Industry lukewarm on Labor’s $2bn support package

AUSTRALIA’S two remaining car-makers have tentatively welcomed an extra $2 billion in funding promised by the Labor government that will provide funds beyond 2020.

However, the funding boost, which could all come unstuck if the Rudd government is not returned after the September 7 election, was slammed by the opposition as little more than a taxpayer-funded “money-go-round”.

Prime minister Kevin Rudd announced on the weekend that the government would tip an extra $500 million into Australia’s struggling automotive industry if it is returned after another election due in 2016, with commitments of $300 million a year from 2020.

It is on top of another $200 million promised to the automotive industry in this year’s federal budget – part of a $500 million bucket of funds the government said was for “decisions taken and not yet announced”.

Federation of Automotive Products Manufacturers chief executive Richard Reilly said while the funding proposal was not primarily directed at parts makers, whatever was good for car companies would also benefit his members.

He said the money would help increase certainty for the sector.

“This is a grand scheme – from my understanding that extra $500 million will be a grant that the vehicle manufacturers will apply for as one-off grants, I think,” Mr Reilly said.

“That gives certainty to the car manufacturers – if they know money is going to be locked in until 2020 and beyond, then that will give them incentive to make investment, which will then give incentive for the suppliers to make their investments to support the decisions by the car companies.

“I think we all know now after the discussion on automotive over quite a number of years now that we need to support our car industry,” he said.

“I think that the government realises now that we need certainty going forward – we can’t just have these ad hoc grants going forward.

“We need to lock in a pool of money that car manufacturers can apply to access on a periodic basis given the new models and business decisions they need to make.” Holden, which wound up a workforce vote last week over austerity measures that would help it save $15 million a year from the cost of building its Cruze small car and Commodore large car range in Australia, said it would take a close look at the policy.

“Holden will await the outcome of the Federal election before deciding on its future investment in Australia,” the car-maker said in a statement released after the announcement.

“Holden has been discussing with both the Government and the Opposition the need for long term, globally competitive automotive policy.

“Holden will carefully assess any policies announced before the election but will not make any decision until it has had the opportunity to hold detailed discussions with the next government," it said.

Holden managing director Mike Devereux said the car-maker and its US parent company General Motors would probably be in a position to make a call on whether it would keep building vehicles in Australia by about October.

Toyota, meanwhile, declined to comment specifically about Mr Rudd’s funding announcement, although said it would “look forward to working with the Government of the day to develop sound policy that provides certainty and clarity for the automotive industry”.

The Association of Professional Engineers, Scientists and Managers Australia welcomed the government’s announcement as a “key to ensuring a strong, diverse economy following the resources boom”.

“With the boom easing, we need a healthy, thriving automotive sector to ensure our economy prospers for many years to come.” APESMA chief executive Chris Walton said.

“We’ve seen commodity prices fall, the dollar drop and our cars become more attractive to international buyers already.

“We must make sure the industry still exists while our economy transforms. We just can’t rely on being Asia’s quarry any more,” he said.

“Australia’s talented engineers design and produce some of the very best cars in the world.

“We need an industry that will foster these talents and provide opportunities for engineers well into the future. The work of these engineers enables tens of thousands of manufacturing jobs.” However, Mr Walton sounded a cautionary warning, saying the industry needed both sides of politics to come together to support its future.

Meanwhile, shadow industry minister Sophie Mirabella labeled Labor’s industry assistance announcement as “another hastily-conceived election con”.

“Today’s promise by Labor represents another chapter in its tale of providing an endless stream of untargeted taxpayer handouts, and we all know that Kevin Rudd’s promises aren’t worth the paper on which they’re written,” Ms Mirabella said.

“It also comes just two weeks after a further $200 million was promised to the industry without any explanation. Labor’s approach is a giant taxing, big handouts, ‘money-go-round’.

“Given the scant justification and costings accompanying it, Labor needs to explain what specific changes it will make to the Automotive Transformation Scheme (ATS) as a result of this announcement,” she said.

“This is money being promised for another 12 years, on the never-never, by a party that hasn’t got its car industry policies right for the past six years.” Opposition leader Tony Abbott said he wanted car-makers to stay in Australia.

“A domestic motor industry is an important element in a 21st century, first-world economy," Mr Abbott said after Mr Rudd’s announcement.

"But if we want the motor industry to continue, it's got to be more competitive and it's got to develop an export plan and that's precisely the kind of thing that I would want to sit down and talk to Toyota and Holden about if we win the election on September 7.” Labor’s car-industry support package is looking less likely to succeed as voters turn away from the incumbent government in increasing numbers.

The latest Newspoll published in The Australian today shows Mr Rudd’s disaffection with voters has risen to 54 per cent – lower than when he was pushed out of the prime ministerial role in 2010.

In contrast, Mr Abbott’s dissatisfaction in the eyes of voters has fallen to just 51 per cent, the Newspoll survey says.