Monday, March 27, 2006

Is Holden on the chopping block?

Although it is fairly wild speculation, an automotive industry analyst has put forward a suggestion that GM in its death throes may sell off Holden while it is profitable to help stop their impending doom.
The principal of international automotive strategic consultants Autopolis, Graeme Maxton, said GM was already taking desperate measures to avert the greatest crisis in its 98-year history and sell-offs of its better performing divisions couldn't be ruled out.

"If you look at in terms of pure economics, their investment in Australia must be under question," he said yesterday.

"GM is having to sell off the family silver and close down anything that is not economic to cut costs in order to survive for the next few years," he said.

The Detroit-based automotive giant had already begun disposing of its shareholdings in Japanese makers Isuzu, Subaru and Suzuki, despite these being strategically significant ventures, Mr Maxton said.

And GM yesterday announced it had sold its property financing arm, GMAC Commercial Holding, for $12.5 billion.

"All of these are desperate measures to stay alive. What GM is waiting for is when enough of its pensioners die off that it can re-fund itself and invest for growth again. But it's absolutely hidebound right now. It has so much debt and so many liabilities that it has to simply cut them loose," Mr Maxton said. "They can't do anything until their situation improves but they've got themselves into something of a death spiral because the more they have to cut, the more consumers stay away from their products, the more their market share goes down and the more their losses go up."

Mr Maxton acknowledged Holden was not in the same dire sales situation as GM's US brands whose combined market share fell to a historic low of 25 per cent last year. But he said that the more profitable Holden was, the more tempting it would be for GM to sell it off.

"The question for Holden is who would buy it. There are actually not many companies except maybe a Chinese maker who would buy it right now," he said.

I doubt that GM would try and sell off Holden. Holden is such a niche market product tied very, very closely to GM in the US that any company is going to have to pay GM a lot of licensing fees and parts costs would hurt too. I suppose the way to end the dependence on GM is to get rid of local production and buy in cheap badge engineered products from elsewhere. Actually quite similar to what Holden do with the Barina and Viva.

I wonder what the public reaction would be to the sale of an 'Aussie icon'?

1 comment:

Tom said...

No doubt the reaction would be for the public to suggest the government buy it or inject money into it to keep it Australian...