The end of GMH

Another day, another stuffup from what already looks like the most incompetent government in Australian history. The Abbott government’s treatment of the car industry has been a disaster in policy terms, and just as bad as far as process is concerned. The key policy failure was the decision to retain fringe benefits tax breaks for cars (90 per cent of which are imported) at a cost of $1.8 billion over the forward estimates, while withdrawing Labor’s promise to give a much smaller amount in additional assistance to the remaining domestic manufacturers GMH and Toyota. Assuming Toyota also pulls out, every bit of the FBT concession will be public money sent overseas, with the exception of the slice creamed off by the salary packaging industry.

The policy process was even worse, announcing an inquiry, then pre-empting the result with a combination of leaks (of course, ABC stenographer Chris Uhlmann was happy to provide anonymity for the source) and Parliamentary taunts. Unsurprisingly, the new GM management in the US was sufficiently unimpressed to pull the plug immediately.

For the diehard fans of microeconomic reform, I guess this counts as a win. But even for them, it’s primarily a matter of cultural symbolism. The protection given to the car industry was so small that on a standard economic analysis, the welfare costs are utterly negligible. And of course, the benefits of protection were swamped by the costs of a chronically overvalued $A, which in turn reflects all manner of policy failures, from global financial deregulation to the subsidisation of the coal industry.

39 thoughts on “The end of GMH

  1. PS – I have never understood the argument that “everyone else subsidises their car industry, so we should too”. Apart from the premise of the argument being simply untrue, those pushing this are just pointing out that we do not even have a competitve advantage in government gullibility.

    Playing off different governments for industry assistance is profitable for the multinationals, not for the people being played.

  2. @john
    IIRC both Ford and GMH experimented with Hybrid vehicles on numerous occasions over the past 5-10 years. Nobody wanted to buy them – sales were terrible. You can’t expect these companies to continually participate in expensive projects that yield terrible results.
    Also, Ford and GMH’s bulk market is/was multi-generational Aussies, not Asian/Subcontinental migrant Aussies (who’ve never been interested in either brand), and your typical multi-generational Aussie’s preference aligns closer to large & powerful petrol guzzling monsters than to environmentally friendly flavours. So, they’ve been faced with unfortunate dilemmas for a while and their current circumstances haven’t materialised through lack of trying or experimentation from my (limited) understanding.

  3. Re
    Hybrid vehicles and Nobody wanted to buy them etc
    If thats the case then why are Hybrid vehicles so popular within the taxi industry ??
    Appears to be the case in Qld anyway that most taxis are now Hybrids (Camry)
    John

  4. In the northern Adelaide suburb of Elizabeth, unemployment runs at 20.3%. That’s right. The closure of the car manufacturing there would have—will have—a major flow-on effect. People who can (just) afford a house in Elizabeth are not likely to be able to afford one in another suburb closer to other work, unfortunately, unless that other work pays well indeed. People who try to sell to move may well find it very difficult, and if the big employer goes, there won’t be much incentive for people to move there. Even so, even without closure of car manufacturing there, the ridiculously high unemployment rate needs to be addressed in some way, and clearly whatever has been tried so far, has effectively failed.

    I’m ambivalent on the decision though: numerous industries have fingered Australian federal and state governments for financial and tax assistance for years, only to pull up stumps and leave when the money tap looked like being turned off. The tragedy for Elizabeth is the concentration of workers in the Elizabeth suburb who worked at Holden. I don’t really know what the answer will be, or indeed if any good resolution is possible, once the car manufacturer leaves. Perhaps manufacturing of some other product—wind turbines would be a particularly ironic one. Who knows. Anyway, I wish good luck to those employees so affected by the announcement.

  5. A little off topic, but it helps I think to understand why GMH finds themselves in the position they do.

    One needs to understand the culture of the parent company GM. They fought every step of the way against higher US vehicle efficiency standards (called CAFE). Management was (is?) stacked with climate and peak-oil deniers (historically Bob Lutz).

    Add to that the generally selfish and energy-wasteful typical US ‘patriot’ bogan and you have a car company that does not believe they need to participate in delivery of efficient vehicles. They had an electric car, they killed it. They purchased a hybrid system for vehicles in the US but actively marketed/white-anted the Prius with their bogan astroturfers.

    Their production quality systems and the quality of vehicles delivered saw them implode in the US. They were rescued because of the too-big-fail nonsense that was pervasive in the US at the time 2008. It was structural decision and most US consumers were turning away from GM. There was plenty of opposition to saving them – a site called The Truth About Cars covered it all pretty well.

    Even now, in the US, the absolutely massive pickup trucks outsell most family cars. Three of the first four in Nov 2013 are absurd trucks http://wap.wsj.com/mdc/public/page/2_3022-autosales.html#autosalesC (think BIGGER than Landcruiser). Present day GM is light different to the basket case that was rescued, except they were able to wipe of ~$90b in liabilities and start again. Lots of GM retirees lost their pensions over that episode.

    US Holden have spent 15 years marketing to Australian bogans, and actually quitely missed that many of them prefer the Subaru WRX. They have zero credibility to reinvent themselves undoing doing 15 years of “big car, man’s car” bullshit.

    As Barry Humphies said “Isn’t it nice of them (US General Motors) to let us call Holden the ‘Australian’ car”.

  6. Yep they shoulda rereleased the Torana as a sporty AWD years ago.
    Would have veered the company off in the right direction so to speak.

  7. I heard on the news tonight that only about one in eight or nine new cars sold in Australia are locally made. Why? I’ve never bought a new car but the new vehicles on offer from Ford and Holden look good to me. Is it just price? My uncle could have owned any car he wanted, within reason, but only ever bought Holdens and updated every time a new model was released. I bought his commodore when he updated in 2002 and I’ve still got it. What have the imports got that the locally made don’t have?

  8. I feel a recession coming on. Industry is not getting the post election lift that all of the pro right publications had flag as certain pre election. On the contrary most are, without criticising the government, predicting losses in many quarters.

    Far from there being a dynamic process of new industrial job creation in Australia, there is an undertone of there being no point in attempting to build manufacturing businesses, one should simply get the work done in China or India. So when 50,000 once secure manufacturing employees hit the job seeking market, there is litle hope that there will be a rapid absorption of these people into other areas, and Australia will skip one more step towards American style employment desperation.

  9. IIRC both Ford and GMH experimented with Hybrid vehicles on numerous occasions over the past 5-10 years. Nobody wanted to buy them – sales were terrible. You can’t expect these companies to continually participate in expensive projects that yield terrible results.

    What experiments were these? GMH developed a prototype hybrid Commodore in 2000, but it never entered commercial production. The Holden Volt plug-in hybrid has been on the market in Australia for about a year, and sales are slow (unsurprising since the price is much higher than competing models). Ford has never released a hybrid onto the Australian market.

  10. Troy Prideaux :
    @john
    Also, Ford and GMH’s bulk market is/was multi-generational Aussies, not Asian/Subcontinental migrant Aussies (who’ve never been interested in either brand), and your typical multi-generational Aussie’s preference aligns closer to large & powerful petrol guzzling monsters than to environmentally friendly flavours. So, they’ve been faced with unfortunate dilemmas for a while and their current circumstances haven’t materialised through lack of trying or experimentation from my (limited) understanding.

    I don’t think so. The evidence is that a lot of Australian’s – even ones who you think are the real Aussie’s don’t want to buy big fuel guzzler’s either. A lot of commodore’s and Falcon’s are fleet vehicles the drivers didn’t pay for. When they buy for themselves they often choose smaller cars hence the popularity of vehicle like Toyota Corolla’s. Admittedly a lot stupid people buy SUV’s too, but that’s down mostly to psychological issues.
    Lets get rid of the distortionary subsidies of fuel, big cars and driving in general and see what the market chooses. By your logic iPads don’t exist because there was no demand for them 10 years ago.

  11. @Tim Macknay
    I apologise, they gathered sales interest at motor shows and various events in Australian versions of US models like the Ford Escape, but there was little interest. Yes, Holden experimented with the ECOCommodore IIRC? This was also during a phase when new diesel tech was proving to be more fuel efficient than what hybrids could offer.

  12. @Troy Prideaux

    Yes, Holden experimented with the ECOCommodore IIRC? This was also during a phase when new diesel tech was proving to be more fuel efficient than what hybrids could offer.

    Yes. I believe one of Ford’s hybrid models on sale in the US (it might have been the Escape) was discontinued a few years ago because the conventional version of the model was just as efficient, if not more so, and also cheaper. The timing of GMC’s hybrid Commodore was pretty bad, not just because of the improvement in diesel tech but also because fuel prices at the turn of the Century were very low.

    That said, the success of the Prius shows that Australians will buy hybrids in decent numbers if they are priced appropriately and marketed the right way. Of course, whether or not it makes sense to manufacture them in Australia is a different question.

    All the major manufacturers seem to be producing or developing plug-in hybrids and EVs at present, notwithstanding sluggish demand (in Australia, at least). Presumably they foresee greater fuel price hikes in the future.

  13. I’m not sure if the Abbott government is technically incompetent, it really probably only represents the interests of the top 20 percent of income earners, so it’s performing quite well so far.

    Contrary to all the neo-liberal propaganda, class war is back on the agenda, Abbott and his accomplices have fired the first salvo.

  14. Contrasting the saving of the salary packaging industry with the passive resignation at the demise of GMH’s Australian operations is a really good way of highlighting the values of this government.

    The triumph of people who make a living out of shuffling papers and numbers over people who make things. At least they are looking after the people who are digging up and selling our country.

    Sigh.

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