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Holden gets $200m subsidy

Holden will promise to keep making cars in Australia for at least a decade.

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GM Holden will promise today to keep making cars in Australia for at least another decade after securing a subsidy package from the federal and South Australian governments worth more than $200 million.

Prime Minister Julia Gillard, SA Premier Jay Weatherill, Holden chairman Mike Devereux and vehicle union boss Ian Jones will be in Canberra for the announcement.

Holden, which like other manufacturers has suffered from the high Australian dollar and rising production costs, threatened to shut down its local operations altogether unless the government committed to a further assistance package beyond 2015.

Hanging around ... GM Holden says it will stay another decade in Australia after securing a hefty government subsidy.

Hanging around ... GM Holden says it will stay another decade in Australia after securing a hefty government subsidy. Photo: Nicolas Walker

Mr Devereux will pledge today to stay in the country until at least 2022.

Holden will continue local production of the Commodore until 2016 when it will be replaced by one of its parent company's US models, it was reported last night.

It is believed a new vehicle will also be produced at the company's Adelaide plant, alongside the popular Cruze model, as part of the deal.

In return for the subsidy - which one industry source said last night could be as high as $250 million - it is likely Holden will have pledged about $750 million in future investment in its Australian operations.

In previous assistance deals, manufacturers have been required to commit about $3 for every $1 of taxpayer aid.

Mr Weatherill said recently that the SA and federal governments would pay a ''substantial amount'' to General Motors to keep its factories in Australia.

Holden makes cars at its plants at Elizabeth, in Adelaide's north, and has an engine manufacturing plant at Fishermen's Bend in Port Melbourne.

Apart from the 2500 workers at Adelaide, there are many thousands more jobs in the components sector that are dependent on Holden.

Today's decision is likely to reignite the political and economic argument about subsidising ailing industries. The Coalition has yet to commit to a subsidy policy for the motor industry beyond 2015.

Shadow treasurer Joe Hockey said in a recent speech that a Coalition government would not be propping up industries it considered unsustainable. He did not specify any industry.

The government has argued it is important for Australia to have a car industry, and that it warrants subsidising because it promotes high technology skills and jobs that are important in other areas of the economy.

Holden is expected soon to confirm an export deal to sell Commodores in the US, where the car will carry a Chevrolet badge.

Speculation mounted last week that the Commodore would form the basis for Chevrolet's race car in the popular NASCAR race series.

Australia's three remaining car makers - Ford, Holden and Toyota - have seen their sales dive as buyers shift away from the large cars that have been their staple for decades to smaller vehicles and SUVs.

In January, Ford, which has manufacturing facilities in Geelong and Broadmeadows, committed to investing another $103 million into its struggling Falcon, $34 million of which is from the federal government and an estimated $19 million from the Victorian government.

In 2011, Holden received $149 million in federal funding in return for committing to investing a further $449 million to begin producing the Cruze small car alongside the Commodore in SA.

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