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Car industry copping it from both sides in Canberra

Hitting back: The Australian motor industry is concerned that the long-term consequences of cuts to local development grants could end up in favour of overseas manufacturers.

FCAI pleads with Gillard and Abbott to stop raiding auto aid funds

General News logo9 Feb 2011

THE Australian motor industry returned fire at both sides of politics this week as Labor and Liberal leaders lined up to take slices out of automotive manufacturing and research assistance programs to help pay for Queensland’s flood reconstruction.

On Monday night, Federal Chamber of Automotive Industries (FCAI) president Mike Devereux – who is also chairman and managing director of GM Holden – wrote to Prime Minister Julia Gillard expressing the industry’s disappointment at the federal government’s decision last month to axe the Green Car Innovation Fund (GCIF).

On Tuesday night, FCAI chief executive Andrew McKellar teed off against Opposition Leader Tony Abbott for his proposal to hack $500 million out of the Automotive Transformation Scheme (ATS) that started just five weeks ago.

The industry believes both proposals put the local automotive manufacturing industry at risk by jeopardizing future investment by the Big Three companies and parts-makers.

They want both sides of politics to examine the long-term consequences of the cuts, which they say tilt the balance of manufacturing programs in favour of other countries.

At the heart of the issue is the breaking of agreements and resultant snapping of trust between the global head offices of the companies and Canberra.

The GCIF and ATS were both part of the Rudd Labor government’s $6.2 billion New Car Plan for a Greener Future that was trumpeted as securing the long-term future of the local industry after the 2008 inquiry headed by former Victorian Labor premier Steve Bracks.

80 center imageTop: Innovation, industry, science and research minister Senator Kim Carr. Bottom: Holden chairman and managing director Mike Devereux

At the time, Prime Minister Kevin Rudd invited the Australian CEOs of the three car-makers to the Lodge in Canberra and asked for letters from the head offices of all three companies promising to commit to Australian manufacturing.

In return for industry assistance, the car-makers agreed to cop a range of reforms, including tariff cuts that have reduced protection to five per cent (and to zero for products from Thailand, which has a free-trade agreement with Australia).

The industry is angry that the Gillard government has broken that agreement by knifing the GCIF to siphon off $429 million to flood reconstruction in what the companies regard as a move that could cause major long-term pain in Victoria and South Australia – the auto industry heartland – to fix a short-term problem in Queensland.

On Thursday, following a meeting with Prime Minister Julia Gillard and industry and innovation minister Kim Carr, the FCAI issued a statement which said that the industry “has been reassured by the guarantee from the Australian Government that it will not seek further reductions in support to the industry”.

“The vehicle manufacturers and component suppliers can be reassured by the confirmation from the Australian Government that no further policy changes will be made,” Mr McKellar said.

“Australia is competing with dozens of other vehicle manufacturing economies and the guarantee provided by the prime minister gives the industry a basis to work to continue to attract new investment.”

Earlier in the week, the Opposition weighed in with a proposal to go even further by reducing available funds in the $3.4 billion ATS by $500 million, with Mr Abbott saying that would return automotive industry funding to the levels of the Howard government in 2007.

"It removes the additional assistance to the motor industry that the Government has provided largely through the stimulus package," he said.

Mr McKellar responded by describing the proposal as ill-advised, saying it would severely damage the local vehicle manufacturing industry.

“To cut funding from the Automotive Transformation Scheme would endanger existing and planned investment projects and potentially put thousands of jobs at risk,” he said.

“Other countries are bending over backwards to attract new automotive investment and it is essential that Australia must continue to strive to retain a reputation as an attractive place to do business in.”

GoAuto understands Mr McKellar was today seeking a meeting with Mr Abbott to plead the industry’s case for retention of the ATS in full.

Ironically, Senator Carr, whose government deleted a total of $926 million in automotive assistance programs last week, accused Mr Abbott of again demonstrating his profound hostility to Australian manufacturing.

He said the proposal showed his callous disregard for the future of the automotive industry and the 200,000 workers and their families who depend upon it.

“The ATS underpins the automotive industry in Australia,” he said. “In South Australia alone it constitutes 2.5 per cent of state GDP.

“I trust Mr Abbott has had the courage to front the workers at Elizabeth and tell them he intends to put their jobs on the line.”

Senator Carr said that under Labor, despite the “hard decision” to axe the GCIF, the government’s support would continue.

“I’ve spoken to the companies, to workers and to unions to affirm that our commitment to the automotive industry remains strong, and the bulk of the funds in the government’s New Car Plan remain intact,” he said.

“It’s a disgrace that Tony Abbott sees this as an opportunity to sacrifice the gains we made through the New Car Plan by slashing funding to pre-2007 levels.

“Only Labor understands that manufacturing is vital to a broad-based and sustainable national economy.”

Apart from the $429 million GCIF, the government also axed the ‘cash for clunkers’ Cleaner Car Rebate scheme that was an election promise, as well as slicing $96 million from the LPG conversion rebates scheme by capping it to 25,000 claims a year.

Senator Carr reportedly was unaware of the cuts that were decided by Ms Gillard’s inner cabinet circle, just days after Senator Carr announced the latest GCIF grant, $3.5 million to Melbourne’s Alternative Fuel Innovations to develop LPG injection systems.

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