Was GM’s Decision to Axe Right-Hand-Drive Holden Wrong-Handed?

Automotive dealerships are big businesses in their own right. They spend a lot of money on their facilities and inventory. And they are dealt a major blow when an automaker eliminates the car brand they sell. Such is the case in Australia, where Holden was the local General Motors brand since 1931. GM stopped producing Holdens in Australia in October 2017, importing vehicles from plants in Thailand and South Korea, with a few Chevrolet Equinox and Buick Acadia SUVs from North America. Then in 2020, GM finally announced that it is getting out all right-hand drive markets globally and that Holden dealers specifically would close by the end of the year.

GM isn't alone in staying away from Australian production. All automakers have stopped manufacturing vehicles in Australia, and many have stopped selling brands in that market, period, because the business case is a tough one. Mitsubishi, Ford, and Toyota had already stopped manufacturing Down Under. The red Holden VFII Commodore Redline that rolled off the line on Oct. 20, 2107 was the last Holden and then last vehicle built in Australia. A Holden office remains to handle service, parts, warranties and recalls for at least 10 years.

So, sounds like that's it—Holden is done, and GM is out of Australia. Not exactly.

The Holden dealer group is negotiating with GM over compensation for ending their franchise agreements prematurely. And that fight has taken a turn since the dealers hired a private investigation firm to look into whether GM knew it was going to kill the brand more than year before the shutdown was announced, according toCarAdvicein Australia. Dealers also want to know if GM had the move planned when it shut the plant in South Korea and made plans to close plants in Thailand and India, two other right-hand-drive countries.

The franchise agreements in Australia are ending almost three years early. GM is no stranger to these kinds of negotiations. It went through a painful and expensive divorce after emerging from bankruptcy in 2009 where restructuring meant shedding four of its eight brands: Pontiac, Saturn, Hummer and Oldsmobile. Those brands were axed and the dealers were compensated. (GM's sale of its European Opel and Vauxhall brands to PSA in 2017 was less pricey. ) Those moves really only left the four main brands: Chevrolet, Cadillac, Buick, and GMC—and the niche Holden brand noted for rear-wheel-drive, right-hand-drive vehicles in Australia.

Axing a brand is never a spur-of-the-moment decision. Executives and actuaries have likely researched such a move periodically for many years, given the relative volume of sales from a global perspective and the high costs in Australia. That said, where the dealers have a more legitimate beef is their contention that General Motors continued to encourage investment in showroom upgrades, promised new models, and had recently signed the Holden dealer network to five-year franchise agreements just before shutting down the Australian division; if GM knew Holden's demise was near, that could be an issue, perCarAdvice.

A GM spokesman said, "as was stated at the time of announcement, the decision to retire the Holden brand in Australia and New Zealand was made shortly prior to the announcement on February 17, 2020."

The dealer investigation is also looking into whether GM knew it would get rid of Holden when it made plans to close the plants in Thailand and India. In November 2018 GM announced global restructuring plans that would shutter plants in North America as well as two overseas factories. China's Great Wall Motors bought the assets from the Thailand and India plants in deals that closed in late 2019 and early 2020.

The investigative firm is also looking into whether GM tried to sell Holden in 2017 when it sold Opel and Vauxhaul but GM and PSA have both repeatedly denied those rumors.

The GM spokesman says Holden "firmly believes the compensation offer to its dealers is fair and Holden strongly disagrees with any assertion that it has acted improperly."