Holden blow to industry future

Manufacturers say the Australian government should not turn its back on the nation's car industry, but have stopped short of calling for the Reserve Bank to intervene to deflate the currency.

"You would not give up your auto industry without a fight because of all the broader benefits it brings to the national economy," Australian Industry Group chief executive Innes Willox said.

His comments followed Australia's biggest car maker detailing plans to cut nearly a quarter of its workforce, blaming the high dollar.

The bulk of the jobs, or 400, will be axed from South Australia, with a further 100 to be cut in Victoria.

The Reserve Bank has recently signalled its surprise at the strength of the dollar, which has risen since mid-February despite a 15 per cent fall in the price of iron ore, the nation's biggest export.

After last week keeping the cash rate on hold, governor Glenn Stevens said the currency "remains higher than might have been expected, given the observed decline in export prices".

At the same time, however, the Reserve argues the high dollar has been "critical" to Australia's strong economic performance in recent years.

The Holden cuts come just two months away from the launch of an all-new VF Commodore.

Holden managing director Mike Devereux said the strength of the Australian dollar and fierce competition from imported brands had dented sales of the locally built cars.

The currency was at its strongest for 30 years and the appreciation of the dollar meant that it cost 60 per cent more to make things in Australia than it did 10 years ago.

Mr Devereux took a swipe at countries that "fiercely" defended their local car industries, effectively closing off export opportunities for Holden, and accused others of manipulating currency to strengthen their own export industries.

"Many of the issues driving today's announcement are things that are beyond the control of people who work here," he said. "What I can't control is some fairly massive external factors." He said the entire Australian manufacturing industry was dealing with "structural changes to the Australian economy".

"The Australian auto industry is heavily trade exposed. We are witnessing a structural shift in the market ... for anyone who makes things in this country."

The company will cut production at its Elizabeth plant from 400 to 335 cars a day from August, as it reacts to slow sales of the Commodore and its other locally built car, the Cruze. The plant will lose 400 workers, while a further 100 will be cut from its Victorian product development operations.

The job cuts come just five months after the company laid off 170 workers for similar reasons, and has cast a cloud over the launch of the new Commodore, which will be exported to the United States as a Chevrolet.

Between 2005 and 2012, sales of locally made vehicles have fallen from 248,912 to 139,796. The new build rate will see Holden produce roughly 75,000 cars a year, down from about 85,000 last year.

In February Holden's US parent posted a fourth-quarter profit of $US900 million, up from $US500 million in the same period a year earlier. The company was bailed out by the US government during the global financial crisis.