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.
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.
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.
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.
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.