billion in additional assistance for automakers until 2020. Last week, Holden said that in the last 12 years, it had gotten over A$2 billion from the Australian government.