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Car finance under scrutiny

Retail reaction: The government says it is hopeful new financiers will enter the car market soon.

PM says he is "acutely concious" of the credit squeeze facing car dealers

General News logo11 Nov 2008

THE federal government is confident of resolving the critical automotive finance problem resulting from the global credit crisis and the imminent departure from Australia of finance giants GMAC and GE Money.

Concerned by an expected accelerated market downturn from the credit squeeze on consumers, dealers and car companies alike, prime minister Kevin Rudd and industry minister Kim Carr confirmed this week that the government is addressing the issue with some urgency.

“In my continued discussions with the Australian treasury, and their continued discussions with the finance company sector in general on those dealing with the auto sector, we are acutely conscious of the challenges which lie there,” Mr Rudd said on Monday.

“Right now, the treasury is in continued discussions with many of those companies in terms of providing appropriate ways forward for the future. We know that auto finance is part of it and I am sure the government will have further to say in the future once our discussions are concluded with the finance company sector.” The following morning, Senator Carr told ABC Radio National that he was confident “developments” would be made in the “very near future”.

 center imageLeft: Senator Kim Carr.

“The government is working with the industry to assess practical solutions to this problem and I’ve got no doubt that we’ll see developments on this front in the very near future,” he said.

When asked whether the government would intervene to ensure people will still have access to finance to continue purchasing new vehicles, Senator Carr said: “It’s not just car purchases, it’s also about the provision of working capital for the small and medium-sized manufacturers because these finance companies have become increasingly important and the banks have rationed credit over the last year or so.

“This is also about ensuring that there is liquidity in the system so we’re working across the economy. There are new market opportunities emerging here and I’m confident we’ll see new players enter the field because this also happens to be a highly profitable area of economic activity.” Earlier, the Motor Trades Association of Australia (MTAA), which represents dealers across the country, reiterated its call for government action, saying that the cessation of two of Australia’s largest automotive financing companies continues to threaten the viability of many new and used car dealers.

“The reality of the current financial circumstances which have beset the automotive retail sector requires a considered and timely response from government,” said the MTAA in a statement.

“MTAA has been working closely with the government on the matter of dealer financing and supports the efforts of government taskforces to develop a strong policy response to the tightening of wholesale and retail credit within the sector, circumstances which are part of a global phenomenon and are not unique to the Australian market.” The MTAA is understood to be seeking government intervention to have the GMAC and GE deadlines extended by three months.

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