Holden is undertaking a professional and respectful wind-down of its new vehicle sales, design and engineering operations, with an ongoing commitment to servicing and supporting the estimated 1.6 million Holden vehicles currently on the road in Australia. Holden appreciates the impact of the decision on dealers, consumers, suppliers, community and business partners and has made good progress in discussions with our stakeholders.
Employee Transition
Although this has been a difficult period for our employees, it is inspiring to see how our people have committed to supporting a respectful and orderly transition of our sales, design and engineering operations.
We have completed individual discussions with nearly all Holden employees to ensure they have clarity around their next steps. The majority of impacted employees will be leaving Holden in June and August. Those leaving have a clear commitment from Holden that they will be paid an appropriate separation payment as well as receive transition support.
We currently plan to have around 200 people in the Aftersales team going forward to support Holden’s commitment to maintain service, warranty, recalls, parts supply and other repair services for our customers for at least the next 10 years.
Dealership Transition
As part of our transition offer, all Holden dealers are given the opportunity to continue to maintain an extensive customer base to service Holden vehicles and provide spare parts and accessories, in addition to being offered a compensation package that takes into account the financial impact on their business of the loss of new vehicle sales, as well as unamortized capital investment and signage. The compensation formula was designed to be favorable to dealers by looking back three years to 2017 when Holden sales and the overall industry were stronger.
Holden’s Dealer Transition Managers have met with over three-quarters of our 185 dealers in Australia over the past three weeks, with meetings scheduled for the remaining dealers. Any assertion that all dealers have received our offer and rejected it is false. Many dealers who have received the offer are now constructively working through the process.
Initial meetings outline the framework for the transition arrangements, the broad terms of the vehicle service and parts offer, and how the relevant dealer compensation payment has been calculated. Dealers require time to consider their position but we are already well down the path to reach a mutually acceptable outcome with several dealers in Australia and New Zealand. Some dealers have presently indicated they intend to decline our offer, which is their right.
Some dealers have indicated they wish to receive additional compensation and have enlisted the support of third parties such as accountants, lawyers and journalists to advance their case. However, significant time and effort has been put into the compensation formula and we have used actual financial information provided by dealers to produce our offer. We remain of the view that it is a fair and reasonable offer.
Holden is applying a consistent formula across our dealer network and it would not be appropriate to discuss individual cases in public. For larger dealerships with higher Holden new car sales volumes in recent years, the compensation offer can reach into the millions of dollars. Individual discussions are complex, as they take into account each dealer’s projected sales volume for the remainder of the term of the dealer agreement, investments they may have made in their Holden new car showroom and signage facilities, and any appropriate special circumstances warranting further consideration.
Only ten per cent of Holden dealers are solely dependent on the Holden franchise for their income. That dependency has been considered in our compensation calculation, with an additional supplemental payment.
Ninety per cent of Holden dealers today are multi-franchise, with Holden representing on average across the network approximately 29 per cent of their new vehicle sales. Over a long period of time, dealers have responded to an increasingly fragmented market and have diversified risk by taking on other brands. This practice intensified as Holden sales declined.
With the vast majority of Holden dealers selling other brands, as well as having used-vehicle sales operations, redeployment of dealership staff is likely to occur in many cases, either at their same dealership location or other sites. With most dealers also likely to continue as authorised Holden Service Operations, this will mean retention of their service staff and apprentices.
In 2019, dealers collectively reported to Holden that there were 400 New Sales Consultants, 157 New Sales Managers, 49 Fleet Sales Consultants and 40 Fleet Managers, dedicated to the Holden brand across the whole network of 185 dealers. This is far less than numbers which have circulated in some media articles.
There may be some impact on jobs at dealers but not anywhere near the exaggerated numbers we have seen reported in media. We regret this additional impact to some dealership employees and anticipate that dealers will utilise a portion of their compensation packages to do the right thing for their employees, just as Holden is doing for its employees.
To that end, we are heartened by comments made in the media by a number of dealers across Australia that they don’t envisage an immediate impact on jobs and intend to re-assign impacted employees to other parts of their businesses.
Customer Transition
Our customers are the focus of what we do at Holden. We continue to assure our existing customers of Holden’s firm commitment to provide aftersales support – servicing, spare parts, honoring warranties and conducting recall actions if required – for at least the next 10 years.
Feedback we have received is that while many customers are saddened by the decision to wind down Holden new vehicle sales operations, they understand that our aftersales network will continue to support them as usual throughout their ownership experience.
We will continue to honour all commitments given to consumers at the time of purchase, including the 7-year free service commitment. This service commitment is funded by Holden, which pays dealers for services undertaken on Holden vehicles. We will also be providing appropriate resourcing for warranty claims and product quality issues.
Conclusion
Holden has developed a detailed plan to professionally and respectfully exit the Australian new car sales market that takes into consideration the implications for customers, dealers, suppliers, business and community partners, and others. We take extremely seriously our obligations to support our various stakeholders.
Discussions with dealers are on an individual basis and to date have been cordial and respectful. We believe our compensation offer is very fair and that in due course most dealers will choose to engage with Holden as they exit Holden new car sales and seek to retain Holden service and repair operations as they transition their businesses.
We will provide you with future updates as Holden’s transition progresses and please don’t hesitate to reach out to us with questions at any time.
Yours sincerely,
Kristian Aquilina
Interim Chairman and Managing Director
GM Holden
By Kristian Aquilina
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