GM’s global cost-cutting to run deeper: Barra

GENERAL Motors has flagged more sweeping changes for underperforming global markets, raising questions over whether more tweaks are in store for its Australian operations.

US car industry website Automotive News reported overnight that GM, the world’s third-largest carmaker behind Volkswagen and Toyota, said it was weighing up pulling out of underperforming markets worldwide after recently selling off its loss-making European divisions Opel and Vauxhall to French carmaker PSA Group.

“There's a little bit more work that we're doing in the international markets,” Automotive News quoted GM chief executive Mary Barra as saying in a conference call with journalists held shortly after last week’s Opel sale announcement.

“Our overall philosophy is that every country, every market segment has to earn its cost of capital.”

While Holden has struggled for profitability in recent years, helping its cause is the enormous cuts already announced for its loss-making manufacturing facilities, which will close on October 20 - reducing the capital investment in Australia.

The Automotive News report said GM “plans to reduce investments in certain international markets as well as cars for North America” – potentially affecting future model plans for Holden in the medium to long term.

GM has made it clear it is focusing on core markets and models as part of a move to improve profitability.

Cadillac is on GM’s radar for Australia, with the US luxury brand confirming that if a push into Europe – and in particular the UK – paid off, it could be here within the next four years.

4

Cadillac president Johan de Nysschen said right-hand drive was “a key requirement” to be a high-profile brand in Europe.

“Once you’ve entered the UK market, well obviously you’ve just unlocked the first big hurdle to entry into some of the right-hand-drive markets; Japan, Australia, South Africa,” he said.

GM president Dan Ammann refused to tell Australian media attending this month’s Geneva motor show where Holden may source its vehicles from once PSA Group-owned models – the Astra small car and the Commodore-badged Insignia mid-size sedan and hatch – reach the end of their lives, likely to happen from 2022 and beyond.

“No specific decisions have been taken on that front,” Ammann said. “We have, I’d say, as a result of yesterday’s announcement, there’s more opportunity [of where Holden sources future models from] not less.

4

“Clearly the current models that are just launching will run through their full life cycle and then what we do beyond that is yet to be determined.”

Opel’s sale was prompted by a string of losses at GM’s Euro branch – more than $26 billion since 1999. Since 2000, Holden has made more than $1.5 billion in profit for GM, but it has written that off against more than $1.7 billion in losses.

Holden declined to comment on the Automotive News story, instead referring Wheels to Ammann’s comments that GM was “100 percent committed to the business in Australia and New Zealand”.

4

The carmaker has struggled since 2005 to keep its head above water after escalating production costs, falling sales and challenging financial conditions hurt its bottom line, and its nervous owner severely scaled back its plans for the Holden-developed Zeta rear-drive platform in the wake of the 2008 global financial crisis and tightening US corporate average fuel economy standards.

It is expected to report its 2016 result – likely to be an improved profit despite a sales slump, as many of the costs associated with closing down almost 60 years of manufacturing legacy have already been written off – in about May.

Holden’s rollercoaster ride
2015: $128.2 million profit
2014: $255.2 million loss
2013: $361 million loss
2012: $553.8 million loss
2011: $89.7 million profit
2010: $112.4 million profit
2009: $210.6 million loss
2008: $70.2 million loss
2007: $6 million loss
2006: $146.5 million loss
2005: $144 million loss
2004: $216.4 million profit
2003: $287.6 million profit
2002: $257 million profit
2001: $285 million profit
2000: $135 million profit