Here’s a genuine question for friends in the US.
I remember back in 2009 there were a lot of people – and I mean a LOT – crying foul about the US government’s bailout of General Motors. This week, the US government sold its final shareholding in the restructured GM, booking a total loss of $10billion on the bailout.
For that $10billion, you basically got to keep your national car industry. You got to keep the jobs (not just GM’s jobs, but most likely Chrysler’s and Ford’s, too), you’ve got the products, the investment and innovation that comes with the industry, retirees got to keep their pensions.
GM are now profitable and reputed to be offering the best products they’ve had in a long, long time.
Now go back to 2008 and imagine that George W Bush had given a flat-out “No” to GM. Imagine Barack Obama didn’t reverse it. Imagine GM gone, perhaps with a corpse bought out by a Chinese or German company. Imagine Ford maybe gone with it, thanks to the loss of suppliers that a dead GM would have led to. I’m not sure what would have happened to Chrysler in this scenario.
Imagine the depressed pockets of your country thanks to the loss of GM. Imagine the lost businesses that support communities around GM facilities.
Given that you now know what it cost, was it worth it to keep GM in business? What would you have done?
We’re pondering a related issue in Australia because a GM statement from Detroit today announced that Holden will disappear as a manufacturer when they close their South Australian plant in Q4, 2017. The engine assembly plant in Melbourne will shut up shop a year earlier.
There are mixed feelings here in Australia about this. Many are saying that manufacturers have had too much government assistance. Others are saying that government assistance preserves jobs in an important industry and reaps a massive reward in investment from the companies concerned (up to $19 of spending for every $1 of government money contributed)
Holden sales have been declining for some time and despite the new VF Commodore winning very good reviews, Holden are way behind Toyota and only just fending off other companies for third on the sales tables. Holden failed to spot the trend away from the large RWD sedans that were Holden’s bread and butter.
Sound familiar? It’s like the US market and GM SUV’s all over again.
There are 3,000 jobs at Holden that will be directly affected by this decision, but a similar number at Toyota are now in jeopardy along with tens of thousands in supply and related industries. Toyota are now reviewing their position in the wake of Holden’s news.
Our new conservative government has long said that it would provide no support for the car industry beyond what was already on the table. Nevertheless, they have been running a productivity assessment on the industry to gauge the support needed.
GM needed an answer on the government’s position by the end of this year. The government refused to speed up the assessment and committed to reporting in March 2014. Further to that, they re-stated their position that there would be no new money on the table for co-investment in the industry (which begs the question – why have the productivity commission at all if you’ve predetermined your policy outcome?).
Bottom line – the government knew what GM needed. Holden Chief, Mike Deveraux said today the GM felt they had enough information to make a decision. They decided to cut production in four years from now.
By the start of the next decade, it’s highly likely that Australia will no longer have an automotive manufacturing industry. Estimates are that 50,000 direct jobs will be cut and as many as 250,000 could be affected over all. Many of those will find new work (they can go and dredge the Great Barrier Reef, for instance) but a lot of communities will feel the pain for a long, long time.