Australia Issues Subsidy to Extend Local GM Production

Australia Issues Subsidy to Extend Local GM Production

Not long ago, we reported that General Motors was possibly looking to move Commodore production out of Australia, which would have resulted in the loss of some 12,000 jobs at Holden and affected numerous other positions in directly.

In order to provide GM with an incentive, Australian Prime Minister, Julia Gillard, recently announced that the country’s government will grant the auto giant a government subsidy of $275 million Australian dollars ($288 million) to engineer and manufacture cars in the country for at least another decade.

A strong Australian dollar driven by high demand for minerals and energy, particularly in China, is rendering Australian manufactured goods increasingly uncompetitive in export markets. For GM this presents an issue because the full-size Holden VE Commodore and it’s  long wheelbase variant, the WM  Caprice, are in relatively high demand in certain export markets, notably the Middle East (where they’re sold as the Chevy Lumina and Caprice) and in North America, where the WM is sold as the 9C1 Caprice Police Pursuit Vehicle.

With the strong dollar eating into profit margins and GM already engaged in a global consolidation and cutting exercise, it must be sorely tempting to seriously consider relocating production of these vehicles elsewhere if not dropping them entirely.

Although the Australian Government subsidy will go a substantial way to easing fears regarding Holden’s future, at least in the short term, Gillard is making it quite clear this isn’t a handout. “It is a strategic investment that will boost our economy, foster innovation, build new business opportunities and promote adoption of new fuel-saving and safety technologies,” she said during a press conference to reporters in the Australian capital, Canberra.

The money, which will come from federal coffers as well as the Victoria and South Australia state governments, is designed to ensure that GM will continue to commit to vehicle production at its Melbourne and Adelaide plants for the foreseeable future. As part of the deal, GM announced that it will be investing more than $1 billion at both these facilities between now and 2022.

With a refreshed Commodore due out soon, that has already been announced to run entirely on a GM platform, it raises the question: will more Holden products make it to the U.S. in the coming years? GM already tried, albeit with little success, to port the Commodore as the Pontiac G8, but a refreshed model might do the trick.

[Source: Detroit News]