Why should the government fund Holden?

Holden is a private company. They employ Australians to manufacture cars in their Australian factory.

They therefore provide jobs to Australians by maintaining the factory here. Holden, and their parent company, General Motors are fully aware they can get labour cheaper in many other countries around the world.

Holden (and General Motors), know that to survive in a competitive market, they need to be innovative. They must ensure the product they sell meets the demands of their target markets, and keep the costs of meeting that objective low, in order to produce large profits  – so they can firstly maintain the business, and secondly satisfy share holder return on investment targets.

The basics of business. You find your market, you do whatever you can to capitalise that market, and you innovate to stay ahead of competitors.

I’m not surprised that Holden again is asking for a government handout or risk large numbers of jobs being lost. But they shouldn’t.

Holden being Holden merely need to make the business decision. Is it affordable to build the same car elsewhere, cheaper and import it, or is it cheaper to maintain the factory in Australia and pay staff the wages they do, at a rate which will no doubt demand increase just as Toyota attempted.

We don’t need to put government funds into competitive markets, they are competitive markets because others have found a way to do what Holden do, cheaper, or in a manner that the market decides is better than Holden, i.e. Toyota sell so many cars for a reason, Holden wasn’t the choice. Mazda are gaining sales in Australia because the market likes the Mazda offering.

Holden don’t need government funds, they need to find what the Australian market wants and deliver on that – and thinking for just a nano second, fuel prices are rising inline with demand for a limited resource – so targetting that more could yeild more sales. But Holden’s parent company already did that – through the Chevrolet Volt- an electric car.

If Holden still can produce the same car elsewhere, cheaper, and by a significant margin, then they shouldn’t pester the government for funds to stay in Australia, they should just get on with it – the profits will always be tempting no matter how much the government tries to meet them.

When more than too many of our jobs have been lost off shore, then, perhaps the market will again adjust to accept that there is in fact a limit to how high wages can increase and it’s flow on effect in the larger picture.

I don’t get it – why would you unnecessarily pay staff more money to do the same job? I know cost of living pressures increase the requirement for an increase – but then those pressures simply stem off other industries who also increase wages, pass the costs on to consumers. There’s got to be an absolute limit to that increase, I’m just now sure how that can be determined.

I’ve long seen this effect – from seeing Rental prices increase from what I thought was reasonable, at $160p/w to what now is $320p/w. Or the price of a bottle of Coke – $1.80 to $3.50.

The problem for Holden is where competitors have products in the market, think Nissan, Hyundai, who have a stronger price advantage – Holden can only go so cheap before they make next to nothing, and so lose sales in that way.

There used to be buy Australian Made adverts on TV – you’d think that those would have made many people think differently – but not so, at least, to me. I don’t care too much where a non-food item originates. It’s the quality and it’s value for money that will be my first consideration.

How does government funding of Holden change that? It doesn’t. It merely delays the inevitable, and forces tax payers to keep the temporary situation possible. It might only be cheaper if we assume the workers will all go to unemployment indefinitely – not so – many will find a job as soon as possible to maintain their lifestyle, whilst others would start their own pursuits, and then, you’ll have a subset stuck in unemployment for short to medium terms (as they have worked, they won’t want to be unemployed so are far more likely to find employment).

Funding Holden will only delay their inevitable decision – workers strike as they don’t get a pay rise, and Holden then decide they can’t afford that, and so pull out. Mitsubishi did similar as far as I know.

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