Holden Announces $146.5m Loss For 2006 Financial Year

[JoeT]

GM Holden In The Red Again

James Stanford
15 June 2007
www.goauto.com.au

VE launch, slow sales, exchange rates, VZ discounts and job cuts cost Holden $146.5m.

GM Holden has posted a $146.56 million loss for the 2006 calendar year. It is the second consecutive red-ink result for the Australian car-maker, which lost $144.6 million in 2005.

Holden said the 2006 result was affected by the launch costs associated with the VE Commodore and the WM Statesman and Caprice, while a substantial amount of the 2005 loss was attributed to development costs for the VE Commodore launched last August.

It added that because the new Commodore and Statesman/Caprice were introduced late in the year, there was limited time to recoup investment.

Holden listed a range of other factors that contributed to the loss in what the company deemed a "challenging environment".

The factors included exchange rates that favoured imports and disadvantaged exports, which fell from record 2005 levels to 46,074 in 2006, and higher fuel prices that led to reduced domestic sales and market share.

Company insiders also claim the prolonged VZ Commodore run-out and the associated discounting also affected its bottom line.

Holden spent $20 million in termination benefits after cutting back the third-shift workforce at its Elizabeth plant.

It also invested $307 million in research and development, and absorbed $69.7 million in revaluation costs.

Total revenue was down 7.8 per cent to $6.149 billion in 2006, when Holden’s 146,511 domestic sales was 16.2 per cent down on 2005 - although the Commodore managed to maintain its spot as the best-selling car in Australia.

The 2005 and 2006 losses come after several strong years at Holden. The company profits of $256.5 million in 2002, $285.6 million in 2003 and $300.8 million in 2004.

On the bright side, engine exports rose 6.8 per cent to 212,266, taking total export revenue to $1.852 billion.

Holden released the media notification of the 2006 result just before 6.00pm Friday, in a traditional tactic designed to minimise TV and newspaper coverage of bad news.

Ford Australia did similar when it announced a $40.3 million loss for the 2006 calendar year in May - its largest since 1993.

Holden $144m In The Red For 2005 Financial Year

[JetMech]

Bummer...

[ford&holden]

Not surprising considering the amount spend on VE, it's a tough environment at the moment.
Nothing to be concerned about though, Holden will bounce back once VE sales are taken into account and things in general settle down.
As i've said before, all the local manufacturers make losses some years while making very healthy profits other years.
It's all very cyclic and expected.

[chinamonty]

Sometimes (well most times) you have to spend money to make money. As long as the loss is within the range they budgetted for then who should care.
Australian car makers seem to be no diffferent to farmers -boom one year bust the next (except the farmers haven't had a boom for a while)

[jbernie]

Not the end of the world, the VE/WM investment was worthwhile given the intent to increase exports with the new platform. It was amazing what they got with the old platform given how old the original platform was and what it wasn't in any way designed to do.

[asim]

Darn. I wonder if GM here in America were selling more of those Holden cars would it be in the RED here. Us Americans seem to favor most of the Holden stuff (like the Commodore and its other big sedan variants).

[1931Chevy]

I think the only problem I see with Holden and Ford AU exporting to the US is going to be sale prices, remember the GTO great car but they needed to lower the price to make the car competitive

[Zomsky]

Considering the development cost for the VE program (which perhaps should have been partially paid for by GM worldwide seeing it's global significance), i think this loss is well within the budget for the coming years. If only GMH can now get decent volumes of this car in to high profit markets (ie Europe)......

[Butz]

They should look into entering more markets, like Europe.

[from oz]

Originally Posted by Butz

They should look into entering more markets, like Europe.

They have and are.

Middle East, England, USA, Brasil, New Zealand plus royalties from buick china and US Chevy for Zeta. Then there is the many engine exports, Alfa Romeo, GM Daewoo and Buick China.

This is purely spending money to make money.

[AusCalais]

Originally Posted by Zomsky

Considering the development cost for the VE program (which perhaps should have been partially paid for by GM worldwide seeing it's global significance), i think this loss is well within the budget for the coming years. If only GMH can now get decent volumes of this car in to high profit markets (ie Europe)......

Once they turn on G8, Ute and the wagon they will be close to full capacity using two shifts.

[FBODYRULES]

not surprised, i think it was expected

[Ssom]

Originally Posted by Butz

They should look into entering more markets, like Europe.

They should do the complete oppisite. Basically they need to ti-ho and let the current expansions pay off and then start investing again.

[civilzues]

dumb question I know, but does GM own 100% of Holden?...

[Stormin]

Originally Posted by civilzues

dumb question I know, but does GM own 100% of Holden?...

Yes.