SYDNEY General Motors Holden, the Australian unit of General Motors, is cutting 500 jobs, or 18 percent of its workforce, as the unprecedented strength of the Australian dollar has left the manufacturer unable to compete with foreign rivals.
"We are experiencing a structural shift in the market," said Holden chairman and managing director, Mike Devereux, adding the company would cut production of its Cruze model by almost one-fifth to 335 cars a day to better align with demand.
Devereux said the price of the Cruze model had been cut by A$2,500 ($2,600) since its release in 2009 to compete with foreign manufacturers.
The Australian dollar has traded above parity with the U.S. dollar for more than two years and has appreciated markedly against the Japanese Yen, making it more difficult for Australian manufacturers to compete with Japanese carmakers.
Australia's three carmakers, GM Holden, the Australian arms of Toyota Motor Corp and Ford Motor Co, have all cut jobs due to falling sales and exports, blamed on the global downturn and a strong Australian dollar that is undermining competitiveness.
Boosted by a stronger dollar helping drive down import costs, Australian buyers have shifted increasingly to carmakers like Mazda Motor Corp and Hyundai Corp, which have seen market share grow on sales of fuel-efficient small cars and popular SUVs.
The Australian government, however, continues to subsidize car manufacturers and has been determined to keep the industry afloat and protect jobs after Japan's Mitsubishi Motors Corp closed its Australian car plants in 2008.
The government has committed A$5.4 billion in extra assistance for car manufacturers until 2020.
Holden last week revealed it had received more than A$2 billion in Australian government support over the past 12 years.
The latest job cuts will mainly affect the company's car manufacturing plant in South Australia state, although 100 engineering and product development jobs would also be lost at its Victoria plant.
"The fact of the matter is that we, Holden, are the only company making small cars in Australia and the cost of making those cars has continued to rise compared with our foreign competitors," Devereux said. "It's crucial to the long-term future of Holden that we align our business with local demand."
Last March, Holden committed to invest A$1 billion in its Australian operations over the next decade after securing A$275 million from Australian government support to help it keep its car plant open until at least 2022.
The Australian automotive industry employs about 55,000 people and supports 200,000 other manufacturing jobs.
($1 = 0.9635 Australian dollars)
(Reporting by James Grubel in Canberra and Maggie Lu Yueyang in Sydney; Editing by Matt Driskill)