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GM Holden Says Labor Costs Must Be Cut to Save Australia Plants

General Motors Co. (GM)’s Holden unit and its labor unions will begin talks to reduce costs enough to keep its Australian plants viable, a month after Ford Motor Co. (F) said it will stop making cars locally.

“Every single option is on the table,” Mike Devereux, Holden managing director, told reporters in Melbourne today in response to a question on possible wage cuts. “Our employees will be presented with a very difficult decision, I know that, but it’s also one that I believe can help save the industry of making automobiles in this country.”

Holden said it will cut about 400 jobs in Australia, blaming the strong local currency and devaluations in competing markets for making its local plants among the world’s most expensive. Devereux said it costs about A$3,750 ($3,570) more to produce a car in Australia than at other GM plants.

“If you want to build anything in this country, you do face significant cost penalties,” he told reporters. “The goal is to make labor-related cost savings.”

Australia’s three carmakers have struggled as a 13 percent rise in the local dollar against the yen over the past year stoked sales of cheaper imported vehicles and cut exports. Japan’s Toyota Motor Corp. (7203) is the largest manufacturer of cars in Australia.

Prime Minister Julia Gillard’s government has set aside A$5.4 billion until 2020 to support the car industry. Purchases of locally made cars fell 18 percent in the past four years, according to Federal Chamber of Automotive Industries data.

Ford Australia plans to cut 1,200 jobs from its two plants in Melbourne and Geelong by October 2016 after costs rose to double those in Europe and four times those of its Asian divisions, the company said last month.

“Holden is committed and remains committed to building cars here,” Devereux said, reiterating a May 23 statement after Ford announced its cuts. “We believe it has a crucial and strategic importance to the Australian economy. But we also recognize that there’s a need to improve our competitiveness.”

To contact the reporters on this story: Brett Foley in Melbourne at bfoley8@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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