Currency cripples US Ute

Global utility: A strong Aussie dollar has hurt the VE Ute's US export propects.

Exchange rates slow plan for Ute to follow VE-based Pontiac sedan as second US export

By JAMES STANFORD 16 October 2007


THE soaring Australian dollar could cripple Holden’s plans to export the VE Ute to the United States.

It has been widely anticipated that the new Ute would be sold in the US as Pontiac or GMC, but GM product chief Bob Lutz has told GoAuto the strength of the Australian dollar could see that plan shelved.

When Mr Lutz visited Holden in Melbourne last week, the Australian dollar had pushed past the US90-cent mark.

GoAuto asked Mr Lutz if that would be an issue when it came to deciding whether the VE Ute would be sold in the US.

“That is why we are not announcing any plans for the Ute at this point because we have to wait and see how the Australian dollar develops against the US dollar, because at some point it stops making sense,” he said.

“We would either lose money on the importation or sale, which we are clearly not going to do, or we would have to raise the price to the point where it no longer represents solid value.”

GM Holden managing director Chris Gubbey said the value of the dollar would be part of decision-making process regarding whether the Ute goes to the US, but remained hopeful. “We have got Utes over there under evaluation so we still have hopes that that is something we could look forward to,” he said.

Mr Lutz said if Holden imported more vehicles from the US, the currency issue would not be as pressing. “The problem is that we really don’t have enough of a product flow from the US to Australia at this point,” he said.

“If you have a two-way flow you can tell yourself, ‘I don’t care what the exchange rates do, what I lose on one I gain on the other’, but we aren’t at this point yet.”

Mr Lutz did not mention Cadillac cars being launched in Australia, but it clear any such move would help the Australia-US balance of trade.

Mr Gubbey told GoAuto that Cadillac was still under “serious review,” but would not confirm the American brand would come here or when it might do so.

As GoAuto reported last week, Mr Lutz also confirmed that a Torana-sized compact RWD vehicle based on GM’s new Alpha platform was in development and would be an obvious model for Australia. While the currency concerns could affect the plan to sell the Ute in the US, Mr Lutz said the Commodore sedan-based G8 was still on track to be launched in the US early next year.

He added that GM would not change the prices it had just announced to cover for the rise of the US currency. “We reviewed the situation and at this point, the announced export program, which is the Pontiac G8 saloon is still looking okay, it is not looking as good as it did a few months ago, but it is still well worth doing,” Mr Lutz said.

“What we don’t want to do is make the mistake that we made last time with the GTO, which was also a time in which the Aussie dollar strengthened as opposed to our original estimates. What we did then was keep the margin and passed it on in the price. So we got up into never-never land for a Pontiac and destroyed the momentum of the car,” he said.

According to Mr Lutz, the G8 pricing – which starts from $US27,595 ($A30,450) for the base V6 model – is very competitive. “We are going to sell at a price that the average person interested in the car would perceive as fantastic value,” he said.

As for the Ute, Mr Lutz would not say when GM would decide if the Ute would be sold to the US. “(There is) no firm timing on a decision and it is certainly way too early to announce that it is a firm program,” Mr Lutz said.

“We just have to look at all aspects of it. How it would fit into the US model program. It is a great vehicle, I drove it today, it looks sensational, I think Americans would absolutely love it. I personally think it would be a smash hit, but we will see.”

Mr Lutz said the rising Australian dollar could certainly prove problematic for local companies who export products. “Listen, any country that has a combination of relatively high wages and benefits, plus a very strong currency is going to find exports very difficult. That is a bad combination to have,” he said.

“Obviously, if I was the government, I would worry about where the Australian dollar was going because a high currency does impact on your exports.” It is not all doom and gloom according to Mr Lutz, who said the exchange rate pain would probably ease.

“These things tend to correct themselves,” he said. “If a country gets itself non-competitive from an exchange rate perspective, it results in a reduction in exports and sales and then imports rise and the currency falls to adjust.” Mr Lutz pointed to the US experience as an example.

“We used to have a very strong dollar, there was zero export potential out of the US, we imported everything, and now we have got a low dollar and we are restructuring all of our industries to a somewhat lower wage and benefits rate and so I think the US is highly competitive,” he said.

“It goes in cycles, you know, nothing is forever, so in the long term I wouldn’t get too depressed about it.”

Mr Gubbey said the rising Australian dollar did hurt its export income, but added that Holden was not alone in this regard. “It makes it tough for all manufacturing in Australia, it is not just an automotive issue,” he said. “It makes being lean and efficient much more important, not just for us, but also our supply base.”

Mr Gubbey said exports might be more difficult with such a strong dollar, but the company was not about to walk away from them.”

“You can’t produce a world-class car and put that amount of money in it and just build it for the Australian market. You need to get that balance of being global,” he said.

Sportwagon saved by exports

It's a wagon, sport: VE Sportwagon breaks official cover in Sydney.

Holden’s VE Commodore wagon was no certainty - until its export potential emerged

By MARTON PETTENDY and BYRON MATHIOUDAKIS 16 October 2007


GM HOLDEN has confirmed that its export potential is the major reason for the VE Sportwagon’s being – and that it will have a smaller cargo area than the model it replaces.

As a result, Holden concedes the next-generation Commodore wagon, which officially broke cover at last Thursday’s Sydney motor show opening in the shape of the VE Sportwagon concept, is likely to attract fewer business buyers than the VZ Commodore wagon it replaces – a model it says was one of the world’s biggest wagons.

Ford president Tom Gorman has already stated his delight that Holden has “handed that market to us”, but Holden says that more lucrative sales to private customers, who are expected to be drawn to the lifestyle-oriented VE wagon in greater numbers than before, will more than compensate for the downturn in (less profitable per-unit) fleet sales.

If approved for US exports, the Sportwagon would follow in the footsteps of the VE Commodore SS sedan (to be badged as the Pontiac G8) and, despite reservations about slimmer profits due to the strong Aussie dollar (see separate story), the VE Ute.

“Sportwagon is next cab off the export rank,” a GMH executive told GoAuto. “The Ute is now under study and the wagon will follow it.

“The success in the US of wagons like the Dodge Magnum shows Americans have rediscovered the wagon.

“It’s smaller inside but it will gain with private sales more than what it loses in fleets sales – maybe not in terms of (sales) volume, but definitely in terms of (profit) margins. There was no money in fleet sales anyway.”

New GM Holden chairman and managing director Chris Gubbey said that while overall cargo space may be reduced, the practicality of Holden’s wagon will increase.

“To get the style it’s a matter of balance, but it still has an impressive load space.

“Obviously you’re getting something that I really do believe redefines the wagon segment. If you look at the design, with the rear opening window, the tailgate that opens to almost vertical and the higher platform for the load space – it all makes it exceedingly practical,” he said.

Speaking at the Sydney show last week, design boss Tony Stolfo said Holden is investigating all export opportunities for the vehicle. If given the green light, North America would be the wagon’s first port of call outside Australia and New Zealand.

“We’d love to see it exported,” he told GoAuto. “It has big export appeal. If you look at the (Pontiac) G8… it’s a natural.”

While he would not divulge any more details about wagon exports, Mr Stolfo did mention how many he would like to see crossing the Pacific.

“10,000 (units per annum) would be good,” he said.

Mr Stolfo indicated that there are still some legislative and governmental hurdles to overcome before final confirmation can be made of any pending export deal.

Despite it ‘being a natural’, he did reveal that a wagon version of the $1 billion-plus VE program was not an automatic certainty.

“(Initially) there was not a lot of support for it. We had to choose which (of the many VE bodystyle proposals) to run with.”

However, Holden’s big brass began to change its corporate mind once it saw early three-dimensional renderings.

“When they saw the full-sized clay model they were convinced,” he said.

Mr Stolfo said that expanding the wagon’s appeal beyond fleet buyers is central to the VE wagon using the sedan’s shorter wheelbase, rather than the long-wheelbase Statesman/Caprice structure that has been the basis of all large Holden wagons since the 1971 HQ, including the outgoing VZ Commodore wagon.

“The market is shifting,” believes Mr Stolfo. “Things like novated leasing are pushing for choice, for more aspirational vehicles. And premium wagons are big. So we need to produce a wagon with loads of functionality but with increased appeal.”

While not abandoning the traditional wagon market altogether with a shorter vehicle offering less cargo space, Holden is after the sort of lifestyle-orientated person who might consider a Mazda 6, Subaru Outback or even a BMW 5 Series wagon.

“We needed a sportier design,” he admitted.

A greater female focus was also deemed important, necessitating a more compact design that is easier to park than the last Commodore wagon.

Holden is hoping that the wagon it calls the Sportwagon will score sales from people wary of the growing global backlash against larger SUVs.

“There is a stigma associated with SUVs,” Mr Stolfo said.

“So to launch a new wagon in this timeframe is the right thing to do.

“It will attract sedan and traditional wagon buyers, and it may even pull people out of SUVs,” he added.

Don’t expect VE-AWD
GM HOLDEN has always said the VE Commodore sedan and its utility and wagon bodystyle derivatives are “package-protected” for all-wheel drive, but don’t expect to see an AWD version of the Sportwagon from Holden any time soon.

Asked if an AWD Sportwagon was possible, Holden design chief Tony Stolfo said part of the VE architecture’s flexibility includes the provision for it.

“It’s been designed to take 4WD, with a transfer case moulded into the floor. When you start exporting to cold-climate markets (then) it has international appeal,” he said.

However, Mr Stolfo dismissed speculation that AWD VE sedans and wagons are on their way into dealer showrooms.

“I can’t say that it will be produced,” he said.

Another GMH executive said the limited US demand for AWD, except in the colder northern states, made the technology difficult to justify for production.

“We wouldn’t get our money back on it,” he said.


AFM: Not yet and not for V6
GM HOLDEN chose the VE Sportwagon concept in which to give Active Fuel Management its local debut, but the company says it is not compatible with V6 engines and won’t divulge when Australians will have access to the fuel-saving technology.

Asked when AFM would be seen in Holden models, chairman and managing director Chris Gubbey said: “Like every other product, it’s a matter of making sure it’s the right time to introduce it. So there’s no definitive timing for it.”

The AFM cylinder deactivation system will be fitted to the Holden-built, VE Commodore sedan-based Pontiac G8, which will soon be exported to the US – possibly as a precursor to introducing it in V8-engined Commodores in Australia, as a key component within the rumoured VE Series II upgrade next year.

Asked why the introduction of the significant new fuel consumption reduction system had been delayed for Australia, Mr Gubbey said: “It’s not a matter of being delayed – this program’s extremely complex.

“In terms of getting the packaging right and everything else – we’ve done that on the back of the G8 program, which then obviously makes it much easier to transfer over to our models,” he said.

Mr Gubbey said the fitment of AFM to V6 engines was unlikely. “Usually with AFM you do need that large capacity engine. With smaller capacity engines it actually becomes a technique that becomes counter-productive,” he said.