General Motors Co. (GM) announced that it will invest A$1 billion ($1.04 billion) in its subsidiary GM Holden in Australia over the next decade with A$275 million ($286 billion) support from the national and two state governments in the country.
The investment will secure the jobs of 12,000 employers at GM Holden’s car manufacturing plant in Adelaide and engine manufacturing plant in Victoria. Consequently, it will also save many manufacturing jobs in the components sector.
GM Holden, founded in 1856, is based in Port Melbourne, Victoria. In 1931, it became a subsidiary of GM. The company offers a broad range of locally produced vehicles, along with imported GM models.
Australia’s automotive industry is going through tough times. The country’s three largest automakers, GM Holden, Toyota Motor (TM) and Ford Motor (F) have been downsizing their workforce in the country due to falling sales and exports driven by the global economic crisis and appreciation of the Australian dollar with respect to U.S. dollar. The Australian dollar traded at 40% above its long-term average.
In January this year, Toyota announced plan to cut 350 jobs out of 4,700 people it employs in the country. The automaker’s production level in the country plunged 36% in 4 years from 149,000 vehicles in 2007 to an expected 95,000 vehicles in 2012. In February, GM Holden decided to cut 140 jobs at its Adelaide car plant.
As a result, the Australian government has been trying to soothe the ailing condition of the automotive industry with government subsidies and tariff supports. The current support to GM Holden is a part of its 12-year package for the automotive industry, which was announced in 2008 and budgeted at A$5.4 billion ($5.6 billion) until 2020.
GM, a Zacks #3 Rank (Hold) company, posted a profit of $0.7 billion or 39 cents per share in the fourth quarter of 2011, missing the Zacks Consensus Estimate by 3 cents per share. The results excluded net loss from special items of $0.2 billion or 11 cents per share. It compared with the profit of $0.9 billion or 52 cents per share in the fourth quarter of 2010.
Revenues in the quarter scaled up 3% to $38.0 billion, which was in line with the Zacks Consensus Estimate. Unit sales escalated 3% to 2.2 million vehicles from the fourth quarter of 2010. The automaker occupied a market share of 11.7% during the quarter, up from 11.5% in the year-ago quarter.
GM expects to boost its top-line revenue in 2012 on the back of an expansion in the global automotive industry. The company anticipates continued pricing improvement with cost inflation while product mix and pension expense are expected to be unfavorable. It projected capital expenditures of $8 billion in the year as it continues to invest aggressively in new products and technologies.
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