Blindsided Holden dealers were led on until moment of demise

Holden was endorsing showroom spending right up to the moment GM made its announcment.

A 2019 Holden Commodore.

Holden was endorsing showroom spending right up to the moment General Motors announced it would kill off the brand and dealers say as many as 6000 sales staff will lose their jobs in the wake of the decision.

Analysts and the national dealer body agreed Holden dealers had been blindsided by the move, handed down by parent body GM on Monday.

“There was very little warning. There were dealers in the last six months who were encouraged to make pretty big investments in their stores at the behest of Holden,” said the leading automotive analyst for KPMG, Steve Bragg.

Some dealers had even bought existing franchises with Holden’s backing in the run-up to the announcement.

“There’s a couple of dealers who have paid goodwill for businesses and Holden signed off, then a couple of days later they’re pulling out.”

The chief operating officer at the Australian Automotive Dealer Association, Brian Savage, agreed that dealers had been caught out, with some now locked into long-term rental agreements or expensive showroom upgrades.

“Commitments have been made to rebuilding facilities very recently and dealers signing 10- and 20-year leases,” Mr Savage said. “You enter into these franchise agreements in good faith as a dealer in the hope and expectation it will be part of an ongoing relationship with the ­factory.”

Businesses believed to have been caught out by the announcement include one new facility just north of Melbourne and another group which bought out an existing Holden franchise in the Brisbane suburbs. Neither re­turned­ calls from The Australian.

Mr Bragg said Holden had vastly underestimated the econo­mic fallout from the decision and the national dealer body estimates 10 times more showroom jobs will be lost then the number of redundancies at Holden itself.

The AADA said in a statement on Wednesday it expected at least 4000 redundancies and “potentially up to 6000”, with an average staff of 20 vulnerable at each of Holden’s 200 dealerships.

By contrast, Holden believes it will redeploy about 200 of its 800 staff, putting 600 out of work.

“There’s a much greater number of dealer employees facing the prospect of needing to find a job — by some sizeable margin,” Mr ­Savage said.

Mr Bragg said the impact of GM’s decision would be felt right across the economy and eventual job losses would be much higher. “Holden is saying only single-franchise dealers are going to be affected but that’s probably not the case,” he said.

“You can’t fix it by taking people­ from one brand and attaching them on to another brand — you can’t afford to keep them.

“Then think about the third-party suppliers attached to all the dealerships — there’s another couple of thousand jobs. It’s more like 10,000 to 15,000 jobs, in my view.” Mr Bragg, who was speaking on the way back from this week’s US national dealer conference, said the mood among the two dozen Holden dealers who were also attending was “shock and devastation”.

The blow comes as all dealers reel from a two-year decline in sales and the worst trading conditions in years. The latest survey of dealer sentiment, taken for the AADA just before the Holden announceme­nt, shows the dealership network shedding jobs at an alarming rate over the past two years, with staff numbers down to fewer than 56,000 nationally — 13,300 fewer than in 2018.

The number of dealerships is also down, with regional areas especial­ly vulnerable and recent closures at Warwick in Queensland, Kalgoorlie and Bunbury in Western Australia, and Darwin.

The survey reveals the downturn has shredded dealers’ bottom line, with 80 per cent saying profit levels are weak and few expecting improvement in the next six months.

Total dealer turnover is down more than 15 per cent over the past two years, equivalent to $10bn.

With the average Holden dealer turning over $25m a year, Mr Bragg said multiplying that across 200 outlets meant that another $5bn would be taken out of the economy.

“It’s not as small an impact as Holden is making it out to be.”