AP Eagers: Holden withdrawal impacts still uncertain

AP Eagers: Holden withdrawal impacts still uncertain

Car retailer AP Eagers (ASX: APE) expects General Motors (GM) will be "fair and reasonable" with compensation and transition arrangements following its decision to retire the Holden brand from Australia and New Zealand

GM will wind down sales, design and engineering operations in the two countries and retire the brand completely by 2021, just a few years after shutting down Australian manufacturing for good in 2017. 

The US company also announced it would withdraw Chevrolet from the Thai domestic market by the end of 2020, and will also sell its Rayong manufacturing facility in Thailand to China's Great Wall Motors.

GM has indicated it expects net charges of approximately US$300 million (AUD$447 million) from these latest changes.

In an announcement to the ASX after the market closed yesterday, AP Eagers responded to the news, which carried the caveat that Holden service outlets would be maintained for existing customers with warranty claims, spare parts, servicing and recalls for 10 years.

"A.P. Eagers Limited (ASX:APE) has been a loyal partner of General Motors within Australia for ninety years having commenced operations in 1930, eighteen years prior to Holden's launch in this country," the group said.

"This is therefore a very sad day for our company, our stakeholders and, particularly, our dedicated employees who have diligently represented the Holden brand on behalf of the General Motors manufacturer, some for over forty years personally.

"General Motors has indicated that it intends to outline proposed transition and compensation arrangements with each dealer on a confidential basis and that these arrangements will be fair."

The Brisbane-based group will not be able to assess the financial impact of these arrangements until further details are received from the US multinational.

"We are expecting General Motors to be fair and reasonable in relation to the transition and compensation arrangements and to fully recognise our partnership that has spanned ninety years as well as the current commitments we have in place to represent them," AP Eagers said.

There was a silver lining however to GM's announcement which the Australian Industry Group (Ai Group) found encouraging, and that was the company's decision to further its specialty vehicles business in Australasia.

"I've often said that we will do the right thing, even when it's hard, and this is one of those times," said GM chairman and CEO Mary Barra.

"We are restructuring our international operations, focusing on markets where we have the right strategies to drive robust returns, and prioritising global investments that will drive growth in the future of mobility, especially in the areas of EVs [electric vehicles] and AVs [autonomous vehicles].

"While these actions support our global strategy, we understand that they impact people who have contributed so much to our company. We will support our people, our customers and our partners, to ensure an orderly and respectful transition in the impacted markets."

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Australia's last remaining car manufacturers Toyota, Ford and Holden struggled in Australia with high costs and subsidies that were relatively lower than in other developed countries, prompting announcements from all three between 2013 and 2014 that they would withdraw.

Prime Minister Scott Morrison expressed his anger yesterday that Holden would leave after taking more than $2 billion in subsidies during its time in Australia.

"Australian taxpayers put millions into this multinational company," he said.

"They let the brand just wither away on their watch. Now they are leaving it behind."

In comparison to Australia's subsidies, the federal and Ontario governments of Canada spent CAD$13 billion (AUD$14.6 billion) to support GM and Chrysler Group in 2009 alone to protect them from impacts of the recession.

The US Treasury's Auto Industry Financing Program (AITP) involved US$9.3 billion (AUD$13.8 billion) in spending on the likes of GM and Chrysler to prevent them from collapsing in that same year.

German newspaper Handelsblatt reports German car manufacturers received 115 billion euros (AUD$186 billion) in subsidies over the past 10 years.

In late 2018 the South Korean government unveiled US$3.1 billion (AUD$4.6 billion) in subsidies to support car parts makers and the use of electric cars, as well as an extension of the maturity of US$1 billion in loans to GM's suppliers in Korea.

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