GM to halt car production in Australia, industry in crisis

Wed Dec 11, 2013 1:43am EST
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By Maggie Lu Yueyang and Sonali Paul

SYDNEY/MELBOURNE (Reuters) - General Motors Co said it would stop making cars in Australia by 2017 due to high costs and a cripplingly strong currency, fuelling fears rival Toyota Motor Corp will follow suit and put the entire local autos industry at risk.

The decision by the world's second-largest auto maker to close its Holden plants in South Australia and Victoria states is the latest blow to Australia's manufacturing industry and the auto sector in particular.

"No matter which way we apply the numbers, our long term business case to make and assemble cars in this country is simply not viable," General Manager Mike Devereux told reporters at GM's car plant in Adelaide on Wednesday.

The decision to halt domestic production of Holden cars, long a source of national pride, will pile more pressure on Prime Minister Tony Abbott's conservative government, which is seeking to manage a slowdown in the $1.5 trillion economy as a decade-long mining investment boom slows.

GM Chairman and CEO Dan Akerson said the decision reflected a "perfect storm" of negative influences facing the Australian automotive industry including the sustained strength of the Australian dollar, high cost of production, and a small, fragmented and highly competitive domestic market.

In May, Ford Motor Co said it would shut its two Australian auto plants in October 2016, blaming similar factors.

There have been widespread concerns that an exit by GM Holden would be followed by the sole remaining producer, Toyota, threatening around 150 parts and component suppliers directly employing more than 40,000 people.

"You need two manufacturers to get that critical mass," said influential independent Senator Nick Xenophon. "You lose that critical mass, they fall like dominos."   Continued...

A stop sign is seen near a General Motors (GM) Holden storage facility in Melbourne June 2, 2009 file photo. REUTERS/Mick Tsikas