$323 million turnaround has taken Holden back into the black

[csv8]

A $323 million turnaround has taken Holden back into the black for the first time in six years.

It today reports a $112 million pre-tax profit for 2010, a massive improvement over the $211 million it lost on its operations in 2009.


The result comes after a huge restructuring at Fishermans Bend and despite the huge investment program to begin local production of the Cruze compact at Elizabeth in South Australia.

Holden says it was helped by a boost in income to $4.4 billion, a result that came as a result of both the third-highest local sales on record and an increase in its export earnings.

It was also helped by the 15th straight year of Commodore sales leadership, as its showroom result in 2010 improved by more than 10 per cent.

"Holden domestic vehicle sales were up 11 per cent from 2009, vehicle exports rose 13 per cent and engine exports were up 25 per cent. This growth was underpinned by more efficient and robust manufacturing, delivering consolidated revenue of $4.4 billion in 2010 compared to $3.8 billion in 2009," says the company's chief financial officer, Mark Bernhard.

But it is the longer-term work on restructuring - what previous chairman Mark Reuss called 'right sizing' during his time in the top job at Holden - which will deliver a sustainable future for the company.

“The measures we took to re-structure our organisation and reduce costs during this period saw us emerge as a leaner, more flexible automotive manufacturer," says Bernhard.

[Brazen]

great news for the Aussie motor industry

[Road_Warrior]

http://www.goauto.com.au/mellor/mell...257870000F2CB0

A LEANER GM Holden has snapped a five-year losing streak, reporting a $112 million after-tax profit in 2010 – its first year in the black since 2004.

The profit, propelled by greater efficiencies and a 16 per cent increase in revenues on the back of improved domestic sales and exports, represents a $323 million turnaround from 2009’s record $210.6 million loss that capped accumulated losses of $576 million since 2005.

Holden joins major rival Ford Australia back in the black, with the Blue Oval expecting another positive result when its 2010 financials are announced in May. Ford returned to profit in 2009 with a $13 million after-tax result after a record $274 million loss in 2008.

Toyota Australia is also likely to return to profit this year, after a huge $290 million tax slug in its 2009-10 tax year drove the company into the red to the tune of $107.9 million.

Holden’s 2009 financial disaster was largely attributed to the global financial crisis that not only drove down Holden’s local sales but killed its major export program, the Pontiac G8, with severe financial consequences.

The 2010 turnaround ends a turbulent period for Holden, with the company being forced to temporarily close one of its two factory shifts at its South Australian vehicle factory in 2009, putting workers on a shared shift arrangement until late last year.

To stave off a potential cash crisis at the height of the global financial crisis in 2009, Holden also had to request a $200 million line of credit from the federal government when its General Motors parent company plunged into chapter 11 bankruptcy.

Holden center imageFrom top: Holden chief financial officer Mark Bernhard, Holden Cruze, Holden Commodore Sportwagon.

A restructuring of the company included the slashing of Holden’s workforce from about 6000 in late 2008 to 4500 last year.

Announcing the 2010 result today with the release of an incomplete set of numbers, Holden’s chief financial officer Mark Bernhard said the harsh impact of several years of challenging global economic conditions had forced greater efficiencies on the company.

“The economic climate experienced during 2008 and 2009 required us to improve our structural cost base and business model to ensure the long-term profitability of our domestic business,” he said.

“The measures we took to restructure our organisation and reduce costs during this period saw us emerge as a leaner, more flexible automotive manufacturer.”

In 2010, Holden domestic vehicle sales were up 11 per cent from 2009, vehicle exports rose 13 per cent and engine exports were up 25 per cent.

“This growth was underpinned by more efficient and robust manufacturing, delivering consolidated revenue of $4.4 billion in 2010 compared to $3.8 billion in 2009,” Holden said.

However, sales revenue was still well short of the $5.8 billion reported in 2008.

Sales of the locally made Holden Commodore were up 5.3 per cent in 2010, with the related Caprice sales volumes gaining 4.4 per cent, and the Ute declining 1.1 per cent

This year, however, Holden’s first-quarter domestic sales are down 11.8 per cent, with Commodore and Ute volumes both slipping, down 6.3 and 24.3 per cent respectively.

Mr Bernhard said he would not like to speculate on the potential for another profit in 2011, saying its goal was to make its domestic operations profitable.

Holden expects overall sales of its locally made vehicles to increase in 2011 with the arrival in showrooms late last month of the locally produced Cruze small sedan and, later in the year, the Cruze hatch. As well, Holden has started production of its Chevrolet Caprice Police Patrol Vehicle (PPV) for export to law enforcement agencies in North America.

Mr Bernhard said the investment to produce a small car alongside Commodore at Holden Vehicle Operations in South Australia formed an important part of Holden’s long-term strategy.

“We are pleased to announce a return to profitability, and to achieve our goal of putting Holden ‘back in the black’ in 2010, but sustained business performance, and our ability to meet the needs of the Australian market, is critical for Holden’s long-term viability,” he said.

Holden said its spend on research and development in 2010 had grown to $179 million – up from $146 million in 2009 but well down on the $360 million spent in 2008.

Holden’s profitability hit the wall well before the GFC, with a whopping $336 million profit in 2004 sliding to a $145 million loss in 2005 and then a record-equalling $147 million loss in 2006.

Holden had almost pulled the company back into the black in 2007 when the GFC hit, resulting in three years of successively greater losses – $6 million in 2007, $70 million in 2008 and $211 million in 2009.

The latter was compounded by costs incurred in the final closure of the company’s four-cylinder engine plant in Port Melbourne, leaving its newer V6 plant as its only manufacturing operation in Victoria.

Federal innovation and industry minister Kim Carr hailed Holden’s 2010 financial result as a resounding vindication of the Australian government’s $5.4 billion New Car Plan for a Greener Future.

“This return to profitability is a $320 million turnaround that shows that the New Car Plan is working,” Senator Carr said.

“Not only are domestic vehicle sales for Holden up by 11 per cent for 2010 compared with 2009, but vehicle exports to Brazil, the Middle East, New Zealand, South Africa and North America also underwent a 13 per cent boost.

“Australian engine exports also rose by 25 per cent and, coupled with greater demand for engine products, this led to a second production shift at Port Melbourne.

“The reinstatement of a second shift at Elizabeth was also a fantastic result for the company and its loyal workers.

“The fact that there are excellent prospects for further export growth at a time of a strong Australian dollar further underscores our faith in the company and the industry.”

Senator Carr said the introduction of the locally produced Holden Cruze and the potential of Caprice PPV for the North American market would add further strength.

Considering this is a FORD forum, this comment may be of particular interest:

Holden joins major rival Ford Australia back in the black, with the Blue Oval expecting another positive result when its 2010 financials are announced in May. Ford returned to profit in 2009 with a $13 million after-tax result after a record $274 million loss in 2008.

[phillyc]

Originally Posted by Road_Warrior

http://www.goauto.com.au/mellor/mell...257870000F2CB0

Considering this is a FORD forum, this comment may be of particular interest:

Great to see Ford Australia are expecting another profitable year.

Also interesting about the level of R & D being done by GMHolden. I was shouted down last year about Ford out investing GMHolden in 2009. But, here is the proof.

Holden said its spend on research and development in 2010 had grown to $179 million – up from $146 million in 2009 but well down on the $360 million spent in 2008.

Article from May 2010
http://www.goauto.com.au/mellor/mell...25771B002DE265

Mr Burela said Ford had been generating a positive cashflow since the latter part of 2009 and that it had reduced its debt levels – that is, inter-company borrowings – by between 42 and 45 per cent. He also said the company had grown its cash reserves.

“And yet at the same time, we have continued to invest in R&D (and) in new product actions,” he said, adding that the company’s R&D expenditure grew by 21-22 per cent, or around $55 million, in 2009 compared to the previous year.

22% growth equalled $55m for Ford in 2009. So, 100% of R & D was $250m in 2008 and $305m in 2009 with 2010 figures to come. GMHolden were respectively $360m in 2008, $146m in 2009 and $179m in 2010.

[bobthebilda]

Originally Posted by phillyc

Great to see Ford Australia are expecting another profitable year.
Also interesting about the level of R & D being done by GMHolden. I was shouted down last year about Ford out investing GMHolden in 2009. But, here is the proof.
Article from May 2010
http://www.goauto.com.au/mellor/mell...25771B002DE265
22% growth equalled $55m for Ford in 2009. So, 100% of R & D was $250m in 2008 and $305m in 2009 with 2010 figures to come. GMHolden were respectively $360m in 2008, $146m in 2009 and $179m in 2010.

Its not too difficult to look at some figures and wonder just how things add up. As above, and the below article
http://www.smh.com.au/business/carma...412-1dc3a.html

Holden spent $179 million on R & D in 2010 (and this included cruze). It just so happens that Holden got $180 million from the governments for cruze start up (from the green car fund), but this was on the proviso that they put in $3 for every $1 put in by the government (wonder where all that money went).

I'm not too convinced that if Holden got $330 million ($180 mil for cruze and $150 mil from ATS), last year, then making a $112 million profit is anything to brag about. A Normal business would call it a $218 million operating loss or a $112 million profit after abnormals.

At least the US government took an equity stake when they bailed out GM (altho they are still going to lose money). Here the government just keeps giving them money with no recourse.

[vztrt]

Originally Posted by bobthebilda

At least the US government took an equity stake when they bailed out GM (altho they are still going to lose money). Here the government just keeps giving them money with no recourse.

Here the money given has to be invested 2:1 by the Holden/Ford. GM was a bailout to stop then going under. But as usual you troll and push your tiring agenda.

[malazn mafia]

What did Ford do right 15 years ago to pip the commodore out of 1st place?? Factory taxi packs?

[Mr Hardware]

Originally Posted by malazn mafia

What did Ford do right 15 years ago to pip the commodore out of 1st place?? Factory taxi packs?

148/157kw instead of 127/130kw?
Proper full size car rather than a full size car on a mid size car wheelbase/track?
Vastly more modern interior in EF as opposed to VR
And offering stuff like XR6 wagon etc

[prydey]

Originally Posted by Mr Hardware

148/157kw instead of 127/130kw?
Proper full size car rather than a full size car on a mid size car wheelbase/track?
Vastly more modern interior in EF as opposed to VR
And offering stuff like XR6 wagon etc

you were doing well until that last bit egas in bf3 form outsold any xr6 wagon hand over fist. ef xr6 wagon sold 476 units in 1-2yrs. the ed sold even less. real profitable model that was.

Originally Posted by csv8

Curious ??? how can Ford make a profit when its not selling many Falcons???? or is it profit from the Euro's?????

can't tell if you are having a lend or serious.

[Ford_The_Win]

Originally Posted by Mr Hardware

148/157kw instead of 127/130kw?
Proper full size car rather than a full size car on a mid size car wheelbase/track?
Vastly more modern interior in EF as opposed to VR
And offering stuff like XR6 wagon etc

That's pretty much it. The VR was a dog compared to the EF, even the ED, when new. The quality of them is blatantly poor.

[irlewy86]

Originally Posted by malazn mafia

What did Ford do right 15 years ago to pip the commodore out of 1st place?? Factory taxi packs?

Its key demographic wasn't yet in retirement age

[Dr Smith]

Originally Posted by malazn mafia

What did Ford do right 15 years ago to pip the commodore out of 1st place?? Factory taxi packs?

The reasons are not just one single point, one forgotten factor was that the two were actually different in size and the bigger, more powerful yet more economical Falcon had a very complelling case. If Holden didn't down size or struggle with their powertrains/economy who knows.

[csv8]

Curious ??? how can Ford make a profit when its not selling many Falcons???? or is it profit from the Euro's?????

[jpd80]

Originally Posted by csv8

Curious ??? how can Ford make a profit when its not selling many Falcons???? or is it profit from the Euro's?????

[Sarcasm->] How can Holden make a profit without all those exports to the USA?

Sometimes the best part about banging your head against the wall is when you stop...

I think the key is in both manufacturers right sizing production for the intended market,
Ford did it by building less cars and with a smaller work force while
Holden did it by switching from exports to building another type of car...

Both manufacturers are probably right and both suit their own ends
but Holden can probably justify another commodore and continued
local manufacturing, with Ford i don't know so much....

Another strategic headline to blow Ford's Territory off the front page?
Call me cynical but you can almost set your watch by Holden....

[phillyc]

Carsguide

http://www.carsguide.com.au/site/new...lion_in_black/

The headline has changed since I wrote my first reply. Originally it said "Holden $323 in the black"
My comment was

Gover, take your HRT jacket off. A $112m profit is NOT $323 million in the black. Happy to see them make money. But is it any wonder you get called Holden Bend over Gover?
Phil Posted on 12 April 2011 1:59pm

I've been bagged since and my reply outlining the headline change has not yet been posted.

[Brazen]

Originally Posted by csv8

Curious ??? how can Ford make a profit when its not selling many Falcons???? or is it profit from the Euro's?????

They also do a lot of engineering work for other Ford models and sell a large amount of imported cars.

[Bossxr8]

Originally Posted by csv8

Curious ??? how can Ford make a profit when its not selling many Falcons???? or is it profit from the Euro's?????

Ford will definately not be making a profit now, but the first half of 2010 was good for Ford, we were having overtime to keep up at one point, but it dropped off pretty bad towards the end of the year.

Hopefully that won't drag down earnings for 2010 to red ink.

2011 so far has been a disaster and i'd assume Ford will lose money for the year, as the new models and engines will come too late to turn it around for the year. If everything fires 2012 should be a good one.


It makes me laugh how some people think Holden are so successful when this is the first or 2nd? profit in 6 years.

[b0son]

Originally Posted by Bossxr8

If everything fires 2012 should be

too little too late. Once again, a risk-shy Ford are too slow to follow trends. Commodore continues to steal what little big-car market share there is.

[vztrt]

http://www.caradvice.com.au/114781/g...ars-of-losses/

GM Holden returns to profit after five years of losses
By Tim Beissmann | April 12th, 2011

GM Holden is back in the black, with a $112 million profit in 2010 breaking a five-year run of losses for the local manufacturer.

Holden chief financial officer, Mark Bernhard, announced the positive economic result today after filing the company’s official statements with the Australian Securities and Investments Commission.

The result marks a $323 million turnaround from 2009, when GM Holden suffered a $211 million loss.

Between 2005 and 2009, GM Holden lost a total of $579 million. Before today’s announcement for the 2010 calendar year, Holden’s last full-year profit came in 2004.

Mr Bernhard said the losses over the past few years forced the company to become a more efficient operation.

“The economic climate experienced during 2008 and 2009 required us to improve our structural cost base and business model to ensure the long-term profitability of our domestic business,” Mr Bernhard said.

“The measures we took to re-structure our organisation and reduce costs during this period saw us emerge as a leaner, more flexible automotive manufacturer.”

GM Holden’s revenue increased from $3.8 billion to $4.4 billion in 2010, despite significant investment to produce the Cruze small car alongside the Commodore at Holden’s Vehicle Operations plant in South Australia and an increase in research and development spending ($179 million vs $146 million).

Compared with 2009, domestic sales of Holden vehicles were up 11 percent in 2010. Vehicle exports rose 13 percent, while engine exports were up a considerable 25 percent.

In total, 59,362 locally manufactured Holden vehicles were sold in Australia in 2010, up from 58,535 in 2009. In Holden’s last year of profitability, 2004, more than 110,000 locally manufactured Holdens were sold in Australia.

Sales of the Commodore increased 3.5 percent in 2010 to slightly fewer than 46,000 units. The Commodore-based Holden Utility lost 5.8 percent (around 700 units), while the Statesman/Caprice luxury pair was largely on par with the previous year.

Looking ahead to 2011, the Commodore has lost ground in terms of sales (down 6.3 percent in Q1), but it will be the Cruze that makes the biggest difference to the company’s bottom line this year from a sales point of view.

Holden is on track to sell 30,000 Cruzes this year, with production of the sedan commencing late last month and the all-new hatch to roll off the line at Elizabeth later this year.

Mr Bernhard said the Cruze had an important role to play moving forward, and admitted the most important factor for Holden in the long-term was to remain relevant to Australian consumers.

“We are pleased to announce a return to profitability, and to achieve our goal of putting Holden ‘back in the black’ in 2010, but sustained business performance, and our ability to meet the needs of the Australian market, is critical for Holden’s long-term viability.”

[BroadyFord]

Ford is highly likely to have made a profit this year thanks mainly to their imported vehicles, which are MUCH cheaper now (both for the consumer and FoA) thanks to the strong Australian dollar.

The local manufacturing arm (Falcon/Territory) has probably made a significant loss given the current state of sales.

[EDManual]

There were many imported cruze cars sold at high profits I would think in this past year!
Now they are making them here, there will be LESS profit surely!

[Road_Warrior]

So are these car makers not measuring their finances and profits on a financial year basis? The way these articles are talking is as though its done on a calendar year basis.

[bobthebilda]

Originally Posted by Road_Warrior

So are these car makers not measuring their finances and profits on a financial year basis? The way these articles are talking is as though its done on a calendar year basis.

They would report inline with what they do in their Head office countries. Ford Oz and Holden both close out their accounts at the end of the calender year.

I am pretty sure (but am open to correction), that there is no requirement for a company to end their financial year at end of June each year. Just needs to be done yearly. Most chose july to june for ease, but even some of the companies on the ASX close out at end of sept each year for example.

[jpd80]

Originally Posted by Road_Warrior

So are these car makers not measuring their finances and profits on a financial year basis? The way these articles are talking is as though its done on a calendar year basis.

Ford GM and Chrysler are calender year,
Japanese financial year ends in March...

[HUNTER8]

Press release states "Announcing the 2010 result today with the release of an incomplete set of numbers" which means the end figures could mean anything.
Also they have cut their work force down by around 1500. 1500 x $50k per annum equates to $75m. Add to this they had the Eizabeth plant on 1/2 wages for the bulk of the year and this could just add to more Holden spin.....

[Bossxr8]

Fords numbers should be out next week, and from all reports will be profit, but we'll wait and see.

[JPFS1]

yes have heard a pretty decent profit... but yes, it's a wait and see.

[BroadyFord]

Originally Posted by JPFS1

yes have heard a pretty decent profit... but yes, it's a wait and see.

Of course it will be a NET profit!

Ford have been saved by their imports. By all accounts their local manufacturing arm should be deep in the red.

[jpd80]

Originally Posted by BroadyFord

Of course it will be a NET profit!

Ford have been saved by their imports. By all accounts their local manufacturing arm should be deep in the red.

That's only recently, for Jan-December 2010 FoA local manufacturing was doing OK.
The drop in Falcon sales really became noticeable from late November onwards.
I doubt this will affect their 2010 result much at all, they may even Match Holden...

It's kind of funny, Holden does $4.4 billion in revenue yet people assume that
they only made $112 million profit...that's creative accounting at it's best.
Ford and Holden have been at this for years with inter company transfers,
a lot of the profit on vehicles and power trains stays with the originator....

[BroadyFord]

Originally Posted by jpd80

That's only recently, for Jan-December 2010 FoA local manufacturing was doing OK.
The drop in Falcon sales really became noticeable from late November onwards.
I doubt this will affect their 2010 result much at all, they may even Match Holden...

So what? Holden are more committed to Aussie manufacturing than Ford are. If you are a company, your main goal is to make a profit. Sure, Ford will probably make a net profit but if they can identify that they can make an even bigger profit by axing the part(s) of the company that's dragging them down then in the long-term they will.