The real reason Holden failed
Oz propped tired sector up too long instead of forcing it to modernise
We love football, meat pies, kangaroos and Holden cars — so goes the famous Holden car advertising jingle.
The 1970s jingle gets rolled out from time to time by nostalgic radio announcers who seem to think that along with “dinky-di” and “bonza”, it constitutes Australian culture and identity.
In actual fact, it was lifted from a US car ad: “We love baseball, hot dogs, apple pie and Chevrolet.” And there’s even a South African version: “We love Braaivleis, rugby, sunny skies and Chevrolet.”
It’s illustrative because it demonstrates the huge success US car giant General Motors had in convincing Australians and their governments that the future Holden, fully owned by GM, was central not only to the health of the Australian economy, but also our way of life.
It’s true the company has a long Australian tradition, dating back to 1856 when James Alexander Holden opened the Holden saddlery in Adelaide, moving into the automotive industry in the 20th century when he began making bodies for imported Chevrolet chassis.
But Australian ownership came to an end almost a century ago, when the company was acquired by General Motors in 1931 and became General Motors Holden.
Since then, General Motors’ promotion of the Holden brand has garnered the company billions of dollars in subsidies from successive governments, right until the firm stopped making cars in Australia in 2017.
The announcement last week that the company would retire the Holden brand altogether was greeted by predictable weeping and teeth gnashing, led by the Prime Minister. Scott Morrison said he was angry that GM had let the Holden brand “wither”, despite receiving more than A$2 billion ($2.08b) in subsidies over the years.
It is, of course, easy for a politician to stick up for Australian workers after the fact and blame a foreignowned company. It’s easy to blame a US multinational, but the truth is more complicated, and exposes failings on the part of Morrison’s Government and those that came before.
The demise of Australian cars was inevitable.
Manufacturers simply didn’t have the scale to produce cars for a market as small as Australia and once import restrictions were lifted in the 1960s and tariffs reduced in the 1980s, it became clear the industry couldn’t compete with cheaper foreign-made cars. By the turn of the 21st century, Australian consumers’ preferences had changed. They no longer wanted the muscle cars made by Holden and rival Ford. Holden changed tack, turning its focus to the smaller cars and SUVs consumers wanted but the mining boom and the resulting high Australian dollar meant foreign cars, no longer slugged with heavy tariffs, were much cheaper.
First manufacturing went. Since 2017 Holdens have been made elsewhere, including in Germany, Canada, the US, Thailand and South Korea.
But offshoring wasn’t enough to save the brand.
Holden was present only in Australia and New Zealand, two markets too small to achieve any scale in what GM called the “highly fragmented right-hand-drive markets”.
“After comprehensive assessment, we regret that we could not prioritise the investment required for Holden to be successful for the long term in Australia and New Zealand, over all other considerations we have globally,” GM International Operations senior vice-president Julian Blissett said last week.
GM is retreating to the US, where it will direct its capital to retooling for lightweight electric vehicles.
What’s surprising is that Holden lasted as long as it did. Australians started to abandon the brand many years ago. In 2002, the last year in which it was the most popular make of car in Australia, Holden had over 20 per cent of the market. When the brand was shelved last week its market share had sunk to 3.7 per cent.
By protecting and subsidising the car industry to shelter it from international competition — and from economic reality — governments were delaying the inevitable.
They have also missed an opportunity.
The feather-bedded automotive sector failed to keep up with modern, efficient manufacturing, ultimately to its own detriment. But it’s also to Australia’s detriment. Had the car industry been forced to modernise and compete on its own terms, it probably wouldn’t have survived anyway, but at least Australia would have the foundations of an advanced and specialised manufacturing sector.
Successive Australian governments poured A$35b in subsidies into the car sector over two decades. Had any of those governments had the courage to stop supporting this inefficient sector and put the money into manufacturing training and research and development, we might have a thriving and internationallycompetitive manufacturing sector instead, with many more high paying jobs than GM’s ultimate exit from Australia will cost.
What’s surprising is that Holden lasted as long as it did.