The armchair critic

With Holden closing the door to manufacturing cars in Australia, the arm chair critics of what went wrong have come out. I'm one of them, but only because I was asked for my opinion of what went wrong. Or more importantly, why are they closing up shop. But before we get there, lets simplify things by looking at the human body.

A person will die from one of two reasons.

  • The heart stops
  • the brain is starved of oxygen

A person might be shot, stabbed, run over or succumb to disease, but ultimately it is one of the two reasons above that a person will die. The equivalent for a business is bankruptcy and being wound up, and ultimately there is one reason for that- not making enough money.

On a simplified scale, a business will generate profits by selling products (or services). Those products will incur expenses to create said products, and a company will be profitable if it can sell the products at a price higher than the cost of creating them.


So if this is the simplified cause, what's causing it and why can't they just change?

Exchange Rates
There could be some things outside the company's control. The high Australian dollar is making importing cars a lot cheaper, and thus making competition for Holden much tougher. Couple that with limited or no import duties, and you can understand Holden going the same way as many other Australian manufacturing companies. If that doesn't do it, then compare the subsidies other car manufacturers get in other countries, and you'll understand Holden is at a distinct disadvantage.

Unions
I'm not privy to the EBA at Holden, but I guarantee you that it'll be a major factor in closing down, If workers are given 3 years notice then imagine what other clauses are in the EBA that limit Holden on what they can do. It means that the conditions are not conducive to restructuring the workforce, and therefore they can only sail the same course and hope for things to improve - have a look at Autodom for an example. It's kind of like being stuck in a bad marriage - just waiting for the inevitable divorce somewhere down the track.


So there are a few things that have combined to cause Holden to close up shop in Australia, but one of the most damning statements is that it is cheaper to pay $600 million and leave Australia than deal with the union and the EBA. So for Holden, manufacturing in Australia was like a bad marriage, and they finally opted for a divorce.

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