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$35 million boost for parts-makers

Part solution: Australian car component-makers can get government help to expand their business.

Governments open purse to help struggling car parts manufacturers to compete

General News logo8 Aug 2012

EMBATTLED Australian automotive parts-makers today received the green light to apply for slice of a $35 million government assistance package designed to help local manufacturers compete against overseas suppliers and diversify into products for other industries.

The announcement came today as a delegation from the Thailand Board of Investment visited Australia to hold free seminars for parts-makers to promote manufacturing in Thailand, where labour rates are as little as $1.12 an hour.

The car component industry is fighting for survival due to plunging sales of locally produced cars, the high Australian dollar and competition from overseas manufacturers, conditions that have contributed to the demise of two Victorian parts manufacturers – APV Automotive Components and CMI Industries – in the past two weeks, costing more than 200 workers their jobs.

Funded jointly by the federal and Victorian governments, the new Automotive New Markets Initiative was foreshadowed by prime minister Julia Gillard in March as part of the $5.4 billion New Car Plan to support the automotive industry.

The scheme was thrown open for public comment until June, but has now been locked in by federal innovation and innovation minister Greg Combet on the eve of the annual conference of the Federal of Australian Parts Manufacturers (FAPM) in Victoria this week.

“This demonstrates the strong commitment of our three governments to securing the longterm sustainability of automotive manufacturing in Australia,” he said in a joint media statement with industry ministers from Victoria and South Australia.

80 center imageLeft: Greg Combet.

“The automotive industry faces challenges as a result of the high value of the Australian dollar and changes in consumer demand.

“The Automotive New Markets Initiative will help automotive component manufacturers to improve their competitiveness and break into the global supply chains which are an increasingly important feature of the car-making industry.”

The program is split into three elements – the Automotive New Markets Program, Business Capability Support Program and Automotive Envoys and Automotive Supplier Advocate.

Most of the money – $30 million over four years – will go to the new markets program, providing financial assistance to automotive firms to diversify their business by securing new customers and developing new products.

Successful applicants will need to contribute one dollar for every government dollar for their development program, with co-contribution grants ranging from $50,000 to $1 million.

The Business Capability Support Program will fund a capability development organisation to help automotive firms to “develop new capabilities, improve productivity and build on their current strengths in new ways”.

The final element of the initiative involves the recruiting of automotive envoys and an automotive supplier advocate to promote the Australian automotive industry in global supply chains and in new emerging industries.

It is unclear how these appointments will differ from current federally-funded Australian automotive industry ambassadors, former Toyota Australia chairman John Conomos and former Victorian premier Steve Bracks, who spruik the Australian industry to global manufacturers.

The overall initiative has been welcomed by the parts industry, which described it as a great incentive for suppliers to develop new business opportunities in Australia and export markets.

Federation of Automotive Products Manufacturers (FAPM) chief executive officer Richard Reilly said the component sector had to make every effort to enter global supply chains and seek markets for their automotive technologies, capabilities and components.

Otherwise, he said, companies run the risk of falling behind their peers.

“For a number of years now, the components sector has been urged to try and enter new markets to compliment their domestic production volumes,” he said.

“This new program provides dollar for dollar grant funding on a competitive basis to component manufacturing companies to do just that.”

Mr Reilly said the program provided incentives for new research and development programs, re-tooling, proof of concept and early stage commercialisation activities for new products.

He said the Business Capability Support Program and the appointment of an automotive envoy and supplier advocate would help automotive supply chain companies improve their international competitiveness, through targeted improvement projects and specialist advice from experienced automotive executives.

Victorian manufacturing, exports and trade minister Richard DallaRiva said the initiative would make the most of the automotive suppliers’ worldclass capabilities by helping them achieve the necessary scale to be successful in global supply chains.

“At a time of significant structural pressures on the car industry, local components suppliers must look to transform themselves into companies that can compete not only in selling parts into local production but also into global auto industry markets and into other sectors like defence, rail, aerospace and mining,” he said.

“We will stand by the industry during this period of transformation.”

South Australian manufacturing, innovation and trade acting minister Jack Snelling said the initiative would support not only the 52,000 Australians directly employed in the industry but the 200,000 jobs across Australia that relied on it.

The initiative will start this year and run until the 201516 financial year.

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