Holden's 'near-death' fright

[SpoolMan]

Holden's 'near-death' fright Eric Johnston, Clancy Yeates
September 2, 2011 from The Age..
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Holden its own: The car maker's prospects looked grim at the height of the financial crisis.

HOLDEN Australia's manufacturing business almost collapsed after its US parent cut it adrift at the height of the financial crisis, according to a leaked diplomatic cable.

Cables released by WikiLeaks show that in 2009 Holden Australia's then chairman and managing director, Mark Reuss, reportedly described the situation as ''very dark'' and said the car maker would ''scrape by'' until local production of its mid-sized Cruze model began.

He reportedly made the comments during a meeting with officials at the US consul in Melbourne in June 2009. Holden's parent, General Motors, had filed for bankruptcy two weeks before the meeting.

Advertisement: Story continues below The cable said the Australian government had stepped in to help Holden raise money through banks, including ANZ, noting that Australian banks were wary about lending to Holden without backing from its parent.

''Holden is scraping by in the competitive Australian automotive market, even though financing from its parent company has all but dried up,'' the cable said.

''While Holden will remain a part of the new GM, the Australian subsidiary was 'fenced off' from the parent in an attempt to prevent US tax dollars from flowing out of the United States,'' it said.

This forced Holden to dramatically scale back production at its South Australian plant and to reportedly seek short-term loans from GM finance facilities in Mexico and the European Union, among others, the cable said.

It said Mr Reuss ''appeared frustrated that GM had effectively left Holden in the financial wilderness'' once it accepted US Treasury money. Mr Reuss has since become president of General Motors' North American arm.

A spokeswoman for Holden said the cable was an interpretation of a conversation and was inaccurate in parts.

''The material appears to be notes taken by someone making observations of a conversation - it's not a factual document - and it includes a number of inaccuracies about potential export volumes and our financial arrangements,'' said Holden spokeswoman Emily Perry, who declined to comment further.

It is believed Holden did not seek financing from ANZ.

The cable also describes the car maker's plan to shift to production of mid-sized cars, with $149 million in financial support from the Australian government's Green Car Innovation Fund.

The cable noted that Mr Reuss believed a good relationship with the federal government ''will be critical'' should Holden need to ask for further assistance.

The undermining of the economics of Holden's Australian business model was mainly due to the collapse of its exports. Holden eventually persuaded the parent company to give financial support to its restructure, despite the parent's problems. Fundamental to its argument was that Holden played a key part in GM's global design and production network.

After racking up more than five years of losses, Holden's latest financial accounts show it delivered an after-tax profit of $112 million in 2009-10, rebounding from a $211 million loss in 2008-09.

In recent years, it has closed its ageing four-cylinder engine plant, cut more than 2000 jobs and shifted its focus to domestic sales. A spokeswoman for Industry Minister Kim Carr declined to comment.


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