HOLDEN has found new hope from an unlikely source. The Coalition Government - widely tipped to spell the death of the Australian car manufacturing industry - has come out fighting to save it.
New Federal Industry Minister Ian Macfarlane, who previously held the portfolio under the Howard Government, said this week he will "arm wrestle" Treasurer Joe Hockey, an opponent of the industry, to secure the required funds.
Mr Macfarlane is yet to meet with Holden but has already spoken with the company at length and has asked his department to expedite a Productivity Commission review and do a forensic check of how much money is left in the $4.3 billion in allocated funds.
When Mr Macfarlane does a walk-through of Holden's Elizabeth factory on Thursday October 3 he will do so with his Coalition colleagues as well as those from unions and the State and Federal Opposition. It's a bipartisan approach to saving the industry we've not seen before.
Holden had secured $275 million from State and Federal Governments in March 2012 but says it needs a new round of funding because "market conditions have changed dramatically".
Mr Macfarlane says he believes in the 1700 factory jobs at Holden and the 16,000 at parts suppliers in SA plus another 28,000 in Victoria. But there is also a fair chance no Government wants to see Holden die on its watch.
By an incredible coincidence, because of the way Holden's model cycles were scheduled a decade ago, if General Motors were to shut down its factories it would be at the end of 2016 - the same time as Ford but, more significantly, on the eve of the next Federal election as the Abbott Government heads to the polls for the first time.
The only thing missing from this week's debate about whether or not to save Holden was Holden itself.
The normally outspoken boss of the company Mike Devereux has been told by his minders to stay quiet.
Which is a shame because among all the noise from economists and so-called industry experts, no-one was pushing Holden's case - except Mr Macfarlane.
Q&A:
1. Why all the fuss?
Holden must make its first big injection of funds for upgrades to the factory during the summer holiday shutdown period. The factory will only be idle three times between now and when the new models are due in 2015 (Cruze) and 2016 (the front-drive car Holden says it will call the Commodore). Holden doesn't want to spend the cash on new equipment if it won't be needing it.
2. Where did it all go wrong?
Australia thought it was doing the grown-up thing when, 20 years ago, it decided to gradually reduce import tariffs and create more free trade. We now have among the lowest import tariffs in the world (5 per cent on most cars and 0 per cent on those imported from Thailand and North America). But the other countries were smarter and had hidden non-tariff barriers that made exporting cars difficult. Add to that mix our high labour costs compared to nearby Asian countries and a strong dollar and exports are all but out.
3. Why are exports crucial?
Because the Australian new-car market is now so fragmented no single brand can sell enough cars to survive on local production alone. There are now more models on sale here (65) than in North America (38) and Europe (42). The top-selling car, the imported Mazda3, led the market with 44,000 sales last year. At its peak Holden sold 94,000 Commodores locally (1998) and exported 60,000 (2005). Last year Holden sold 30,500 Commodores locally and exported 14,500.
4. How does Toyota do it?
Toyota is said to lose about $2500 on every Camry it exports. In other words, the more it builds the more it loses. But the loss is offset by the profits from its imports (aided by the Japanese Yen that's been artificially devalued by the Japanese government). Toyota imports 181,000 cars a year and builds about 100,000 (30,000 sold locally). Holden imports 45,000 cars and builds 80,000 (65,000 sold locally) so General Motors doesn't have the ability to use imports to prop up its struggling manufacturing operations.
5. What happens to Holden factory workers now?
If Holden doesn't go ahead with the new models then the workers revert to their old workplace agreement which has generous and flexible conditions. But they'll be out of a job by the end of 2016. If Holden does strike a deal with the new Federal Government then the workers will forego wage rises for three years, which means they won't be keeping up with the cost of inflation but will still be slightly better paid and have bigger bonuses than Toyota factory workers in Melbourne.
6. What happens to manufacturing workers at auto parts makers?
They're waiting with their colleagues from Holden on the outcome of negotiations over the next three months. If Holden gets over the line as hoped then they'll be safe for at least three years. But the next generation cars will have the least amount of local parts than ever before. The Cruze has 30 per cent local content compared to the Commodore's 50 per cent (and Camry 65 per cent and Ford Falcon 70 per cent). But the next Commodore will likely dip closer to 30 per cent local content.
