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News Analysis: Holden's closure underscores challenges faced by Aussie car manufacturing

English.news.cn   2013-12-12 18:00:15            

by Jeremy Zhao

CANBERRA, Dec. 12 (Xinhua) -- Just days after Qantas announced its huge operating losses and potential 1,000 job cuts, another Australian iconic brand, Holden, confirmed on Wednesday that it will cease producing cars in Australia from 2017.

"The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world," said Dan Akerson, chairman of Holden's parent company General Motors (GM).

For most Australians, this is frustrating. All the previous hundreds of millions subsidies to the car manufacturing industry end in vain and thousands of workers will lose their jobs in the coming four years. However, in the eyes of some, it is just a matter of time for Australia to give up low-end manufacturing industry.

Minutes after Holden's announcement, in the debate at the Parliament, government ministers used high wages, unreasonable high Australian dollar and hard economic conditions, as reasons for Holden's departure from the market.

"It's self-evident to us all that wages paid in Australia are much higher than wages in other parts of the world," Acting Prime Minister Warren Truss said.

Faced with today's globalized competition, Holden would have died long ago without government subsidies. As Tony Abbott's government decided no extra money for Holden, GM is doing what is right for its commercial interests.

Mitsubishi pulled out of Australia in 2008 and Ford will end production in Australia in 2016. Now even Toyota expressed worries after Holden's announcement.

"This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia. We will now work with our suppliers, key stakeholders and the government to determine our next step and whether we can continue operating as the sole vehicle manufacturer in Australia," the company said.

For Australia, the commodity boom is a double-edged sword. It has created the classic example of what economists call the "Dutch disease," a term that originates from a crisis in the Netherlands in the 1960s when discoveries of vast natural gas deposits in the North Sea led to increased revenues from natural resources and reduced competitiveness of the country's manufacturing sector.

Economists pointed out two ways to solve this crisis: first by depreciating the currency; and second by increasing the competitiveness of industries.

Australians are happy to see the Aussie dollar began to depreciate since May this year. Cheaper dollar will gradually mitigate the negative effects of the bleeding manufacturing and mining sector.

And car manufacturing industry is neither necessary nor enough to propel Australian economic prosperity.

"There's no question that manufacturing's share of the economy has been declining over time," said Jim Minifie, economist from the Grattan Institute.

The car industry has been given 19 billion AU dollars (17 billion U.S. dollars) in handouts and tariff protection over the past decade. Based on this reality, Holden's impending closure is not at all a bad news.

Editor: Hou Qiang
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