General Motors to Quit Australia

General Motors, which earlier this week named Mary Barra as the group’s first female chief executive (CEO), announced that its vehicle and engine manufacturing operations in Australia will end by 2017.

“The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” GM’s outgoing chairman and CEO, Dan Akerson, said in a statement.

The phasing out of production will result in 2,900 job losses at Holden, the group’s Australian business unit, although GM will maintain a sales and parts distribution network in the country.

“The Australian automotive industry is heavily trade exposed. The appreciation of the currency alone means that at the Australian dollar’s peak, making things in Australia was 65% more expensive compared to just a decade earlier,” the GM statement added.

The decision follows a similar announcement by Ford in May this year that it would exit Australia because of high costs and a limited market. It leaves Toyota as the only remaining mass producer of cars in Australia.

A statement issued by the Japanese company in response to its rival’s announcement read: “This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia. We will now?.?.?.?determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia.”

Australia rode out the 2008 financial crisis relatively unscathed and has enjoyed more than two decades of continuous economic growth, becoming one of the world’s most popular investment havens due to its strong links to Chinese growth through its resources export sector. However, this success and the retention of the country’s triple-A credit rating has also kept the Australian dollar (AUD) strong. The country’s exports from the car and vehicle part production sector have fallen from A$5.8bn in 2008 to A$3.7bn in 2012.

GM has instigated other cost reduction plans, which include closing a car assembly plant in Germany, ending Chevrolet sales in Europe and reducing production in South Korea by as much as 20% over the next three years.

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