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Car industry analysis 'misguided, cynical'

Tough times: Report questions whether government aid for local car-makers goes to jobs.

FCAI says negative appraisal of federal industry policy has no basis in reality

General News logo17 Mar 2009


AN ANALYSIS that predicts the government’s car industry policies are doomed to failure has been dismissed as deeply flawed and misguided.

The Centre for Independent Studies (CIS), a hard-line free-market think-tank based in Sydney, released the paper claiming the government’s plans would fail in all their goals.

The policies were designed to support a key national industry, protect the environment and secure jobs, but author Dr Oliver Marc Hartwich claims it will fail on all these objectives.

Dr Hartwich says the government has made a fundamental error by considering the car industry as a national industry when, in fact it is a global operation.

He casts doubt on whether the “subsidies” offered to US-owned companies GM Holden and Ford, actually support local jobs or “effectively go to Detroit”.

He says the parlous state of General Motors’ finances in the US mean that, if GM falls over, GM Holden could end up dependent on state funding.

 center image Left: CIS research fellow Dr Oliver Marc Hartwich.

And, in a re-run of an argument that has been used ever since tariffs were at 57.5 per cent in the 1980s, Dr Hartwich says the best way to ensure a better environmental result would be to slash tariffs and open the market to even greater competition.

He says supporting jobs in the car industry come at the expense of all other sectors of the economy that are required to pay for this through higher car prices. However, there is no mention of the sorts of manufacturing operations that would spring up and provide jobs in the absence of the car industry.

The car industry has responded with a vigorous defence of the government policies and a withering attack on the motives of the CIS and Dr Hartwich.

Federal Chamber of Automotive Industries (FCAI) chief executive Andrew McKellar told GoAuto: “This is a deeply ideological argument and a deeply flawed one as well.

“They are coming at this particular issue with a very fixed perspective and a very misguided perspective. I reject the analysis almost in its entirety,” he said.

“What it ignores is the enormous contribution the car industry makes to the national economy. That’s just wrong.” Mr McKellar also points out that the CIS analysis makes a mistake commonly committed by automotive policy critics.

“The other thing is that where the government has provided supportive policies to encourage renewed and increased investment in the industry, at no point has the government ever signed a blank cheque to the industry.

“Any support that the government offers to the industry has to be more than matched by the companies. In fact, the contribution that comes from the parent companies of the local manufacturers is several multiples of the input received from the government.

“Those policies the government has announced are used to attract significant additional investment into the Australian economy which would otherwise have not come to Australia.” He said each dollar invested by the government “would generate a return many times over in terms of increased investment, increased innovation, the exports that it generates and the jobs that it generates”.

The Green Car Innovation Fund had already paid immediate dividends, with each of the three local manufacturers announcing new investments that would otherwise not have happened.

Mr McKellar said Toyota’s decision to make the Camry hybrid here, the Holden decision to build a small car here and the Ford decision to keep open its Geelong engine plant were all direct results of government policy.

“All of those things took a commitment from the industry and took the involvement of the government to help facilitate those outcomes.

“What they didn’t do was stand by and accept no as the answer,” Mr McKellar said.

“In the end a better result comes out of it all for the industry and for the national economy.

“The sort of analysis presented in this CIS article is a cynical perspective, a misguided perspective based on a particular ideological paradigm which has little or no basis in reality.”

Read more:

‘Scrap’ incentive mooted to boost car sales

Holden and Ford to get greener

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