A car industry expert claims Australia’s automotive industry is doomed, and says GM Holden will be the first local car maker to shut its doors.
Clive Matthew-Wilson, editor of a guide for car buyers called the Dog & Lemon Guide, claims Holden’s decision to halve production at its South Australian plant last month was the beginning of the end.
“Australia’s car factories are losing money on every vehicle they make,” Matthew-Wilson said in a statement.
“No amount of incentives from the state and federal governments can solve this basic problem. It’s not a matter of whether they close down, but when they close down.”
Matthew-Wilson’s doomsday claims come as Holden’s parent company, Detroit-based General Motors, lurches closer to bankruptcy.
The New York Times revealed on the weekend that US Treasury officials have instructed the company to prepare to file for bankruptcy in the event it cannot finalise deals with bondholders (it needs their approval to restructure its debt) and unions (it needs their approval to cut benefits and pay) by 1 June.
While Holden officials insist GM’s bankruptcy would not automatically force Holden to close, it would make the local company’s position extraordinarily precarious.
Matthew-Wilson claims Ford and then Toyota would also be forced to close their Australian operations because of the precarious positions of their parent companies.
“Ford is losing billions just like GM; it’s just that Ford arranged private sector finance before the recession, so it’s not quite so obvious how serious things are,” he says.
“Australia’s only other manufacturer, Toyota, is globally facing its first annual net loss in 59 years. How long do you think Toyota is going to put up with losing money by assembling cars in Australia?”
Matthew-Wilson has also slammed the Australian Government’s decision to offer the automotive industry a $6 billion bailout package, including millions for the development of green cars. He says the size of Australia’s market and the relatively high cost of labour means there is no way to make the industry viable in the long term.
“The Australian car industry can re-focus on small cars, green cars, blue cars or red cars. None of this will make the slightest difference.
“Globally, there’s a glut of new cars at bargain prices, yet Australia, which produces a small number of high cost cars, is trying to compete with countries like China, which produces 10 million cars a year and pays its car workers as little as one dollar per hour.
“Australia’s car plants are losing money faster than a drunk at a casino, and there’s no feasible way of turning this around.”
Do you believe Clive Matthew-Wilson’s doomsday scenario? Should the Government continue to put money into the auto sector? Send in your comments using the field below.
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
