Why did Holden fail in Australia?

Like all major disasters, the demise of Holden after 72 years in Australia is the result of a vast number of factors – some of which were out of its control.

The problems go way beyond the use of the Commodore name on the imported model after local manufacturing ended in October 2017, or the series of misguided advertisements which tried to change Holden’s image to appeal to a more cosmopolitan audience.

When Holden made the decision to quit car manufacturing in Australia in 2013, it said it had been hit by a ‘perfect storm’ of unfavourable economic conditions.

A high Australian dollar, high production costs, a small domestic market and increasing global competition, combined with the coalition government’s decision to end financial assistance, simply rendered local vehicle production unviable.

The same was true for Ford and Toyota and with Holden’s closure on Friday, there is now no longer any local assembly.

But the company also had a role to play and, in motoring terms, might be said to have taken its eye off the road long before the economic tsunami swept it away.

Crucial to Holden’s demise was its failure to properly address the changing nature of the vehicle market in Australia and the surge towards SUVs and small cars as petrol prices rose and buying habits evolved.

Why it failed: Two years on from Holden’s Aussie factory closure “We have the right people in place, and we are financially very sound. So, it makes my departure fairly easy from the point of view of people. The team is in place, the products are in place, and the things that are to come are in place.”

A little more than 14 years since one of Holden’s greatest leaders uttered those optimistic words, and Holden joined Ford and Toyota in abandoning the Australian car-building business.

We despair about all three, but Holden especially so. When General Motors won the right from the Australian government to build Australia’s car, its relationship with us changed. Even if we didn’t own a Holden, even if a US giant owned Holden, we felt proprietary because of Holden’s local name, its ancestry, the 48-215 and the many cars that came after.

Holden was the market leader for decades, rode on the back of its Australian-ness and promoted its true-blue patriotism at every turn. But that special relationship couldn’t save Holden from ending manufacturing and killing off the locally developed Commodore. As protection fell, Asia rose, tastes changed, more brands launched into a small and already congested market, the Global Financial Crisis bit and finally, the federal government turned its back, the sums didn’t add up, the end came, and the tears fell.

Intrinsic to his tenure was a 10-year strategic plan developed soon after he took over at Holden in 1999. It was a document of blue-sky ambition, calling for production at a vastly expanded Elizabeth to hit 300,000 in 2010. The plant would pump out a wide range of locally developed and manufactured models on Zeta architecture including all-wheel drives and a smaller rear-drive BMW 3 Series rival based on a shrunken version of Zeta.

As GM’s ‘homeroom’ for affordable rear-wheel-drive development, Holden would ship Zeta technology to the world, as well as completely built-up cars to selected markets such as the Middle East and North America for export. The plan also called for a strong promotion of halo models. Today’s fabulous Commodore SS V Redline is a direct descendant of that thinking.

The pace at Hanenberger’s Holden was frantic. The Crewman and Adventra were spun off the V-Car platforms, the plant added a third shift, the Monaro became a Pontiac GTO with GM product guru Bob Lutz’s support, exports boomed, and a new V6 engine plant was built at Port Melbourne. In 2003 Holden reported a $285.6 million profit, and in 2004 it made a heady $300.8 million.

As is typical of such driven men, Hanenberger had his flaws. He over-reached as a matter of course, routinely made autocratic decisions and placed huge expectations and strains on his management team that included legendary sales and marketing chief Ross McKenzie, droll engineering director Tony Hyde and thoughtful planning boss Ian McCleave.

Hanenberger’s most outlandish vision was taking the Holden brand-name international. It was an idea that got short shrift at GM. There was the logic behind the breathtaking audacity, though. Hanenberger saw it as a way to guarantee export volume against unexpected reversals like GM’s decision years later to close Pontiac and end G8 (Commodore V8) exports.

Why did Australia’s Holden car manufacturer die?

Holden is dead, and in a few decades so too will be the motorists who can remember a time where every second driveway had a locally-built car sitting in it.

From family car trips in a rusting 1970s Kingswood station wagon to teenage excursions in a second-hand Commodore, the history of Holden is indelibly ingrained in Australian history.

But all the nostalgia in the world was not enough to save Holden from the bold financial gamble it made after the Global Financial Crisis: pouring all of its resources into creating large sedans.

As the car-buying public shifted towards SUVs and dual-cab utes for family duties – or micro Japanese city cars for urban trips – Holden persisted with its large, comfortable sedan-based Commodore.

The last Australian iteration, the VF Commodore, was a beautiful car: with a powerful LS3 engine, bi-modal exhaust and class-leading interior, it was truly the best of Australian engineering. But other than the dyed-in-the-wool enthusiasts, it wasn’t what the market wanted.

Mothers of school-aged children, who so often control the family budget, wanted ride height as it gave a greater sense of safety – so much so that SUV sales soared through the roof. Tradies, once the backbone of Holden’s sales thanks to a long history of performance utes and wagons, turned to hulking dual-cab utes. The truck-like Toyota HiLux has been the best-selling new car in the country for the last decade.

In the second place, it’s Ford’s Ranger, also a dual-cab utility. No large sedan from any manufacturer sits within Australia’s top-selling new vehicles. 

When General Motors decided that Holden could no longer build vehicles in Australia due to the high cost of labour, the death toll on Holden’s future was sounded.

Years earlier, after the GFC of 2007-2008, the Federal Government was desperate to keep the lion roaring. 

In the 12 years since 2000, the government gave Holden $2.17 billion in Federal subsidies as it scrambled to keep Australian car workers in a job. But it wasn’t enough.

In 2017, at Holden’s Elizabeth plant in Adelaide, the last Australian-made VF Commodore rolled off the line. In 2017, GM decided to get out of Europe after decades in that market, selling its Opel and Vauxhall badges to French car giant Peugeot-Citroen. To replace it, Holden imported a rebadged Opel Insignia from Germany and called it a Commodore – and the Australian public appeared to hate it.

In 2019, Holden sold just 43,176 new vehicles, the lowest since 1954. In 2019, Toyota sold more than 47,000 HiLuxs – more than Holden’s entire line up with just one model.

In 1998, at the peak of Holden’s power, Australians bought 94,682 new Commodores, even though the average yearly wage was just over $42,000.

Many people will take cheap shots on Holden’s demise – commenting on squeaky dashboards, the brand’s affinity with “bogan” consumers and its failure to cash in on the SUV boom – but the fact is its parent company General Motors is the one calling the shots.

For GM, Holden is not the centre of its world. Currently, GM makes right-hand drive vehicles for Thailand, Japan, Australia and New Zealand.

It is not competitive in these markets and therefore is cutting one part of the Australian dream: to have a house in the suburbs with a backyard and a Holden wagon in the driveway.

At the time of that sale, there were unsubstantiated rumours about bundling Holden into the Peugeot-Citroen deal, but senior GM executives flatly denied them.

Thailand, Australia and New Zealand became the three key remaining right-hand-drive markets for GM. But the cost of developing vehicles unique to this region have now been deemed prohibitively expensive.

“As much as Holden fans will be sad about this, Holden is not making money, and there’s clearly not much chance of recovery.”

Holden is dead because…

The end of Holden should serve as a massive warning signal for other automakers that continue to fail to not only listen to what customers want from vehicles but also predict future demand.

While Holden has had their hits and misses design-wise, recent products like the Arcadia, the Equinox and even the newest Commodore have not been bold enough. The company produced vehicles that tried to appeal to everyone and ended up appealing to nobody.

When it comes to technology, sure Holden followed many others and raised the white flag to smartphone auto platforms Android Auto and Apple CarPlay. The biggest failing may be the missed opportunity to leverage the investments made by parent GM to bring future-looking vehicle platforms like the all-electric Bolt to Australia.

If it’s not clear already, the shift is on to Electric Vehicles, and the companies prepared to lean into that future are reaping the rewards at the cost of market share from legacy auto brands that desperately cling to the past.

The challenge for all vehicle manufacturers is to transition to EVs while not destroying their income from existing products. Unfortunately, Holden is one of the first big-name brands to falter, but they certainly won’t be the last.

Holden could have carved out a decent market in Australia and around the globe, had they used GM’s R&D resources to innovate and create a fleet of vehicles for the future. A great-looking, great performing vehicle at a great price should have been Holden’s road trip to future success, but that’s been squandered.

So who’s to blame for the demise of Holden? Many are keen to point the finger at the government, but that’s wrong. Consumers are also not to blame; they simply but cars that answer the needs and wants of their family.

Ultimately the blame has to rest with the people at the top of the company, and in the last ten years, Holden has had seven different leaders.

  • Alan Batey (2009–2010)
  • Michael Devereux (2010–2014)
  • Gerry Dorizas (2014–2014)
  • Jeff Rolfs (Interim chairman and managing director) (2014–2015)
  • Mark Bernhard (2015–2018)
  • Dave Buttner (2018–2019)
  • Kristian Aquilina (Dec 2019 – present) [Acting Chairman and Managing Director]

With falling sales, it’s inviting to replace the person at the top and hopes that’s an easy solution. It wasn’t. The disruption caused by exchanging a CEO or MD is dramatic, and in 2014, they had three different leaders in a single year.

A new person in the top seat of a company like this will almost always be conservative when the company needs someone bold and disruptive. Somewhere between 600 and 800 Australians will now lose their job by the end of 2020 as a result of the decisions, the management and Holden and GM made.

It’s probably also worth reminding everyone about the decision to take the Summernats-loved rear-wheel-drive Aussie-built Commodore and make it a front-wheel-drive made half-way around the world, a move that angered the most avid fans of the nameplate.

General Motors owns a number of other brands, including Chevrolet, Buick, GMC, Cadillac that all risk the same fate if lessons are not learned here.

If you want to be around in 10 years, you have to have the guts to make the hard decisions. You’ve got to spend the money in R&D to catch up, create efficient electric vehicles with a great design, great range, and great performance at the right price and that’s not easy.

GM is doing some interesting things through sub-brands like Cruise that focus on autonomous, all-electric urban transportation for medium density vehicles.

Take a look at this comparison of automotive companies if you’re at all confused where the future is. By the way, that 100+ year history counts for exactly zero.

Naturally, with such an important announcement, there are plenty of questions, so Holden tried to provide some clarity around the implications of today’s announcement.

In the meantime, my hope is that, just as BMW reinvented the Mini Cooper, one day GM sees fit to reinvent the gorgeous Holden FJ as an electric ute. Don’t tell me I’m dreaming. Vale Holden.

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