Cruze Powers Up GM Holden’s 2011 $89.7M Profits
The worst appears to be behind GM Holden, for now, as the carmaker reported on Monday $89.7 million in profits for 2011, largely boosted by the total number of Cruze that hit Australian roads since last year.
Analysts said the company also benefitted from the financial lifeline that the federal government had extended last year, a fact that Holden chief financial officer George Kapitelli would love to downplay as he stressed: "We are running our business responsibly and sustainably, which is critical for our long term success."
Yet in a statement, he admitted too that "we need (taxpayer assistance) to help level the playing field with our global competitors which have also received direct and indirect government financial support."
"Without the government funding Holden would not have invested in production capability," Kapitelli was reported by Business Day as saying on Monday.
With its eyes focused on increasing output, highlighted by the 90,442 units of Cruze that Holden assembled last year, the company accumulated enough sales, which in whole represented a slow down from its 2010 earnings of $112 million, that should impress even the most pessimistic observer.
Holden after all racked up more than $89 million after suffering more than half-a-decade of operational losses that only halted in 2010, coinciding with the Prime Minister Julia Gillard's decision to bail out the country's ailing automotive industry, which replicated the earlier efforts of her U.S. counterpart, President Barack Obama.
Holden's difficulties have been blamed to the last global financial crisis, which also affected the carmaker's parent company in America - General Motors, and the stiff competition in the global arena as the Australian dollar consistently spirals upward.
"After the financial crisis, we reshaped our business to improve structural cost, reduce our reliance on exports and bring the Cruze into local production," Kapitelli claimed.
The company's adjustment efforts clearly paid off as Australians over the past 12 months snapped up sufficient numbers of Cruze to propel Holden into two straight years of being in the black, which came when reds were all over the company books in the past six years that preceded 2010.
"The Cruze has definitely made an impact on our business model. The combination of Cruze and Commodore helps us going forward, to work through the peaks and troughs ... That program has been very successful. It's not just profit, it provides us the flexibility to respond to market needs," Kapitelli was quoted by The Herald Sun as saying.
That flexibility includes the declining sales of Holden's flagship sedan, the Commodore, which to date, Holden said, has tallied a full-year sales retreat of 11.6 percent, with more alarms as the country's former bestselling vehicle registered another sale slide of 22.8 percent as of April this year.
But Holden appears undisturbed by its conflicting sales figures, which generally head to north, as Kapitelli pointed out that "our work to manage costs and improve efficiency has paid off. It shows we have a solid foundation for the future. We do expect to be profitable going forward."
This year's profit charts also read some headway on Holden's export ventures into a number of countries, largely anchored on its manufacture of V6 Engines, but Kapitelli was quite realistic on that area of the company's overall operations.
"We don't see any significant increase in export volumes in this calendar year ... The high Australian dollar makes it difficult," he explained.
Holden aims to re-inject its 2011 haul on further product development initiatives, one of which is the fresh attempt to upgrade the company's VF Commodore.
"The plan is to totally re-invest that profit. We're confident that's enough to be sustainable going forward," Kapitelli said.