Holden slumps to $210m loss

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Holden Australia slumps to $210m loss

BARRY PARK
March 31, 2010
Car maker Holden today announced it has made a $210.6 million loss last financial year, largely due to the suspension of its lucrative US export program.

"Much of our loss was incurred as a result of GM's decision to discontinue the Pontiac brand in North America," Holden chief financial officer Mark Bernhard said in a statement released today to the car maker's 6000-plus employees.

Mr Bernhard said the record loss included a series of special, one-off charges totalling $223.4 million.

"Before the special charges, which stemmed mainly from program cancellations and the final closure of the Family II engine plant, we posted a small, after-tax profit of $12.8 million," he said.

"The result, while disappointing, was the by-product of one of the most severe economic downturns in recent memory."

Mr Bernhard said much of Holden's loss was incurred "as a result of GM's decision to discontinue the Pontiac brand in North America".

Holden was building Pontiac-badged left-hand drive versions of its Commodore family car for sale in the US, with exports at one stage accounting for one in every two vehicles built at Holden's Adelaide-based car-making plant.

The program was cancelled in April after Holden's US parent, General Motors, restructured to protect itself from bankruptcy.

As a result, Mr Bernhard said revenue had fallen from $5.8 billion in 2008 to $3.8 billion last year.

Holden's Australian operations also felt the pain of the global economic crisis last year.

"At a local level, despite producing Australia's top-selling car, the Commodore, our domestic market was also impacted," he said.

"However, as the health of the world economy began to improve in the second half of the year, so too did our finances. At this time that we started to witness the benefits of some of the more difficult restructuring decisions made during the year to ensure we were operating on a leaner, more efficient base. This contributed to the company's positive operating cash flow of $289.8 million."

Holden has already made changes to align production with consumer demand at its South Australian and Victorian manufacturing facilities, he said.

"To this end, we have been able to ensure the business is in the best possible position leading into the start of small car production at Elizabeth in the first quarter of 2011."

Holden will start building hatch and sedan versions of the Cruze small car in Adelaide from early next year to shore up its vehicle-building operations in Australia.

The Commodore large car continues as Australia's best-selling car, but the Cruze also gives the car maker insurance as sales in the large family car sector continue to decline, hurt by rising interest rates and the on-going fallout from the global financial crisis.

Mr Bernhard said improvements in the Australian new car market, and streamlining its production process, meant that Holden had made a profit in the first two months of this year.

"Throughout the year, we also remained a significant investor in local research and development, spending $146 million and demonstrating that the business remains committed to investing in our long-term future," Mr Bernhard said.

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