The managing director of Australian car maker GM Holden says the company is safe and on the verge of profitability, despite the fact its parent company General Motors sunk into bankruptcy overnight.
Holden managing director Mark Reuss says his company is “safe and part of the new GM” and has been identified as an important part of GM’s operations in the Asia-Pacific region. .
“This is an epic day. It’s sort of like studying for the final exam. The final exam is here and we’ve passed,” he told reporters this morning.
“We are a viable, sustainable business in the long-term. We are cashflow positive, we are liquid [and] on the verge of turning a profit here this last month even in a down business.”
Reuss says Holden has responded to the global downturn in the last 12 months by cutting shifts, freezing pay and trimming production. It has also unveiled plans to build more fuel-efficient cars, including a small car which will go on sale next year.
“With all those things in place, with the right operating and structural cost, we can be very profitable here.”
GM’s seemingly inevitable slide towards bankruptcy was complete last night, with the company becoming the biggest industrial failure in US corporate history.
Now the hard work of restructuring the company begins. The US Government, which now owns 60% of the company, is demanding heavy production and staff costs and asset sales to try and get the business back on track.
President Barack Obama has been forced to defend his decision to pump another $30 billion into GM.
“Understand we’re making these investments not because I want to spend the American people’s tax dollars, but because I want to protect them. Instead of taking so much stock in GM, we could have simply offered the company more loans.
“But for years, GM has been buried under an unsustainable mountain of debt. And piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past. So we are acting as reluctant shareholders – because that is the only way to help GM succeed.”
Despite GM’s position, Reuss says Holden will still borrow small amounts from GM to keep operating.
“We don’t get into big debt positions with the parent company since the parent company is now in a bridge loan activity with the United States Treasury. We’ve been operating pretty much as a stand-alone self-funded unit here since that’s been going on.”
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.
