Auto suppliers win $35m funding boost

THE Australian car components sector has received a $35 million boost with a new four-year government-funded program designed to enable parts-makers expand their operations and win new contracts, primarily overseas and outside the automotive industry.

Running until 2015/16, the ‘Automotive New Markets Initiative’ was announced today in conjunction with the $275 million in government funding that has enabled Holden to commit to a 10-year, billion-dollar manufacturing program based on two all-new next-generation global vehicle platforms.

The company has also made a commitment to set up a new ‘Suppliers’ Working Group’ to better connect Australian auto suppliers to GM’s worldwide supply chains.

A further $16m in government funding has been allocated to retrain retrenched employees in the industry, including the 100-plus workers at Holden’s Elizabeth assembly plant in South Australia who will lose their job when the factory scales back to a single shift by the end of May.

Federal industry and innovation minister Greg Combet said the new markets initiative – which is jointly funded by the federal and Victorian governments – would include a $30 million “merit-based grants program” that provides direct financial assistance for auto suppliers to expand their customer base and/or product range.

This will include assistance for “R&D for new products, preproduction development, early-stage commercialisation and retooling”.

Left: Greg Combet.

The program will also fund support services to help firms “develop new business capabilities, improve productivity and use existing skills and capabilities in new ways”, while funding will be allocated to continue the ‘automotive envoy’ program and create a new ‘automotive supplier advocate’.

The latter will help identify new products and customers in automotive and non-automotive industries.

In announcing the new program, Mr Combet said the new initiative, combined with General Motors’ manufacturing commitment in Australia to 2022, would enable Holden to alter its purchasing strategy “to provide more long-term certainty to local auto components manufacturers”.

“It will also help local auto components manufacturers to improve their competitiveness and very importantly obtain greater access to global supply chains and diversify their business into new non-auto markets in Australia,” he said.

“Internationally, the auto industry is moving towards global platform vehicles to achieve economies of scale.

“Our industry needs to move with that, and it means that it’s essential for Australian suppliers to integrate into global supply chains to survive and grow. It also means finding new markets domestically through diversification.” Mr Combet specified clean technologies and the defence and mining industries as areas outside the auto sector that offered potential.

The Federation of Automotive Products Manufacturers (FAPM) chief executive Richard Reilly welcomed the Holden funding boost and related initiatives, describing them as a “very positive development for the Australian industry”.

“We warmly welcome the decision,” he told GoAuto. “It gives Holden certainty for the next 10 years, and certainly gives a level of certainty to the supply chain that perhaps wasn’t there.” Mr Reilly said the new working group should assist existing Holden suppliers build on the work being done by the current Holden Suppliers’ Council.

“Looking to assist Holden suppliers enter GM supply chains is inherently a positive development for the guys who are looking to diversify overseas into new markets,” he said.

The FAPM chief also welcomed the extension of the automotive envoy program, which since 2009 has created export opportunities for component suppliers with the help of former Victorian premier Steve Bracks and former Toyota Australia chairman emeritus John Conomos.

These envoys were appointed under the Automotive Market Access Program, which formed part of the federal government’s $6.2 billion New Car Plan for a Greener Future. Funding for the envoy program was due to expire on June 30, 2012.

“Obviously they’ve committed some more funds to have an automotive envoy going forward, which is great,” Mr Reilly said.

“I think the automotive envoys have been really a positive development to assist (parts suppliers) going overseas on trade missions. So to have one automotive envoy position going forward is another good development and a good continuity of policy.” He said it remains to be seen how the supplier advocate would operate, but “anything that is going to assist companies diversify into new products or markets I think is a good step”.

“So overall these are positive developments for the industry.” At a press conference in Canberra today, Holden chairman and managing director Mike Devereux used Melbourne-based Holden supplier INC Corporation – which produces sound-deadening material – as an example of how a company could look to a range of industries outside automotive, such as mining and construction, to sell its products.

“They supply recycled, hi-tech, eco-friendly sound-deadening materials for Holden cars and they also export these same kinds of materials to BMW in countries like Germany, the United States and China,” he said.

“That’s an impressive feat when you consider the strength of the Aussie dollar right now.

“And they use the critical mass and the scale provided by the base auto industry to develop new products that have got absolutely nothing to do with making a car. Products like hi-tech, commercial-grade acoustic linings for office buildings or classrooms ... and even for our homes.” Mr Devereux said that as well showing how a local supplier could drive innovation, the INC example demonstrated how Australian taxpayers were receiving a return on their investment.

The new markets initiative, funding and support guidelines for which are still being developed, will be jointly administered by the federal, South Australian and Victorian governments.