A cyclist rides past a General Motors (GM) Holden storage facility in Melbourne. (Reuters)
The closure is because of weak car sales in Australia. Reports said that the sales of the locally built Commodore declined 11 per cent, while sales of the Cruze tumbled down 15 per cent.
The decrease in sales is partly due to more choices available to Australian motorists as a wider array of brands and models are on hand, caused by the falling tariffs over the past two decades and the recent appreciation of the Australian dollar.
In the past, Holden's sales were boosted by fleet sales, and as company-provided cars, the users didn't have a choice as to the model of the vehicle they would be given. However, with different car allowance arrangements now such as subsidised transport, employees could pick their own choice of vehicle and brand since they are partially paying it out of their salaries.
Upon hearing GM's announcement at 2 pm of Wednesday, Jim Griffin, operator of Diver Consolidated Industries in northern Melbourne, which is a GM supplier since 1948, expressed disappointment with the news and described it as a terrible day for manufacturing in Australia.
Diver has 115 workers who stamp, diecut and weld car parts, 70 per cent of which are supplied to Holden and Ford. With the planned closure, Mr Griffin said Diver would double its efforts to cut is dependence on local vehicle production.
All of his lobbying efforts with Australian MPs to convince them that the automotive industry in Australia still faced a good future were washed away. He spent Wednesday meeting with the staff of Industry Minister Ian Macfarlane, former Labor Industry Minister Kim Carr, independent Senator Nick Xenophon and other politicians.
Mr Griffin said, quoted by The Sydney Morning Herald, "There's a lot of people here in Canberra in various government departments that have put a lot of effort into the automobile industry over the years and it's a kick in the guts to everybody."
Other automotive products manufacturers in Australia would also be affected by GM's decision since Holden buys over $2 billion worth of parts annually, in effect, impacting 32,000 workers employed in the car parts supply chain, said Richard Reilly, chief executive of the Federation of Automotive Products Manufacturers.
With the development, Japanese carmaker Toyota would be the only vehicle manufacturer in Australia after 2017 since Ford announced six months ago that it would shutter its Australia facility in 2016 due to $585 million losses over the last 5 years.