General Motors Co said today it will stop making cars and engines in Australia by the end of 2017, with nearly 2,900 jobs to be lost, because of high production costs and competition.
The decision could spell the end of car manufacturing in Australia as the industry will be too small for supporting businesses such as parts makers to remain economic.
Toyota Motor Corp. announced it is reassessing its future in Australia. A union said 50,000 jobs in the auto parts industry are also in jeopardy.
General Motors's Australian subsidiary Holden once dominated Australian auto sales, but lost market share to imported cars. Ford Motor Co, once Holden's major rival in Australia, announced in May that it was ending production in the country in 2016. Toyota is the only other auto manufacturer in Australia.
GM's announcement has been anticipated for months. The Australian government has been under mounting political pressure to offer increased subsidies to the Detroit-based company to keep it manufacturing in Australia for the sake of the auto parts industry.
"The decision to end manufacturing in Australia reflects the perfect storm of negative influences the industry faces in the country including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world," GM's chief executive Dan Akerson said in a statement.
Holden, which has manufactured cars in Australia for 65 years, would become a sales company, he said.
The announcement was made the same day GM announced that Akerson will be replaced by Mary Barra on Jan. 15.
GM's Australia chairman Mike Devereux said the priority over the next four years would be to ensure the best possible transition for workers in South Australia and Victoria.
"Building cars in this country is just not sustainable," Devereux told reporters.
Industry Minister Ian Macfarlane said he was disappointed that GM had made its decision before an inquiry had completed an analysis of government support of the auto industry.
Holden has received 1.8 billion Australian dollars (USD 1.6 billion) in federal government assistance in the past 11 years.
The government will consult with Toyota and the car components industry about the impact of GM's decision, Macfarlane said in a statement.
Toyota said GM's decision put its own ability to make Australian cars under "unprecedented pressure."