The Australian government has denied reports from local media that General Motors’ Aussie subsidiary Holden will be ending production in 2016, about when Holden’s Commodore range and the version of the Cruze it produces is scheduled to be replaced by their respective successors. Holden and the Australian government are currently negotiating a future co-investment scheme, which Holden says it requires to continue producing cars Down Under.

However, there have been rumors Holden has already made the decision to end production in Australia and this week the ABC, citing a senior government source, reported that Holden was planning to announce the end of production in Australia as early as this week but has delayed the announcement until early next year.

Carsguide is reporting that auto industry minister Ian Macfarlane denied the report and said negotiations between the government and Holden were ongoing.

"The productivity commission is continuing its work assessing the Australian automotive industry and will report to the government,” Macfarlane is quoted as saying. “That process is unchanged and will continue.”

Further hurting the situation is a separate announcement this week of a free trade agreement with South Korea. Holden loses money on the Cruze vehicles it builds in Australia so the new free trade agreement virtually paves the way for future generations of the General Motors Company [NYSE:GM] small car to be imported to Australia from Korea where Cruze production takes place at a much lower cost.

Close rival Ford announced this year it would be ending production in Australia by the same 2016 date. If Holden goes, that would leave Toyota as the only producer of mass-market cars in the country, though the impact to the industry should Holden go, particularly to suppliers, would likely see Toyota also end its local operations.

Key reasons for the demise of the Aussie auto industry include higher wages than other production sites, stiff competition from cheap imports flooding in from low-cost sites and falling demand for large, rear-wheel-drive sedans.

Stay tuned for an update.


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