* GM drops Chevrolet brand in Europe; to hit S.Korean
* GM has decided to cease Australian production - reports
* GM Holden exit would threaten Australian auto industry
* PM Abbott calls on GM Holden to clarify position
* Australia, S.Korea just signed free trade agreement
By Hyunjoo Jin and Lincoln Feast
SEOUL/SYDNEY, Dec 6 General Motors Co may
consider shipping more South Korean-made cars to Australia, a
source said on Friday, as part of a global restructuring that
will see its Chevrolet brand in Europe dropped and production in
Australia potentially scrapped.
GM, which has been mulling its future in Australia for
months, has decided to pull out as early as 2016, Australian
media reported on Friday.
One option that would be looked at was to supply Australia
using factories in South Korea affected by GM's announcement on
Thursday that it will drop the Chevrolet brand in Europe by the
end of 2015.
GM Korea shipped 187,000 Chevy cars to Europe last year but
the brand has failed to gain significant share in the market.
"GM Korea could consider exporting Korean-made cars such as
the Cruze compact to Australia if it were to shut down a plant
there," the source, who asked not to be identified because of
the sensitivity of the matter, told Reuters.
GM Korea has not started discussions on the plan yet, the
GM Korea last year exported about 30,000 vehicles including
Barina/Aveo subcompact and Captiva sport utility vehicles to
Australia, where they are sold under the Holden badge.
Such a move might face a backlash in Australia, where there
are widespread concerns that any exit by GM Holden will be
followed by Toyota Motor Co, causing a collapse of the
entire domestic industry.
"When Holden pulls out of this country, it will be a domino
effect," said opposition Senator John Madigan, whose state of
Victoria is the one of the major centres for Australia's auto
"Already car component manufacturers have lost critical mass
with the decision of Ford to pull out of Australia. If another
one pulls out, that's the end, then we're going to be hearing
about Toyota - there are going to be tens of thousands of jobs
A spokeswoman for Toyota Australia, which has previously
said it expects to make to a decision on its manufacturing
future in the country in 2014, declined to comment.
AUSTRALIAN PRODUCTION UNDER PRESSURE
Citing unnamed senior government sources, the Australian
Broadcasting Corp said GM had been expected to make an
announcement on its plans to quit Australia this week but had
put it off until early next year.
A GM spokesman in Detroit declined to comment on the
reports, while Holden said its discussions with the government
were ongoing. Australia's Industry Minister Ian Macfarlane said
no decision had been made.
Holden, which traces its roots in Australia to a saddle
maker in 1856, makes vehicles at its Elizabeth plant in South
Australia and engines in Port Melbourne, Victoria, employing
almost 4,000 people and producing around 95,000 vehicles a year.
Australia's auto industry has been under pressure for years
as high costs, a strong local dollar, weak exports and tough
international competition take a toll.
In May, Ford Motor Co announced it would shut its two
Australian auto plants in October 2016, following the exit of
Mitsubishi Motors in 2008.
The industry has been propped up by billions of dollars in
government support, which has become less certain since Prime
Minister Tony Abbott's conservative coalition won power in
"The message we are getting from Holden is they are in two
minds and I would like them to clarify what their position is,"
Abbott told local radio on Friday. "There is not going to be any
extra money over and above the generous support taxpayers have
been giving for some time," he added.
Adding to the pressure on the industry, Australia on
Thursday signed a free trade deal with South Korea, cutting
tariffs on imports of cars and car parts.
"You've got to look at the relative size of the industry.
Korea pumped out 4.5 million vehicles last year - we did 221,000
- so you can imagine the size of their supply chain," Richard
Reilly, the chief executive of Federation of Automotive Products
Manufacturers said. "They are going to be getting better access
to our market going forward."
Ian Park, an analyst at IHS Automotive, said he expected GM
Korea to seek to export more cars to Australia after Chevy is
withdrawn from Europe, boosted by the trade deal.
GM Korea said in a statement that: "The phase-out of
Chevrolet in Western and Eastern Europe will increase focus on
driving profitability, managing costs and maximising sales
opportunities in Korea."
Even before the FTA, vehicles were Australia's
second-largest import from South Korea, worth more than A$2
billion last year.
Morgan Stanley analyst Adam Jonas also said the trade deal
could offer opportunities in Australia for GM's Korean-made
"It also serves to put a little pressure on the Koreans. The
costs in Korea are rising. The labour environment is not the
friendliest in the world," he told Reuters.