Friday, August 24, 2018

THE SAD AND SORRY DEMISE OF HOLDEN (Continued)

Holden, the cars, the name and the badge, have been part of the Australian landscape for 70 years. On Monday, August 20, 2018 General Motors flew several of its TOP management men to Australia, to join GM-Holden’s new CEO (the ex-Toyota Australia President) Dave Buttner, to reassure Holden dealers, the employees and the public that GM was not about to abandon Holden, just because it’s going through tough times. It is not planning to change the name to Chevrolet, and instead will attempt to capitalize on its long history in an attempt to arrest Holden’s long, slow slide into oblivion. 

Was this too little, too late?


The big question is: “Where to start?”

First, the focus has to be on the local manufacturing operation, which, ultimately was supported by only ONE vehicle, the Commodore.

From its introduction to the Australian market in 1978 Commodore became an automotive icon, however its importance, both to the market and the company demanded that Commodore always devoured the majority of whatever resources GM-Holden had to play with.

The original four-door sedan spawned a plethora of variants, including a long wheelbase model, which underpinned the station wagon, and later a crew-cab utility, an AWD wagon (Adventra), as well as the upmarket Calais and Statesman premium sedans. Then, in addition, there were all the models built by Holden Special vehicles.

In its heyday, Commodore earned big profits for Holden and its dealers, but the saddest thing about the end of local manufacturing, and the death of the indigenous and iconic Commodore is that the company missed the moment to decide when to kill it off!

Holden employees past and present will abhor that statement, but nonetheless it’s true. Like Ford with the Falcon, GM-Holden tried to sustain Commodore long after its obvious ‘use-by’ date.

Of course Holden supporters will say: “Why would you kill it off? It’s making money.” Yes, but a local manufacturing operation the size of GM-Holden, sustained by only one model line, is impossible to maintain in a country with such a small population, and the growing number of competitive nameplates.

At the moment we have 65 different brands fighting for oxygen in an annual market of around 1.2 million vehicles on average. I’m sure I am right when I say that Blind Freddy could have seen that the golden Commodore bonanza could not last as long as GM-Holden hoped.

However, in an interesting twist, Commodore was still around 20% of total volume in its final months; but most of those were high-profit V8 models, so there was money to be made right up until its death.




The Commodore and Falcon fanboys inside both companies fought to keep their ‘babies’ on life support, thereby diverting resources to support them, to the detriment of any other marketing or product moves the companies might have needed to implement.

Unfortunately, their voices were louder than commonsense.

So, in recent times what have been the opportunities that were missed, or misread?

They are many and varied, and the responsibilities for potential and real disasters can be shared beyond Australia’s shores. GM International, and the local Asia-Pacific Regional Division all played a part in the destruction of the Holden brand.

In no particular order let’s look at some of the issues.

First, the Holden Cruze.

GM-Holden introduced this model just as Toyota’s Corolla was on the way to becoming Australia’s most popular passenger car.

Why was the small Toyota so popular?


Corolla was compact, fuel-efficient, versatile and priced right. Holden did not have a product, which could compete, so it introduced a 1.8L four-door Cruze sedan, which, if GM-Holden had not devoted the majority of its resources to supporting its precious Commodore, could have been promoted as the ideal answer to Corolla.

Cruze was smaller than Commodore, but still capacious. It had a 1.8L fuel-efficient engine like Corolla and enjoyed excellent build quality. It also added important extra numbers on the production line.

Holden simply pushed it out to the dealers using as much promotional resource as it could spare from Commodore, and it failed to hit the mark.

Sure, Cruze was successful, to a degree. But, it could have been much more successful had it been specifically targeted against Corolla – by name, and by size. If you bought a Cruze you ended up with a bigger, more capacious car, not a smaller Japanese hatchback, and if GM-Holden had priced it against Corolla (model-for-model), Cruze would have done much better than it did in the end.

Then we had the Camry competitor – the Holden Epica. This was a classic management disaster.

The Epica was sourced from a ‘cheap’ manufacturing operation, Daewoo in Korea. Although GM deals in US dollars, it was still a relatively cheap car to import.


The trouble was, GM-Holden did not have any spare resources to promote the Epica the way it should have; it was also overpriced and guess what? Despite an excellent powertrain and good build quality, Epica was rubbish to drive and became a nameplate to nowhere.

Just as Epica was bumping along the bottom of the pond, about to fall into a bottomless pit, some bright spark somewhere (USA, Asia-Pacific or Australia) decides that Holden needed to re-arm for its Camry battle by introducing the Holden Malibu, via Chevrolet, and also built in Korea.



Then, same-old, same-old. Not enough resources to do a decent job of pitching it against Camry. That’s because all the big money had to support Commodore.

We should also not forget the many millions of dollars GM-Holden received in subsidies from successive Australian Federal Governments, ostensibly to shore up local manufacturing and guarantee job tenure for its employees.

If you were looking over your shoulder at the date GM should have been thinking about killing off the local Commodore, then the swift rise in popularity of the Toyota Corolla was probably the right time to be planning its demise!

Not everyone is prescient enough to see a trend starting, but at that time SUVs were growing in popularity, and a versatile little car like Corolla was the tip of the iceberg approaching. And soon conventional, large passenger cars like Commodore and Falcon were 'on the nose'.

Then, we have another huge blunder entering from out of left field. GM Europe, the perennial money-losing drag on GM gets the bright idea to increase its revenues by exporting Opels to Australia.

You have to ask, what was the business case that said this would work for GM overall? Bringing the Insignia (below), built on the same platform as the Holden Malibu (Epsilon II); and the successful Holden Astra now replaced by the ‘Opel Astra’ setting up a market battle between internal divisions of the same company!

Apparently the back story is that GM Europe (Opel/Vauxhall) was trying to get German government financial support so it could set up as a stand-alone exporter. It nominated Australia as its first export market, introduced an overpriced Opel Astra with no marketing support and it failed – as did GM Europe’s stand-alone export strategy.

But, that decision must have had some input from GM International in Detroit, and that was a boner. It was plain dumb from the start and the cost to GM, to discount the unsold stock, and reimburse Australian dealers who had shelled out for exclusive Opel facilities was a very expensive mistake.

And now, the Commodore is beginning its death throes, and still GM-Holden decides it will soldier on. Commonsense would have suggested it was time to pull the plug, but there were strong emotions at work in Australia, and a great lack of vision, and financial clarity.

No wonder Mary Barra had the idea of offering Holden to PSA’s Carlos Tavares, when she was stitching up the sale of GM Europe to the French group.

Holden was becoming a millstone, and it was a long time in the making. 

Maybe 2009 was the year GM should have been accelerating the demise of local manufacturing in Australia, and doing the restructuring necessary to emerge as a viable importer of whatever good stuff GM was churning out around the world.

For me, the final nail in the Holden coffin was the truly, truly dumb decision to name the Opel Insignia, the ZB Commodore.


Although senior GM-Holden executives now admit it was a poor decision, those same execs were living inside their ‘Bubble of Excellence’ at the time and thought it was a great move.

Holden Commodore enthusiasts, buyers, and dealers couldn’t handle that one. First, a FWD 2.0L four-cylinder car replacing the fire-breathing RWD V6/V8 sedan; then actually anointing it with the precious Commodore badge when it clearly was nothing like the car it was replacing.

At least, despite Opel’s rapid demise in Australia, the Insignia badge did have some value and market recognition, and using that badge would not have led to Holden spending squillions (or rather, wasting squillions) trying to educate the dealers, the public and the Commodore fans that it ‘really was a Commodore’.

However, over the decades there have been some fabulous highs for Holden, delivered by huge successes from motor racing.

Before the inter-marque rivalry between Holden and Ford which developed into the V8 Supercar Series, a red-hot young racer called Peter Brock brought home glass cabinets full of trophies with a variety of race-bred Monaro coupes and compact Holden Toranas, managed by the redoubtable Harry Firth for the Holden Dealer Team. HDT was a way to get around the fact that GM was a car company that did not participate in motor sport.

After Commodore came along that list of motor racing victories expanded exponentially, with Brock and a number of other talented race drivers taking the chequered flag with successive developments of V8 Commodores which burnished the Holden legend and helped boost the continued success of the Commodore to iconic status.

That’s not to say Ford did not enjoy the limelight of the Winners’ Circle with Falcon, but this story is about Commodore’s contribution to the rise and rise of something that inevitably eroded Holden’s ability to stay at the top of its game.

With every successful series of new model Holdens, starting in 1948 with the FX, Holden wove itself into the fabric of daily life in Australia.

One famous advertising phrase ‘Meat Pies, Kangaroos and Holden Cars’ (admittedly lifted from an equally successful US-created jingle for Chevrolet) came to signify and solidify Holden’s place in the mindset of most Australians.

Sales success and a 56% share of the market at one time began to breed an erosive brand of empirical thinking at GM-Holden’s headquarters in Fisherman’s Bend, Melbourne.

Over the decades following the appearance of the Holden Commodore it was as if the company could do no wrong. The range of profit-making Commodores grew with each successive model generation, and the company also continued to enjoy success in other sectors, with the small Gemini, compact Toranas, and the brilliant Camira.

As GM expanded its Korean operations, in the search for a cheaper manufacturing base, cars from Korea’s Daewoo Motor appeared in Australia with Holden badges, and even a few small European models were added to the mix, to bring in more sales and profits to both the company and its dealers

Unfortunately, this heady success continued to create ever-increasing evidence of empirical thinking and a confidence in itself, which would begin to destroy the company from inside.

I sincerely believe that in the early 2000s, GM-Holden began to represent the worst business practices, which ultimately bring down winners. It indulged in some of the crazy, inconsistent model introductions I’ve referred to earlier – many of which made no sense at all, and added to the complexity of dealers’ stocks, parts and service support, for some models which lasted on the Australian market for just two years or less.

Then, probably the most dangerous of all business practices began to damage GM-Holden’s overall competitiveness, its approach to model pricing.

When you’re the big gun in town you can act with a swagger and a confidence that may not always guarantee continued success and domination, especially as Australia’s GDP growth and revenue inflows grew rapidly thanks to a mining boom, prompting many other carmakers to try their hand in the Australian market. 

GM-Holden acted like it was untouchable. GM-Holden’s pedestal was so high, it could barely recognize the newcomers as being any sort of threat.

Successive CEO’s and the company’s management began to believe it was still ‘Mr 56%’.

Thus, its pricing policies did not reflect the incredible growth of competitors entering the melee that became the cutthroat Australian new car market.

Holdens were always just that bit more expensive than comparable competitors.

Sure, Australia had seen that before, with the growth of Japanese cars in the 60s, but although the Japanese companies executed a slow and steady infiltration of the Australian car buyers’ choices, the Big Two managed to maintain their dominance thanks to decades of ‘just always being there’.

However, from the late 2000s competing carmakers began to find cracks in the market, where GM-Holden, especially, either didn’t have a competitive model, or it was priced a couple of thousand dollars higher. After all, we’re Holden; we’re a big player; we enjoy the complete confidence of the Australian car buying public.

Well, unfortunately that empirical thinking thing began to emerge as an almost simple answer to Holden’s failing competitiveness, and with resources metered out in such a way as to not damage its glorious Commodore’s continued success, the iconic badge began not only to lose its glitter, but also sales.

GM threw more and more of its resources at Commodore, strangling supply of much-needed marketing dollars and sales power to the rest of its car catalogue.

As I said, by 2009, or even maybe five years earlier it must have occurred to ‘someone’ at Fisherman’s Bend, or the Renaissance Center in Detroit, that this rosy patch could not remain in full bloom.

Guess what? It couldn’t, and it didn’t, and the giant gradually toppled off its pedestal, smashing into such tiny pieces that ‘Mr 56%’ has been reduced to ‘Mr 5%’ – sad, but true, and you know what? The saddest thing of all, is it’s entirely of its own making.

There are none so blind, they cannot see. In GM-Holden’s case it was a freight train of considerable size, with a great noise to go with it – how could they miss that coming at them at high speed?

It has been one sad decision after another, and made possible by the policy, or happenstance, of a revolving door of CEOs to run the Down Under Division. And, again, like Ford, GM-Holden struggled to create a successful small car strategy – evidence the failed JVs with Suzuki, Isuzu, Toyota, Daewoo, Opel et al.

It makes me think that Detroit didn’t really pay that much attention to Holden over the decades. It was just this strange indigenous part of the company, which made a car that appeared to be popular with those weird Australians.

That was also apparent in the flow of career-GM execs which came through Holden’s revolving door of CEOs, not understanding anything at all about Holden, or Commodore – that is with the possible exception of Denny Mooney and Mark Reuss.

Then, when it became obvious it was a BIG problem, it was too late.

All the Band-Aids in the world can’t save this company, or rebuild it to anywhere near its former dominance – even with the skills and patience which Dave Buttner (left) will have to invest in the next few years.

He's a good man, and a good operator, but he will be tested.

I hope he’s already negotiated a valuable exit package! 

1 comment:

  1. Another excellent piece John as usual. The only item I can't agree with is calling the Camira "brilliant". On paper it certainly was and when the second model came out with the two litre fuel injected engine it was certainly a force to be reckoned with, but friends who purchased both models when new had nothing but issues with poor build quality and many dealer visits as a result. An opportunity wasted.

    I also drove one of the new ZB Commodores for the first time on Wednesday, a hire car driven from Orange to Sydney. It surprised me how well it drove, the engine had excellent torque, it made the drive with little effort and still claimed 750km range when we got to Sydney so impressive efficiency. Most punters would be unable to tell whether it was front or rear wheel drive and what sort of engine was under the bonnet (although it clearly does not sound like a V8). So I suggest it is an excellent car and the hatch made it super easy to load all our gear. But I am unsure whether it should have been called a Commodore but as someone who has never been a Holden owner or fan boy it is a moot point.

    I do agree with your various articles on this topic and whether Holden will be here for the long run is a big question.

    ReplyDelete