Death of Australian car output leaves chasm

As thousands of people attended an automobile rally in Australia's blue-collar heartland on Sunday, many knew it was also a funeral procession for the nation's car industry.

General Motors closed its Holden factory in the South Australian suburb of Elizabeth on Friday, ending more than a century of car manufacturing in the country. Hundreds of workers will be left jobless, just weeks after Toyota Motor Corp. shut its plant in neighboring Victoria state, where Ford Motor Co. closed two sites last year.

Current and former workers and other car enthusiasts gathered outside the factory Friday to greet the last car off the production line.

"The end of Holden making cars in Australia is a very sad day for the workers and for every Australian. It is the end of an era," Prime Minister Malcolm Turnbull told reporters at a regular briefing on Friday. "Everyone has a Holden story."

Rising discretionary income and record-low interest rates have encouraged consumers to buy new vehicles, but many turned against the large passenger cars for which GM Holden is known.

"Consumers want fuel-efficient small cars and sports utility vehicles, and overseas manufacturers have been able to profit from changing tastes," said William McGregor, industry analyst at ‎IBISWorld.

Monthly SUV and crossover sales hit a record in June, surpassing 40,000 light vehicles, data from Australia's Bureau of Statistics show.

GM Holden, whose SUV range proved unpopular with Australians, will shift production to Germany where advanced automation will help keep costs low as it revamps its lineup.

GM Holden began auto production in 1948 with then-Prime Minister Ben Chifley driving the first vehicle off the production line, declaring it "a beauty".

"I have bought four of them," said Shane Oliver, an AMP Capital economist who described the closure as a "sad day".

"But it's clear that not enough Australians' agreed, opting for foreign-made SUVs instead," Oliver added.

End of local icons

The closing of GM, Toyota and Ford plants mark the end of home-grown icons such as the Holden Commodore and the Ford Falcon driven by Mel Gibson in the original "Mad Max" movie. But they also strike an economic blow, especially in the rust belt state of South Australia, where recent signs of recovery haven't been enough to stop people leaving in droves.

"It is clear that the automobile industry is a very significant industry that once it is gone, will leave a very deep economic gap, an investment gap and an employment gap," said John Spoehr, a professor of economics and director of the Australian Industrial Transformation Institute at Flinders University in Adelaide. "Holden injects a billion dollars plus into the South Australia economy. So its loss is going to be very significant."

More than 25,000 people attended the weekend parade in Elizabeth, including Holden workers past and present, to watch around 1,200 vintage models take to the streets. The last Holden built in Australia -- a VFII Commodore Redline -- rolled off the production line Friday more than 50 years after the factory opened.

South Australia, which is 60 percent desert, gained little benefit from the mining boom that spread wealth among other resource-rich states. Instead it suffered from the side effects of the soaring currency and rising wages. While its jobless rate has this year dropped from 7 percent to 5.8 percent, a record 6,900 more people departed the state than arrived last year.

Migration

The state has a "solid foundation from which to absorb this shock," South Australia Premier Jay Weatherill said in a television interview Friday. "Of course it will put upward pressure on the unemployment rate, but I think it will be temporary, I think it will be manageable."

Victoria is better placed to absorb the shock of its closures. The state is booming, with net interstate migration soaring over the last five years to a record 18,000 arrivals in 2016 as workers moved for jobs and slightly cheaper homes than New South Wales, the most populous state.

"Victoria's economy is more diverse and has stronger business services and financial services sectors, and stronger population growth, which help mitigate impacts," said Spoehr. "The opportunities for workers in other sectors of manufacturing are more substantial too."

Still, the jobs market in Australia has been an economic bright spot of late. Despite losses from car manufacturing, more than 800,000 jobs have been created since the first closure was announced four years ago. In the past 12 months, most new jobs have been in health care, construction and education.

Australia's car industry traces its roots to 1901, when land surveyor Harley Tarrant built the first gasoline-powered car in a small workshop in Melbourne. By the end of the century, Holden's Commodore was the country's best-selling car and remained so until 2011. As well as the currency, there was fierce competition from low-cost labor in countries such as China and Thailand.

The pressures took their toll. Ford, Holden and Toyota said separately in 2013 and 2014 they would cease production Down Under. At that time, just over 11,000 people were employed directly by the three automakers in Australia, according to the Productivity Commission.

"If only Australia had held its nerve, the car industry might have just hung on, and taken advantage of new innovation in hybrids, driverless cars etc.," said Tim Harcourt, an economist at The University of New South Wales Business School, who advised on a state-commissioned review of the car industry in 2008. "Australia failed. To hang out the car industry to dry is very sad."

'Ripple effect'

Since the announcement of the closure of the Elizabeth plant, almost three quarters of departing workers have found jobs, according to Holden, which has provided career counseling, interview training and other services. While many of the 950 workers who remain at the factory will wake up without a job on Saturday, it's not just them who will feel the pain.

"We are more concerned with workers of the supplier companies, and then the general ripple effect on the wider community as the economic activities slow down," said Peter Sandeman, chief executive officer of Anglicare SA, a Christian charity which helps South Australian communities.

Sandeman estimates another 2,500 jobs will be lost in the region from suppliers, and the effect will be palpable. Over the past year, his organization has seen an increasing demand in Elizabeth for emergency assistance, including groceries and meals, and he expects that to only rise further following the Holden plant's closure.

The Holden factory in Elizabeth was completed in 1962 and a year later, Queen Elizabeth II, after whom the suburb was named, visited and toured the plant. Filling its gap will be daunting: the last car plant to close in the state -- Mitsubishi Motors in 2008 -- triggered the biggest annual exodus of people to other states in 12 years.

There are some brighter spots on the horizon. The government has announced an A$89 billion ($70 billion) shipbuilding plan, which includes constructing 12 submarines mainly in South Australia and should generate thousands of jobs. But the key part of the program isn't scheduled to start until the early 2020s.

"That's four or five years away," said Scott Batchelor, South Australia vehicles secretary of the Australian Manufacturing Workers' Union. "That's a long time between the auto industry closing-down and then people getting employed in shipbuilding."

Reuters contributed to this report.