GM to sell Holden?

Holden could change hands or even cease to exist at all under a potential vehicle distribution deal revealed by the Australian Financial Review newspaper yesterday.

According to the AFR, independent vehicle wholesaler and retailer Inchcape and GM Holden are in confidential talks that could lead to the UK company assuming control of the Holden brand from General Motors in Australia.

It says UK-based Inchcape -- which holds the Australian distribution rights for Subaru and PSA-owned French brands Peugeot and Citroen – is “running the numbers on GM's Australian operations including the 163-year old iconic Holden brand”.

“Inchcape is believed to be keen to see whether GM could be tempted to pull up stumps in Australia altogether, as part of the restructuring activities worldwide,” AFR reported.

“It is understood bilateral discussions have progressed slowly and there are extreme sensitivities on both sides of the negotiating table.

“Sources suggested Inchcape has had one of the big four accounting firms helping with due diligence, and looking at various scenarios for GM's Holden and its various imported vehicles.”

GM is not expected to relinquish its Australian R&D operations, which include about 350 designers and engineers at Holden's Port Melbourne design studio and the historic Lang Lang proving ground in Victoria, which would likely remain part of GM’s global product development team.

But among those scenarios could be the closure of Holden’s head office and control of Holden vehicle distribution going to Inchcape, or even the end of Holden as a brand in Australia, where it could be replaced by Opel.

Holden became a full-line importer when GM closed its factory doors in October 2017 and now imports the Commodore and Astra from Germany’s Opel, which GM sold to PSA in August 2017.

The rest of Holden’s range comes from GM subsidiaries in North America (Acadia), Mexico (Equinox), Thailand (Colorado/Trailblazer) and Korea (Astra sedan).

But Holden, which reduced its dealer network by 30 outlets last year, recorded its eighth consecutive annual sales decline in 2018 and ranked sixth behind Ford in January 2019.

Following several years of heavy losses, Holden was profitable in 2015, 2016 and 2017 – its final year of manufacturing -- when it reported revenues of $1.8 billion (down from $2.3b in 2016). It is yet to reveal its 2018 financials.

Meantime, having axed Chevrolet from Europe (except for Russia and the Camaro and Corvette) in 2016, GM announced last November it would cut 1400 workers and close five North American factories, and has signaled its intention to reduce right-hand model production globally.

"Under the leadership of [GM Holden CEO] Dave Buttner, who was appointed in August last year, we are turning around the Holden business, growing sales, re-engaging and re-energizing our distribution network and launching exciting vehicles like the all-new Acadia,” said Holden in a statement to AFR.

“We are fully focused on supporting Dave in building a strong Holden for the future, as it remains an important part of GM's business," the AFR quoted.

For its part, in 2018 Inchcape sold almost as many vehicles in Australia as Holden (60,750), including the Subaru (50,015), Peugeot (2838) and Citroen (494) brands.

On a retail level, Inchcape also sells more than 25,000 cars annually via its Trivett dealership group, which is billed as Australia’s largest prestige automotive group with 23 dealerships.

Inchcape is understood to be in wholesale expansion mode worldwide, and keen to bolster its distribution portfolio after slower sales for Subaru (-4.8%), Peugeot (-16.3%), Citroen (-32.8%) and its Trivett luxury car business in Australia last year.

Nonetheless industry sources say Subaru Australia – the only top 10 vehicle brand not imported directly by a subsidiary of a car-maker – remains one of the most profitable parts of the global Inchcape empire.

And while Holden has more than 300 white-collar workers, Subaru Australia has a workforce of about 100 and is likely to sell a similar number of vehicles this year. Taking over Holden’s distribution network would give it even greater economies of scale by sharing backroom costs across several brands.

“Inchcape’s cost structure would be much lower than GM’s so Holden could still be profitable as a brand in Australia,” said one auto industry expert.

However, another insider we spoke to said the Inchcape-Holden discussions could well have been instigated by GM as the first step in axing the Holden brand, the value of which could well decide its future.

“It could well be that the liability of 10 years’ parts supply for the Holden carpark, plus the cost of staff redundancies and wholesale infrastructure, is more than the Holden brand’s goodwill value.

“In that case, GM could actually pay Inchcape to kill Holden and exit Australia.”

Under that scenario, Inchcape could replace the GM/Opel-sourced model line-up currently sold by Holden’s dealer network with a model range imported solely from Opel.

Opel is now owned by PSA, which already sells its products in Australia via Inchcape, and has previously expressed its intention to make Opel a global brand including in North America.

Indeed, PSA boss Carlos Tavares told carsales exclusively in March 2017 that the French company would consider returning Opel to Australia, where it made a brief appearance before being axed by GM in 2013.

At the time, he also denied rumours that Holden had been offered to PSA by GM as part of the Opel sale.

If the current Holden range was replaced by an all-Opel line-up, it would continue to comprise the Commodore (badged as the Opel Insignia) and Astra hatch, as well as the new Corsa hatch due for release this year.

Also at PSA’s disposal would be the Cascada cabrio, Mokka/Trax small SUV, the Crossland X and Grandland X crossovers co-developed with PSA, the Meriva and Zafira people-movers and the Combo, Vivaro and Movano vans.

PSA is also co-developing its first one-tonne ute with its Chinese partner Changan. If the joint-venture ute, which is due on sale in China and global markets from 2020, is sold here it could be badged as either a Peugeot, Citroen or Opel.