Holden’s Road To Ruin

holden smallIt’s official. Farewell, Holden. “Australia’s car” will soon be no more.

The cars that once seemed an everlasting manifestation of the national psyche — Australian as meat pies, the Grand Final, a kookaburra’s cackle and the smell of eucalyptus — will no longer be produced in here. The company is not the only victim of globalisation, cost-cutting and rationalisation, factors with which we all are all familiar. Along with the loss of expertise that will come with the plant closures there will be many lost jobs and the sure knowledge many Australian families will suffer.

As the news sinks in, one need only say “Holden” to see shock, horror, grief and disgust at an allegedly heartless government pour forth. Alas, poor Yorick!  I knew him, etc etc etc. It is easy enough to be on the side of angels and commiserate with the afflicted, but before we open more floodgates of accusation and recrimination let us ask a simple question: Why, oh why, did it happen?

holden big

Is it that a dastardly Liberal government, heartless conservatives, right wing zealots and capitalism’s  global puppet-masters colluded in secretive luxury to inflict grievous wounds on thousands of household budgets, laughing as they spread misery all the way to the bank? We all want to change the world, but such a conspiracy is rather difficult to imagine — unless, of course, the game is being played in Pakistan, Egypt or those other societies which cherish conspiracy theories because pointing the finger at imaginary enemies is so much more convenient than accepting blame for troubles of their own making.

When I visited America about a year ago, I noticed quite a few differences between the USA and the Land of Oz.  One of the most striking is the immeasurably better roads. I think it was Richard Nixon who observed that Russians do not have roads in the sense that Americans have roads, which is to say ribbons of all-weather bitumen criss-crossing every corner of the country. I am not saying that Australia’s byways are in the same sorry league as Russia’s roads, but we are not that much better once you turn off the main, high-traffic routes.  The other striking thing about American roads is that they are largely populated by American-made cars. To spot an imported vehicle on America’s roads one has to keep a sharp eye peeled. Even so-called foreign cars – BMWs, Toyotas, Nissans etc – are built or assembled in US satellite factories. In Germany and France they also drive the cars they build. In Russia, only those who cannot afford an imported car buy the notoriously unreliable, locally made conveyances.

What percentage of Australian-made cars do you observe on Australian roads? A minority, with marques from Germany, Japan, France, Italy, Korea, the UK  and the USA representing the bulk of vehicles. What does that tell us? With few Australians buying the local product, the market sentenced Holden to a shrinking share and, as has now been made official, eventual oblivion.

We know that every time a Holden is sold the manufacturer loses an average of $4000 dollars.  No business can withstand this kind of loss without subsidies, and the government has now decided enough good money has been thrown after bad in the fruitless pursuit of preserving an inefficient and unsustainable industry. Or think of it this way: every $4000 wasted on cars that the market rejects is one less hospital bed or another classroom short of a teacher.

There was another possible way to save Holden, the solution the unions demanded: close off the local market, introduce ever-higher tariffs and restore the manufacturer’s dominance on our roads. That is what the unions sought — the same unions whose demands guaranteed Holden would become increasingly uncompetitive. Even now, unions might still succeed in driving Toyota out of the country by making much the same demands. Fortunately, Australia has rejected the closed-market model and opened itself for an international competition, lowering the cost to consumers.

Had Holden improved its products, resisted union demands  and built vehicles as good as its imported competitors, we can be reasonably sure the market would have reacted positively.

It did not happen and the end became a foregone conclusion..


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