* GM says closure of vehicle, engine plants to affect 2,900
* GM exit plans follows Ford, concerns about Toyota future
* Strong A$, slipping sales, high costs hammer local auto
* Toyota says decision puts it under "unprecedented
By Maggie Lu Yueyang and Sonali Paul
SYDNEY/MELBOURNE, Dec 11 General Motors Co
said it would stop making cars in Australia by 2017 due
to high costs and a cripplingly strong currency, fuelling fears
rival Toyota Motor Corp will follow suit and put the
entire local autos industry at risk.
The decision by the world's second-largest auto maker to
close its Holden plants in South Australia and Victoria states
is the latest blow to Australia's manufacturing industry and the
auto sector in particular.
"No matter which way we apply the numbers, our long term
business case to make and assemble cars in this country is
simply not viable," General Manager Mike Devereux told reporters
at GM's car plant in Adelaide on Wednesday.
The decision to halt domestic production of Holden cars,
long a source of national pride, will pile more pressure on
Prime Minister Tony Abbott's conservative government, which is
seeking to manage a slowdown in the $1.5 trillion economy as a
decade-long mining investment boom slows.
GM Chairman and CEO Dan Akerson said the decision reflected
a "perfect storm" of negative influences facing the Australian
automotive industry including the sustained strength of the
Australian dollar, high cost of production, and a small,
fragmented and highly competitive domestic market.
In May, Ford Motor Co said it would shut its two
Australian auto plants in October 2016, blaming similar factors.
There have been widespread concerns that an exit by GM
Holden would be followed by the sole remaining producer, Toyota,
threatening around 150 parts and component suppliers directly
employing more than 40,000 people.
"You need two manufacturers to get that critical mass," said
influential independent Senator Nick Xenophon. "You lose that
critical mass, they fall like dominos."
Australian Manufacturing Workers Union national vehicles
division secretary Dave Smith said it was "almost certain"
Toyota would follow suit and leave Australia.
STRONG DOLLAR WEIGHS
Toyota said it would work with suppliers and the government
to determine its next steps and whether it could continue
operating in Australia, where it employs 4,000 people and
produced almost 100,000 vehicles last year.
"This will place unprecedented pressure on the local
supplier network and our ability to build cars in Australia,"
Toyota Australia said in a statement.
The world's largest automaker is currently negotiating
changes to its workplace agreement as it seeks to improve
productivity and cut costs. A worker vote is due on Friday.
"A no vote is going to send a very strong message to our
parent company that we are not serious about transforming our
business," Beck Angel, spokeswoman for Toyota Australia, told
Reuters before the GM announcement.
Deputy Prime Minister Warren Truss said it was important
that Toyota was given "every opportunity to survive these
Australian manufacturing employs around 921,000 people,
having declined by more than 10 percent in the past decade as
the strong Australian dollar and high costs make imports more
"If the automotive sector leaves then that's a sector of
manufacturing in Australia that has been a source of innovation
and skills that has spilled over to other forms of manufacturing
in Australia," said Stephen Clibborn, a lecturer in work and
organisational studies at the University of Sydney Business
Holden traces its roots in Australia to a saddle maker in
1856 and is part of the Australian psyche, fuelled by a fierce
rivalry with Ford in showrooms around the country and on
racetracks such as Mt Panorama at Bathurst.
GM may look at shipping more South Korean-made cars to
Australia as part of a global production restructuring, a source
told Reuters last week.
Devereux declined to comment on where it would source
Wednesday's announcement came only one day after Devereux
said the company needed more assistance from the Australian
government to survive long term.
Abbott's government had earlier ruled out providing the
industry further additional assistance, saying it needed to
stand on its own feet.
The government has also come under pressure to support flag
carrier Qantas Airways Ltd, which is shedding 1,000
jobs in an attempt to stem mounting losses.
Australia has annual sales of around 1.1 million new
vehicles, but sales of locally manufactured vehicles have fallen
to less than a quarter of that, from almost 389,000 in 2005.
GM said it expects to record pre-tax charges of $400 million
to $600 million in the fourth quarter of 2013 due to the