The end of the road?
It’s bad news for “Australian Made” as Holden announced that it will turn the engine off on its car manufacturing in Australia, with the last Aussie-made car to roll off its production line in 2017.
2900 jobs will be lost in South Australia and Victoria as the company’s 65 year history of making cars in this country comes to an end.
Holden cited factors such as a high Australian dollar, costly production and a relatively small domestic market as reasons behind the decision.
Toyota will paint a lonely figure as the only brand to be left producing cars in Australia. Will it withstand the inevitably immense pressure to remain?
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Dario Petkovic
:
errr .. no
Collin Guin
:
Collin Guin
Australian Car industry is a dead man walking. How much would you invest into a dead body unless you are Invocare LTD investor?
Sue POLSON
:
Let’s hope so.
David S
:
I noticed people have been selling off MMS lately. Does anyone know if there much fundamental reason to explain a decline in value linked to the closure of Holden, or have people just been selling indiscriminately in fear because both business models involve motor vehicles?
Roger Montgomery
:
I think it might be some of the latter but you should do your homework. We have spoken to one senior Federal MP about the link between a local car manufacturing base and the policy around FBT on car leases and we have been told the policy is not dependent on car manufacturing existing in Aus. You may however want to check out and understand all of MMS’s business lines.
Dennis Bergmans
:
A caveat, this is my opinion and I am sure plenty of people will not share my opinion.
This should have happened many years ago. It is the nature of capitalism – if a business can’t make money, it has no right to be in business or it should go where it can make money. The car industry has similarities with the airline industry as well as the free to air TV industry (per Roger’s perpetual poker game view). Similarities with airlines – it has a lot of excess capacity, it is capital intensive. Similarities with free to air – if one car manufacturer has a popular car, the chips collect there until the next manufacturer has the next popular car.
In addition, if one manufacturer introduces new technological manufacturing efficiencies or car safety features, you can be sure that soon enough all the other manufacturers will introduce the same technology or safety such that no one wins.
The government should not be pouring money into businesses with poor economics. What the government should be doing is encouraging continual innovation by pouring the money they spent on propping up poor businesses into innovative businesses. Innovations that the rest of the world hasn’t thought of and yet needs to have.
Moreover, if we are seen around the world has being the nation for innovation, we will attract more smart people that will in turn innovate more.
I recently watched a few youtube videos from a physicist named Neil deGrasse Tyson, who made a compelling argument that NASA was an important source of innovation for America and the American government should increase NASA’s funding. Want proof of NASA’s innovations? NASA publishes a book each year of its private industry spin offs http://spinoff.nasa.gov/
Here is a good video from Neil: http://www.youtube.com/watch?v=wNxnCzz5oQE
Dennis Bergmans
:
Sorry, here is the NASA book as a pdf. http://spinoff.nasa.gov/Spinoff2012/pdf/Spinoff2012.pdf
Roger Montgomery
:
You may be more interested in this suggestion that government programs are the source of US innovation. It’s a counter-intuitive view: http://www.youtube.com/watch?v=3r1IPsldbBg
Daniel Rosenthal
:
From what I here Toyota are in as much trouble…What are your thoughts on the Silver Chef profit guidance?
Regards Daniel