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Effects of Holden exit on parts suppliers 'uncertain'

12 December, 2013

Following Holden's announcement that it will be exiting Australia, business information analysts at IBISWorld provide insights into the outlook for domestic car manufacturing - forecast to decline by 10.2 per cent per annum over next five years.

Impact of Holden's departure

GM Holden Ltd holds a market share of 22.2 per cent of the industry. Their exit in 2017 would reduce the size of the industry by a similar percentage.

GM's exit marks the second major exit of the last three remaining major players in the industry.

Combined with Ford's exit in October 2016, the industry is expected to be reduced by a total of 40 per cent by the end of 2017 calendar year. Holden's exit from the industry would lead to a direct reduction of 2900 employees over 2016-17 and 2017-18 (1,600 from SA and 1,300 from VIC).
 
While the effects of Holden's departure on parts suppliers is not certain, it is anticipated excess capacity will arise, which is expected to result in layoffs of workers and closures of some firms.

Manufacturers that supply parts to Holden and Ford are expected to see their sales significantly reduced, but falling production costs of some inputs may help surviving firms transition to manufacturing other products.
 
Opportunity for other operators


Toyota is currently the only remaining manufacturer with no official intentions of abandoning the Australian car manufacturing industry however the company has questioned its commitment to Australia if certain conditions are not met.
 
IBISWorld general manager (Australia), Karen Dobie said: "As the only remaining major player, theoretically Toyota will have greater control of the market and greater bargaining power - which could result in an overall benefit to the company if it is able to negotiate with unions for lower employee wages which could reduce labour costs for the company (and industry).
 
"If Toyota does exit, it would reduce the motor vehicle manufacturing industry in Australia to negligible levels," Dobie added.
 
Impact on industry revenue

Taking into account Ford and Holden's departures from the Australian motor vehicle manufacturing industry, over the five years through to 2018-19 IBISWorld expects revenue to decline at an annualised 10.2 per cent.
 
In 2013-14 the Australian car manufacturing industry is expected to generate $11.3 billion, declining to $6.6 billion by 2018-19

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ceirano | Friday, December 13, 2013, 11:40 AM
Blame GM for bending to Union demands, & blame the Union for demanding ridiculous payments & Union control. 60-70G per year is out of all proportion to what process workers receive in other industries. Unions seem to have a victim complex & forget who pays the wages.
Tommo | Friday, December 13, 2013, 1:51 PM
yep, as I wrote in a letter to all federal member in august. The people in the firms that supply Holden get $16-18 per hour and have kept the Holden workers there for decades. The Holden guys got $30-31 per hour and now ti was their turn to help. I pointed out the German union IG Metal told their Volkswagen members to get real and take a pay cut in 2005. They did and Volkswagens are still made in Germany in Wolfsburg and productivity has risen. Thye get bonuses from that. But our unions with 100+ year old thinking are too dumb to think like the German union. GM is a company poorly run that has sucked the USA govt for a few billion and has its Volt car subsidised to the tune of > $100K I asked the guys working for me what they think of it going and the 2 under 30 said they did not care as they would not buy a Holden, so what does that say about is the company switched on and understanding its the potential customers. Ford should have a diesel in terriotry The problems are from both sides.
Julie | Friday, December 13, 2013, 4:25 PM
Finally we have a government that has seen the light and not bowing to Union Pressure. There are many other Buinesses that have closed or are struggling and we don't get any help from the government. Thank goodness that they are not wasting any more of my taxes on this industry. At the end of the day these employees will get a package deal when a small business has to shut the owners walk away with nothing and probably still owe business loans.
Goldie | Saturday, December 14, 2013, 7:46 AM
The old chicken and the egg conundrum. What came first, the drive for ever more wages that inevitably drive up the cost of the finished article or rising production costs, the likes of wages, taxes, compulsory everything, complying legislation and who knows what else which inevitably leads to rise in cost of whatever is being made. Two problems. Aussies want a standard of living that inevitably makes us uncompetitive in the worldwide marketplace and modern worker entitlements that only ever seem to grow combined with suffocating legislation, skyrocketing utility costs, all manner of taxes, and exorbitant prices for just about everything almost guarantee that little if anything wil continue to be made in Australia. I wonder when Julia Gillard's "new economy" that they talked a lot about is going to make an appearance. Me thinks it was all hyperbole just like themselves.
Alf | Monday, January 13, 2014, 12:12 PM
I have said it before and I will say it again, Communism is dead now its time for the unions, it should have been at the end of them when Howard was in but he was removed with lies and scare mongering by these same bloody idiots,now after all the damage Labor has done over the last 6 years we have a chance to gain control of our destiny,Bugger Holden its not Australian its US owned,and possibly a major reason the unions drained them dry, now we all suffer. This government has to keep this dollar down, and support those of us who are still in business,Guarantee the banks as Rudderless did and get this country moving again and kill off these unions or at least educate them that they have to stop biting the had that feeds it.