Edition 65 – Why Holden is Dead in the Water?

We are witnessing the slow and painful death of an Australian icon right before our very eyes. Most people don’t know that. Some people couldn’t care less. However, owners and managers of family businesses in Australia should pay very close attention to what is happening to Australia’s car company, Holden, right now.

In 1948, Prime Minister Ben Chifley officiated at the opening of the General Motor’s Holden plant in Melbourne. Whilst car production had taken place in Australia since before that date, it was Holden that built the first Australian car for Australian conditions.

By 1953, Holden commanded a huge share of the Australian new car market. Throughout the 1960s and 1970s, Holden continued to garner national attention with each new model it released. Growing up, we had a succession of Holdens in our household. A beige HG Kingswood station wagon was a step up from the pale blue HT Belmont utility which somehow managed to transport a family of five. My own first car was a 1981 VC Commodore with a three speed automatic, AM radio, wind down windows and vinyl seats.

The first indication that things were wrong with Holden was in 1984 when GM wrote Holden a cheque for $500 million – and promptly told Holden management they either made it work, or the factory was closed for good.

Fast forward to 2013. A limited export market for its product and low market volumes domestically put significant pressure on “Australia’s own”. In 2014, Holden’s management made the decision to cease manufacturing cars in Australia and become a full line importer.
The iconic Commodore will celebrate 39 years of Australian production – however, the 40th anniversary model will be an Opel product, re-badged. Other vehicles in Holden’s range will also be sourced out of Opel in Europe or GM Korea (formerly Daewoo).

In my opinion, the chink in the armour from the announcement of the closure of the Australian factory is now a mortal wound. GM have made the decision to sell Opel to the Peugeot Citroen group out of France. After $20 billion in losses over 20 years, GM has raised the white flag in Europe.

So, why does this spell the death of Holden? Holden’s decision to source the Commodore replacement out of Opel’s stable was made well before GM decided to sell Opel. Now that Opel will be a Peugeot Citroen brand means that, potentially, Holden will be without a large car and its flag carrier by 2020. Why will a French car company want to supply a small volume, Southern Hemisphere based retailer with a product that, potentially, is a low volume seller in Europe anyway?

Holden’s strategy of rebranding other products from GM’s global portfolio sounded good in theory, but is now a bad move. There will be no brand loyalty. In my opinion, people will choose to deal with a car company that manufactures its own product. I envisage that within 10 years, Holden as a brand will cease to exist.

There are many lessons for family business from observing Holden’s demise:

1. Be aware of changing market conditions – and adapt accordingly.
2. Make money on your key products – and if you can’t, find out why?
3. Expand your markets – your product or service may have reached beyond your own geographic market.
4. Make the customer passionate about your business – whether it is the product you develop or the service you deliver, passion drives loyalty which drives profitability and business value.
5. Be acutely aware of your suppliers and how much you rely on them.
6. Control as much as you can, and set the direction of your business on those controllables.
7. Exposing a significant portion of your business to the decisions of someone else is a risky move at best – and potentially fatal.

This Week’s Tip

What decisions made by those outside your business could cripple it overnight?