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by Tim Beissmann

Holden will cease vehicle and engine production by the end of 2017, confirming rumours of the local car maker’s impending exit from the Australian automotive manufacturing industry.

The decision will lead to the loss of 2900 jobs at Holden’s South Australian and Victorian manufacturing facilities over the next four years, and is expected to lead to the death of the local car making industry, with Toyota Australia, hundreds of parts suppliers and tens of thousands of jobs likely to follow.

General Motors chairman and managing director Dan Akerson said the decision was motivated by the US-based car maker’s determination to strengthen its global operations.

“The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” Akerson said.

Holden chairman and managing director Mike Devereux, who as recently as yesterday said no decision had been made on the car maker’s future, said the decision to close its local manufacturing operations was a “difficult” one given Holden’s “long and proud history of building vehicles in Australia”.

Devereux said ensuring the best possible transition for its workers would be an “important priority” over the next four years.

“Moving forward, our business model will change significantly, however GM Holden will remain an integral part of its communities and an important employer both directly and through our dealers,” he said.

Approximately 1600 workers at Holden’s Elizabeth vehicle manufacturing plant in South Australia and 1300 employees from its Victorian workforce will lose their jobs as a result of the car maker’s exit. The company will also “significantly reduce” its engineering operations in Australia by the end of 2017, but will continue to operate a global design studio for GM.

Devereux confirmed Holden’s national sales and parts distribution network would also continue beyond 2017.

“GM remains committed to the automotive industry in Australia and New Zealand,” he said.

“We recognise the need for change and understand the government’s point of view.”

Speculation of Holden’s exit from the Australian car making industry has intensified over the past two weeks, with federal government ministers telling the media they believed the decision to end local production had already been made, and Prime Minister Tony Abbott insisting there would be no additional funding for the industry beyond what was promised heading into September’s election.

GM blamed Australia’s high manufacturing costs for much of the decision to exit the local manufacturing scene, claiming the high Australian dollar – which has risen from US$0.50 to as high as US$1.10 in recent years – has made manufacturing products in Australia 65 per cent more expensive compared with just a decade earlier.

GM says it expects to record pre-tax charges of $400 million to $600 million in the fourth quarter of 2013 as a result of the decision to discontinue vehicle and engine manufacturing in Australia by the end of 2017. The charges will consist of approximately $300 million to $500 million for non-cash impairment charges, including property, plant and equipment and approximately $100 million for cash payment of exit-related costs including employee severance-related costs.

Additional charges are expected through to 2017 for incremental future cash payments of employ severance once negotiations of the amount are completed with the employees’ union.

Devereux will front a press conference at the Holden Vehicle Operations facility in Elizabeth, South Australia at 3:30pm AEST. Stay tuned for updates.