Holden together

Holden has been in the news in recent months and not always for good reasons. Last week, we had monthly vehicle sales reports for September and it was bad news for the General’s Australian division, with Holden being overtaken as the #2 brand in Australia by Mazda for the month. Hyundai is coming hard at #4, too, so there’s no rest for the wicked.

I thought I’d take a deeper look into Australia’s car company. Given that I spent six years writing about – and ended up working for – a brand that was discarded by General Motors, I’m familiar with the warning signs. Could Holden be in danger?

Holden’s Chairman and Managing Director, Mike Deveraux, was asked about Holden’s commitment to producing cars in Australia while in Bathurst for the V8 Supercars highlight endurance race last weekend. He was very positive and very sincere, stating a long-term commitment to both Australian production and the company’s involvement in V8 Supercar racing (a key element to Holden’s marketing and brand identity here in Australia).

I still think there is some cause for concern, however.

Sales

Holden sold 126,095 vehicles for the full year in 2011. That was down from 132,923 sales in 2010. So far in 2012, Holden have slipped another 11% with just over 85,000 vehicles sold.

It gets worse.

The 2012 figure includes full year-so-far sales for the Holden Cruze, which was only available for part of 2011. That’s one extra model and still an 11% fall in 2012 – in a market that’s risen by 9%.

Much of the fall is due to the Holden Commodore. The Commodore was Australia’s most popular car for 15 consecutive years until it lost its crown at the hands of the Mazda 3 in 2011. Commodore sales have slipped 27% in 2012, including a 31% dip in September. This is symbolic of an Australian shift away from large sedans into either utes/SUVs or more efficient, smaller vehicles (and to be fair, the Ford Falcon is suffering even more, despite now offering a turbocharged 4-cylinder variant).

More worrying is a 37% drop in Cruze sales last month. The Holden Cruze is part of GM’s global vehicle strategy and was launched with great fanfare in February 2011. The Cruze is built locally and its addition to Holden’s production line in South Australia was big news. Even our Prime Minister got in on the act, being invited to drive the first vehicle off the production line.

Production

Holden produced 66,061 vehicles in Australia in 2010. 7,817 of those vehicles were exported to other countries.

Holden also built 98,146 V6 engines in 2010, for use by GM and other companies around the world.

In 2011, Holden added the Cruze to its Elizabeth production facility in Adelaide and produced around 90,000 vehicles. The number of engines produced in 2011 at the Fisherman’s Bend plant, in Melbourne, is unknown. The expansion of the line at Elizabeth is good news for Holden and may position the company for future export growth but only if the Australian dollar falls in value over the next couple of years.

Range

If you visit Holden’s website you can see their range of vehicles currently for sale in Australia.

Commodore – a great car but one that’s out of fashion. Australians are currently smitten with SUV’s and utes when it comes to larger vehicles.

Cruze – after a good start, the Cruze has ….. cruised to a more lack-lustre position. Commodore and Cruze sales are so slow, in fact, that Holden has recently announced a series of small stoppages at their Elizabeth plant in South Australia in order to adjust to reduced demand.

Barina – there are three different Barinas for sale at the moment. Holden would probably dispute suggestions about a lack of clear identity in the light car segment by saying that’s an example of customers being offered choice.

Colorado – a new vehicle with a big marketing push. It’s regarded as a solid improvement over its predecessor but reviews indicate that it’s not a leader in its segment despite being a fresh new vehicle.

Captiva SUV – Holden have built a a good market for the Captiva, but it’s still not a top seller in what is a very heated segment.

Ute – Has a strong market position and given the popularity of utes in Australia, should retain a good position.

Caprice – in a very small segment along with the Chrysler 300, which leads it in sales for upper large vehicles under $100K.

Volt – The Holden Volt extended range electric vehicle has just been launched. The Volt is an undoubted technical achievement and has received good driving reviews so far ….. BUT ….. seems to be universally regarded as simply too expensive for a vehicle of its size, despite its considerable technology. The Volt is an answer to a question that customers aren’t scared enough to ask yet.

Malibu – it hasn’t arrived here yet, but the Malibu will soon fill the medium car segment gap between the Cruze and the Commodore. The new 2.5 litre Malibu LTZ recently came a distant sixth in a six-vehicle midsize segment test published by Motor Trend in the US. Car and Driver said that the new 2.0 Turbo version is the best of the Malibus, but is not worth the premium you pay over better choices in the segment. It’s not an auspicious introduction but we’ll have to see what Australian journalists make of the car when it arrives.

In 14 of the passenger car segments measured in Australia, Holden finished on the podium in only 3 segments for September 2012 – Large Car (Commodore), the almost non-existant upper-large car (Caprice) and the 4×2 Work utility vehicle (Holden Ute). We’ll have to wait to see the full year figures, but I’m betting they won’t be much rosier.

Comparisons with Saab

Holden is in decline, but is still a major seller in its home market, second only to Toyota but with Hyundai continuing to eat away at its market share.

Saab was a major seller in the Scandinavian market, second only to Volvo.

Holden sold 126,000 vehicles in Australia in its last measured full calendar year and I’m sure there were several thousand exported as well. As noted earlier, less than half of Holden’s 2010 sales were actually manufactured in Australia, though that number would have risen in 2011.

In the decade leading up to when GM decided to sell Saab, the company sold an average 123,000 vehicles per year around the world. The vast majority of those cars were 9-3 and 9-5 sedans and wagons, made at Saab’s plant in Trollhattan, Sweden.

Holden had 4,661 employees at the end of 2010.

Saab had around 3,500 employees.

Saab manufactured more vehicles in what should be a more profitable segment and they did it with fewer employees, a much smaller model range and in one of the most expensive manufacturing countries in the world. Despite Saab having brand new models in the pipeline with investment funds already spent, GM saw fit to sell Saab off in 2009.

Should this have any relevance for Holden?

They won’t talk about it publicly, but I would be willing to bet the shirt on my back that conversations have taken place in Detroit about just how much the Holden brand is worth to GM. We already know that it wasn’t valuable enough to keep Opel out of Australia. There might just come a time when Chevrolet holds more cachet than a domestic label that’s no longer selling domestic vehicles in great numbers, one whose historic attraction has been overtaken by consumer sentiment.

Economies of scale are one of the key factors that rule the automotive business and it’s not just the production of vehicles and parts. Marketing and advertising are huge cost centers for car companies and the cost of supporting a niche, single-country brand in decline are not insignificant.

Holden recently secured a $250mil investment from the Australian government. GM will contribute another $750mil and that billion dollars of investment is said to see local Holden production in Australia continue until 2022. GM also plan to take high-spec Commodores and sell them as the Chevrolet SS in the United States, though a persistently high Aussie dollar must be putting pressure on those plans.

It’s not unusual for GM (or other companies) to squeeze money out of governments in order to sway decisions about which factories will stay and which ones will go. GM knows that its plants are major employers and the loss of thousands of jobs is a politically sensitive issue for any government. Even the last bastion of capitalism and free trade, the USA, deemed GM too big to fail back in 2008.

But the fact that a government like ours came up with some money doesn’t make GM’s decision binding. Here’s another example from Saab’s time as a GM-owned company.

In 2006/7, General Motors were faced with a decision about where to build their next generation of ‘Delta’ platform vehicles. The Opel Astra was the main vehicle in question, though Saab’s new 9-3 would have been made on this platform as well if it had come to light. The choice came down to Opel’s plant in Russelsheim and Saab’s plant in Trollhattan and given the might of the unions in Germany, the future of the Trollhattan plant was looking grim. Saab’s Trollhattan plant eventually won the decision, however, and part of that outcome was thanks to the Swedish government.

GM insisted that if they were going to continue production in Trollhattan, the transport infrastructure between Trollhattan and Gothenburg had to be improved. The infrastructure in question is the E45 highway that stretches some 70 kms NNE from Gothenburg to Trollhattan. There were already plans in place to improve the E45 but these plans were expanded in the name of safeguarding Swedish jobs in Trollhattan.

Result? This small, winding piece of highway has now been expanded into a four-lane expressway with improved rail as well, at a cost of 1.5 billion Euros (around $A1.918 billion at today’s rates). Work is scheduled to finish at the end of this year.

The Swedish government made the commitment, but it didn’t stop GM from pulling the pin on Saab when the going got especially tough.

Conclusion

Holden is a rich part of Australia’s automotive history but the decline of the Holden brand as an Aussie icon started back in the late 1970s and has continued apace. The iconic vehicle types that were Holden’s bread and butter have become less relevant as the focus has shifted from the basics of space and power to more sophisticated qualities such as efficiency, reliability and styling. Holden have got better at all of these things, but they are consistently behind the market, playing catchup to brands like Toyota and the fast-moving Hyundai/Kia twins.

Holden have an uphill climb ahead of them and face fierce competition along the way from brands that aren’t burdened with high labour costs or a high currency in their country of origin. I don’t doubt GM’s commitment to the Australian market but given the challenges that Holden face both now and in times ahead, I fear that the brand’s future is far from guaranteed.

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38 Comments

  1. For US readers:

    Holden Commodore = former Pontiac G8, which was a very good car.
    Holden Caprice = Buick Park Avenue in China.
    Holden Colorado = Chevrolet Colorado (four-door pickup)
    Holden Ute = Commodore-based El Camino

    My feeling is that the value in the Holden brand in Australia, based upon what I’ve heard from you and others, is really tied to domestic production as you’ve stated. There have been many very, very good (even great) designs in Holden history, but a market like Australia will always have a much larger number of imported cars and designs to choose from. Even the largest, most robust OEM will have off years when the domestic designs are a little older and the imports are new. This is likely one of those years.

    As you also hint, Holden has, in the words of the fashion retail market, ‘over assorted’ in my opinion. They simply offer too many cars for the volume of production and/or sales. If they eliminated one-third of the products (a couple of Barinas, one of the SUVs and trade the Commodore for the Malibu), I’ll bet they would be more profitable and more competitive.

    1. Regardless of sales figures, if you say the word ‘Holden’ in Australia, (especially country Australia) the synonym is ‘Commodore’ (whether that be in the sedan or Ute format). If that is taken off the market, Holden will virtually disappear in the minds of many Australians I would venture.

        1. Note that Holden have given no commitment to a new Commodore beyond the VF (for which they’re received another $40million in funding to set up aluminium stamping to reduce the vehicle’s weight).

          It’s amazing how much of Holden’s identity is encapsulated in V8 Supercar racing. It’s the one primary, patriotic link to their golden past. If the Commodore goes, I wonder how they’ll bridge that link.

          Ford will suffer if the Falcon’s lost, too, but at least they’ve got an identity of their own in the light vehicle and utility segments with the Focus and the Ranger.

          1. A couple of years ago at my cousins wedding, one of my other cousins (who used to own a HQ) and I were chatting when an old bloke came up and started chatting to us. He ended up telling us that the real Holdens have chrome bumpers. I imagine that there are a lot of guys like this as well.

            I think Holdens undoing is changing from rebadging Opels to rebadging Daewoos.

      1. “Kingswood” was once synonymous with Holden. When that disappeared, it was replaced by “Commodore”. The original Commodore wasn’t that well received by Holden traditionalists. The smaller narrower car derived from the Opel Rekord/Commodore wasn’t considered to be much bigger than a Torana by Holden fans, and many of them shunned it. Ford stayed with a larger design for it’s Falcon and reaped some rewards for that. The Commodore gradually grew to Falcon size and really became a Kingswood again, except in name. Speaking of “Torana”, many consider that Holden should have built the new Torana concept it displayed back in 2004 and put less emphasis on the Commodore. The smaller hatchback might have been just the ticket instead of eventually building Daewoos here in South Australia?

        http://www.netcarshow.com/holden/2004-torana_tt36_hatch_concept/

    2. Eggs, when I started writing this, it was intended for a different (more local) audience, hence the lack of model description. As I weaved more and more Saab content into it, I came to realise that it wouldn’t fly with that audience. Still learning.

      Holden’s decline isn’t down to something that’s happening just this year. It’s been a long, drawn out affair that’s been very closely aligned with GM’s own decline, actually. The competition has simply got better, quicker.

      1. Brendan, there are still HEAPS of people like that old bloke.

        Holden built their massive base back when they really were Australia’s car company, building models like the Kingswood and its predecessors. Ted Bullpit was funny mostly because the character was so close to being true in many respects (non-Aussies should Youtube “Kingswood country” for a humorous and very politically incorrect slice of 1970’s Australia)

        Since then, Holden have got slightly less Aussie each year and we’ve all got slightly more cosmopolitan as well. As you mention, the Daewoo connection has sped things up quite a bit in the last few years and once people move away and find something they like, you’ve got to have something overwhelmingly good to win them back. Holden haven’t had anything revolutionary, or overwhelmingly good for a long, long time.

          1. Happy to claim that one.

            Also a little wary – it’s the same body that gave VM a gong back in 2010 as best entrepreneur. I love Victor and his work, but let’s just hope there’s no curse associated with a Eurostar award 🙂

            Well done Carlos!

      2. Yes, I gathered that, just trying to put some context to the piece.

        And whether it’s a short-term or longer-term thing, I’m not in the position to know; you are. I think that my point remains valid: it’s relatively easy to dilute sales with new imports when the market is the size of Australia’s vs. the US, Europe or China. One newcomer can really dent the sales of even the largest market presence.

        Frankly, I’m sorry to see the Holden suffer because they brought a great deal to the GM table with alternate designs.

  2. Thanks for this analysis Steven. Your concerns are very plausable.

    Back in January when the Saab Community was preparing for the ‘We are Many, We are SAAB’ meetings around the world, South Australian Premiere Jay Weatherill was on an 11 day tour in the States which included discussions at GM headquarters on the future vaibility of vehicle manufacturing in South Australia. I remember being surprised that this did not cause more of a concern at the time, given what had so recently happened with Saab. People were talking about solidarity against GM but the point for me at that time was if GM could ditch Saab, surely Holden would be a likely target given its lack of significance as a global manufacturer and that it really only caters for the domestic market – one with much higher labour costs than some of its competitors.

    Fortunately the financial agreement was reached back in March which has bought time but I share your concerns for the future of the automotive industry in this country.

    1. I should clarify that though I have concerns for the industry, I don’t have any allegiance to the Holden brand, at least not towards any of its current incarnations. The classic Monaro was their zenith in my opinion.

      As I write this, glancing out of my window, about 70 metres away, there’s a Purple SS Commodore V8 Ute parked across the road. It’s less than 10 years old with 4 spot lamps across its roof, a nudge bar with 2 more driving lights, and 3 aerials (antenna’s) that I can make out. Oh… he just drove it past my window…make that 5 aerials and add an RM Williams sticker in the rear window. The mentality of this demographic is one that I really just don’t get.

      1. I think that’s a whole other post, Ian. The two Australias. So close, but yet so far sometimes.

        I’d love to go to one of those Ute Musters and just people-watch.

        1. Whilst I’ve never been there, it’s always struck me how much this country has modelled itself on the US – or at least the US depicted in TV. From the high street shop facades of the 60’s, 70’s and 80’s, which resemble their counterparts from the wild west, to the font type and colour of road signs, the popularity baseball and even the cowboy (Man from Snowy River). That we have Ute/Pick-up culture in common should therefor come as no surprise I suppose.

  3. When I first started reading this I thought there is no way Holden could be closed. However by the end I’m convinced there is now a chance.

    My Grandfather always owned Holdens, never anything else, and always bought them new. I believe there are many others of his vintage that have the same view. However my Grandfather has passed away so is no longer a customer.

    My parents had a couple of Holdens, but haven’t always bought Holdens. Mum really likes Commodores that she’s had and is thinking of buying a new one. However I keep giving them alternatives.

    I’d happily own a Holden, I even learnt to drive in a Holden. There’s two reasons why I wouldn’t
    1) They’re not the best option on the market.
    2) The image that comes with it. It’s become a lower middle class car.

    I hope Holden continue in this country.

  4. Interesting article. What do you think the impact of Opel’s launch here will be ? This could signal the transition to a GM global brand and the dismise of the local product

    1. Opel’s progress will be interesting. They only sold 174 vehicles in September, which I’m sure isn’t too far off their forecast though I’m also sure they’re hoping the Astra nameplate will gain some traction some time very soon.

      Opel’s gone for a big launch, complete with an AFL team sponsorship (Melbourne Football Club). GM wouldn’t do that for a brand that’s intended only as a niche player. They’re aiming for a position above the garden variety brands, similar to a position that Saab used to occupy as entry-level premium. Will customers ever view the Astra that way?

      They’re not aiming for Opel to replace Holden, but they could still end up shooting Holden in the foot. An Insignia vs Commodore comparison would be interesting. Astra vs Cruze would be, too.

      1. So while GM is pushing Chevrolet to take over Opel’s position i Europe, they are also pushing Opel to take Holden?
        Why is GM competing against itself? Again?

    2. Opel’s Astra re-badged as a Holden Astra sold very well here. The Opel Corsa re-badged as a Holden Barina did pretty well too. The cheaper Daewoo Kalos derived replacement for the (Opel Corsa) Barina received considerable criticism initially. One reviewer said that Holden had gone from a class leading small car to one that noticeably trailed the pack. The Astra’s replacement copped some flack too. The re-badged Daewoo Lacetti (re-named Holden Viva) was certainly off pace. Subsequently Holden has done much to improve the Cruze including the locally designed hatchback version, it’s still probably a class below the current Astra. However Opel will charge a premium over the Cruze.

      1. I am hugely surprised that GM allowed Opel to compete directly in Oz. It seems that a Vauxhall rebadged as a Holden would be the smart play?

        I don’t ‘get’ moves like this within the context of GM’s ‘control’ strategy with brands like Saab and Buick.

        Brighter minds than mine….

        1. A Vauxhall, Opel or Holden Astra have traditionally been re badged versions of the same car so it makes little sense to me that one should sell more than another. I know about brand perception etc, but all that goes to show is how gullible and stupid people sometimes are. GM would seem to be taking the pis5 by allowing those brands to compete on the same market. But then you only have to look at how many Holden Commodore Utes are being driven around with Chevrolet (and increasingly) Pontiac badging to realise that they’ve succeeded! Would Aussies have bought a SAAB 900 badged as a Holden I wonder? Strange days on planet earth.

  5. Agreed. Interesting times ahead. Off topic but a great finish at Bathurst for both Holden and Ford. It will be curious to see them mix it with Mercedes and Nissan in next years series. The round in Texas may help both their causes via promotion in the US ?

    1. I watched the first few hours but was at the movies for the finish (wife’s birthday – must be a good husband). Sounded good, though. I’m a big fan of Dean Canto so to see him nab a podium spot was great.

      I’m very excited about the new entrants next year. Some new blood is always good.

  6. One thing we can count on is GM shooting itself in the foot. Both of them. And other feet around them. We’ve seen it happen with Saab, and we’ll see it happen with other brands. It’s sad to see good brands wretched and disfigured while the monster lives on…

  7. I think GM has a problem with their “local” brands. On the one side it’s fine to relay on local brands, like Holden, Vauxhall, Daewoo, Opel, Saab, but only if those brands are not accounted as closed companies with its own earnings and costs.

    I don’t know about Holden, but Opel is having constant costs but with a continuously reducing income, because their home market is in a big crisis.

    If, and only if, GM wants to keep local brands, Gm will have to globalize their earnings and costs as it makes no sense that Buick cars based on platforms developed in Europe are being sold in China, giving GM a big income but taking the ROI possibility from GM-E. At the end of the day a brand for GM is mostly only a badge on the hood, or a different colour of the instrument panel.

    An other scenario for GM is going full global with their 3 US brands, Chevrolet (low-end), Buick (Lower Up-market), Cadillac (Up-market). Those three brands would be able to compensate losses on weak markets with earnings in stronger markets.

  8. Holden has been a part of GM since 1931. While it is unfortunate, it seems local brands are less likely to flourish in the future than they did in the past. The asian brands that threaten Holden appear to be doing so with global cars. This doesn’t seem like it has much to do with Saab – Saab was a global brand – but one with a tiny footprint.

    Global branding and manufacturing has clear benefits – benefits that apply to Mazda, Toyota or GM.

    Can GM be more successful in Australia with cars branded as Holden, Opel or Chevrolet? The answer to that may define the future for Holden.

  9. I just can’t speak of GM , on the ground where they had a very large plant in the US about 100 miles south of Detroit a new gaming house just opened and the once strong union plant is gone . Too big to fail ? What with the new slave labor in China GM has no stearage , they will burn any bridge. Rant over …..

  10. I have seen 2 unusual Holdens here in the USA, both in 2007. I was lucky to see the Holden Efijy Concept Car at the 2007 Detroit Auto show when SAAB displayed my SPG on its stand. Later in the year I saw a Holden pick-up truck from down under on the track. It was with a salesman for dba Brakes and was very quick on the SAAB Track day at Waterford Hills, MI during our Convention, near Detroit.

    When I look at Holden’s production they are now below those of SAAB’s record in 2006. So Holden is that small in the minds of GM. I certainly hope they survive. I like the Griffin-like emblem.
    http://automobilebrandsofthepast.blogspot.com/2010/12/holden-efijy.html

  11. the current commodore is good car [rwd too] but aussies want suv’s regardless of running costs, it’s not like the hilux is cheap or economical but it is a big seller, the cruze has aged very quickly, no holden no v8 supercars, no more battle with tru-blu, it would be interesting to see Holden sales on a rural vs metro comparision [hobart has a large modern holden dealership so still doing well?], speaking with two taxi drivers to + from the airport in the last 10 days one was driving a prius the other a hybrid aurion [also toyota] and they relayed their running costs as cheaper by $20 per 24hrs

  12. At a more abstract level, the problem is that automotive technology is converging. Everyone is chasing the same design goals, such as fuel efficiency, safety, low NVH, etc. 30 years ago, cars from different manufacturers were genuinely different in a number of technical dimensions, that’s much less true today.

    This was a big problem for Saab. In 1982, it could market safety and turbocharging and really stand out from the crowd. In 2010, it’s distinctiveness was a function of how it chose to implement the same technology as nearly every other manufacturer. (E.g., however sophisticated the 4th gen Haldex AWD is, the distinction between that and any other manufacturer’s AWD technology was too subtle for 95% of car buyers).

    Other car manufacturers are catching up to the automotive state of the art faster than the traditional industry leaders can change it. And they often have a better value proposition than the traditional choices.

    Without knowing a thing about Holden, I’d bet that the differences between a 1982 Holden and a 1982 Mazda were quite large, much more than the differences between comparable 2012 models.

    1. Well said, and that’s exactly why I said that a market like Australia is more likely to show erosion of the established market leaders with the introduction of new competition. By virtue of simply being a newer design, a newcomer can easily pry business from the existing leaders when there is little or no distinction in performance or features.

  13. I hope Holden fairs better than Saab. The US President is taking a lot of credit for GM. “Detroit makes the best cars in the world” or something like that.

    1. Obama on debate with Romney: ‘I had a bad night’

      So, maybe he didn’t mean what he has been saying about GM.

      Although, I don’t remember him saying anything about Australian jobs.

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