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Holden quits Australia

Another Aussie icon is dead, long live the Holden!

In sad news today, General Motors Holden has announced that it will cease local manufacturing operations and significantly cut back its engineering operations by the end of 2017. That ends 65 years of local production.

General Motors Chairman and CEO Dan Akerson said in a statement, “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.”

Australia has the highest number of car brands globally, with more than 60 manufacturers selling their product in Australia.

Approximately 2,900 positions will be lost, including 1,600 from the Elizabeth vehicle manufacturing plant, and approximately 1,300 from Holden’s Victoria workforce. Holden will still retain a global design studio, a national sales company and provide support for existing Holdens through a parts distribution centre.

GM Holden Chairman and MD Mike Devereaux said, “This has been a difficult decision given Holden’s long and proud history of building vehicles in Australia. We are dedicated to working with our teams, unions and the local communities, along with the federal and state governments, to support our people.” Mr Devereaux said a key priority would be to ensure the best possible transition for workers in South Australia and Victoria.

A spokesman for the Australian Manufacturing Workers Union says Holden’s withdrawal would have a profound effect on the economy, with 50,000 job losses and a $21 billion hole in the economy. Ford has already announced that it would shut down manufacturing operations in Australia in 2016, while Toyota is expected to follow Holden’s move, devastating the local automotive suppliers sector.

Foolish takeaway

What is not clear is whether GM will still sell Holdens in Australia post 2017, or whether we’ll be seeing Chevrolets, Buicks and Cadillacs in the Automotive Holdings (ASX: AHE) and AP Eagers (ASX: APE) new car dealerships. My guess is the Holden brand will cease in 2017.

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