General Motors Co. (GM)’s Holden division will cut about 500 jobs in Australia, saying the strong local dollar and currency devaluations in competing markets had made operations in the nation among the most expensive in the world.
The Australian dollar’s 83 percent surge against the yen since its low on Oct. 27, 2008 propelled imports of Japanese cars to a record high last year. The yen today dropped to its weakest since June 2009 on expectations that Bank of Japan measures to fight deflation will further debase the currency.
“I can’t control what central banks do,” Mike Devereux, Holden managing director, told reporters in the southern city of Adelaide today. “The value of the Australian dollar, and importantly the currency plays being made by other countries, mean that we are not competing on a level playing field.”
Costs at Australian plants were up 60 percent compared to 10 years earlier, making the operation “one of the most expensive, if not the most expensive” in GM, Devereux said.
Holden will cut 12 percent of jobs at its plants in Adelaide and Melbourne. About 500 people in the cities will be sacked from a total workforce of 4,320, among which manufacturing plant workers number 2,100.
Japan’s leaders have pledged steps to boost the economy, causing the yen’s tumble. The Swiss National Bank has capped the franc at 1.20 per euro since September 2011 to help exporters and fend off deflation.
Reserve Bank of Australia Governor Glenn Stevens on Feb. 22 said the currency is “somewhat too high” considering declines in prices for the nation’s commodity exports, while adding he’d need to be confident it’s “seriously overvalued” before intervening to weaken it.
The RBA’s Australian dollar trade-weighted index rose to 79.4 on March 27, the highest since 1985.
“The devaluation of the yen, because it’s quite a high proportion of the Australian trade weighted index, could spur the Australian dollar higher and become more of a concern for the Reserve Bank,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney. “The high Australian dollar makes some models of foreign cars more affordable to the Australian motoring public.”
Purchases of locally made cars fell 18 percent in the four years to Dec. 31, according to Federal Chamber of Automotive Industries data.
“While Holden has made significant productivity gains and will continue to do that, we are witnessing a structural shift in the market not just for cars but for anyone or any company that makes things in this country,” Devereux said.
Prime Minister Julia Gillard’s government set aside A$5.4 billion ($5.6 billion) up to 2020 to support the car industry.
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