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Government moves to slash automotive aid

Going, going: Senators John Madigan and Nick Xenophon go into bat for the Automotive Transformation Scheme that is facing major cuts.

Independent senators to scrutinise coalition cuts to auto industry assistance scheme

24 Sep 2014

INDEPENDENT senators appear to hold the key to Abbott government plans to slash the former Labor government’s Automotive Transformation Scheme (ATS) by $900 million.

A coalition amendment bill that will close the motor industry assistance scheme early, in 2018, and strip it of $500 million between 2015 and 2017 was introduced in the House of Representatives today, despite angst in the motor manufacturing industry, especially among struggling parts-makers.

While it is likely to pass through the lower house on coalition votes, what happens in the senate is less clear.

Industry advocates have been lobbying independent senators about the issue, seeking to have the amendment blocked on the grounds that it will have serious implications for many companies as they try to transition their operations by securing other markets or new products after the death of the Australian car industry in 2017.

They say 30,000 jobs will be in jeopardy in the auto parts industry alone if government assistance is cut.

South Australian independent senator Nick Xenophon and Victorians John Madigan and Ricky Muir are among those on the record as saying they are opposed to the cuts, and thus are likely to side with the Labor opposition.

The Greens are also said to be concerned about potential job losses at a time of rising unemployment.

Federation of Automotive Products Manufacturers (FAPM) chief executive Richard Reilly said reducing funding of the ATS by 66 per cent in 2015 and by a further $150 million each year from 2016 to 2017 would have serious implications for the continued operations of many firms in the automotive supply chain.

“The ATS has been and continues to be an integral part of the business planning processes and quoting mechanisms of companies for many years,” he said.

“To reduce the funds available mid-stream leaves companies in the supply chain vulnerable to more competitive international pressures.”

Mr Reilly said the early closure of the ATS upon departure of the vehicle manufacturers ignored the reality that many dozens of component manufacturing companies employing many thousands of workers would still exist after 2017.

“The government continues to press on with the amendment bill knowing that a reduction in ATS funding will put in jeopardy up to 30,000 jobs in the component industry, not to mention the potential impact on jobs in the vehicle manufacturing side of the sector, Mr Reilly said.

“We urge the senate to reject this amendment and enable component suppliers the best chance to transition into new markets and new industries over the next three years.”

Federal Chamber of Automotive Industries chief executive Tony Weber said the Australian automotive supply chain had already factored ATS funding into their long-term business plans.

“If the amendment bill passes parliament, it will reduce the Automotive Transformation Scheme by $900 million and intensify the financial pressure on the automotive supply chain, at a time when they are trying to transition their operations into new business area,” Mr he said.

Holden managing director Gerry Dorizas has warned that if suppliers were forced to close, Holden might shut its Adelaide manufacturing operation early than its planned end date in 2017.

The federal coalition announced planned cuts to the ATS as a part of the May budget. According to the government, these cuts represent a saving of $618.5 million over eight years by cutting annual expenditure and ending the scheme in 2018 – a year after the last Australian car-maker quits manufacturing.

The plan involves slicing $176.7 million in the 2018-19 financial year, $95.2 million in 2019-20 and $28.6 million in 2020-21, on top of the $118 million set to be removed from the current financial year and $100 million from the previous 12-month period.

This marks a massive reduction from the $1.6 billion originally allocated to the scheme under the previous Labor government, and leaves $400 million in the assistance pot.

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