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Government backs down on ATS cuts

Back down: The federal coalition has confirmed it will maintain the Automotive Transformation Scheme and will not cut $500 million worth of funding.

$500 million cut to automotive industry support scheme ditched by coalition

10 Mar 2015

THE federal government has abandoned plans to slice $500 million from the former Labor government's Automotive Transformation Scheme (ATS), following pressure from the opposition and independent senators to ditch the cuts.

A statement from industry minister Ian Macfarlane said the government would “maintain the Automotive Transformation Scheme in its original form as legislated,” adding that it would “come to a natural conclusion at the end of 2017 when Holden and Toyota end their Australian manufacturing operations, following Ford in 2016”.

Minister Macfarlane's confirmation came as he announced that 12 Australian auto industry suppliers would benefit from further investment as a part of the $20 million Automotive Diversification Program.

Under the coalition's plans for an amendment bill announced during last year's May budget, $500 million would have been stripped from the scheme between 2015 and 2017 and the ATS would finish up in 2018, rather than 2021 when it was originally set to end under the previous government's version of the scheme.

The $900 million scheme was introduced by the previous government to assist Australian car- and parts-makers in transitioning their businesses from being reliant on the three local automotive manufacturers, Ford, Holden and Toyota and develop new business practices and opportunities to ensure their survival.

This, however, included $400 million for the four years following 2017 and was dependent on automotive manufacturing continuing beyond 2017, which is no longer the case, with the last two remaining car-makers – Holden and Toyota – closing their factories in late 2017.

Independent senator for South Australia Nick Xenophon, who opposed the cuts, said he was “cynical” about the government's motives and added that more than 100,000 jobs could be lost as a result of the scheme finishing earlier than expected.

“Under the current rules of the ATS, the government will never have to spend that $400 million, because Ford, GM Holden, and Toyota will have ceased car manufacturing by then,” he said. “This leaves 140 auto component firms with 33,000 direct jobs and conservatively another 70,000 that are dependent on the sector, potentially disappearing by 2018.” “Forgive me for being cynical, but the government is trying to win a political battle by announcing scrapping the cuts, but in effect they will still achieve what they wanted unless the criteria for the ATS funding is changed in respect of the new landscape.” Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber said in a statement that he welcomed Mr Macfarlane’s pledge to keep the ATS in its original state.

“This is particularly important for the small and medium-sized business in the supply chain, who have already factored ATS funding into their long-term business and investment decision-making processes,” he said.

“It also recognises the 45,000 workers directly employed, and the more than 100,000 workers indirectly employed in the automotive manufacturing sector, around Australia. This is good news for the Victorian and South Australian economies.” The Australian Manufacturing Workers’ Union (AMWU) national vehicle secretary Dave Smith praised the opposition and cross-bench in pressuring the government to back down on the cuts, but criticised the coalition by suggesting the delay caused by debating the changes has already had an impact on the local industry.

“This is a huge win for the workers in South Australia, Victoria and around the country,” he said. “Fifty thousand workers can breathe a little easier because their industry should keep going to 2017, rather than closing any day.

“But what we know for sure is that we’ve had 18 months of uncertainty and inaction, and threats to further cuts for Australia’s auto sector.

“This Government delay means that the industry has stagnated further, and thousands more jobs are at risk in the components sector.

“Without this delay, right now we’d be watching the industry transform, change and grow. The decline in the Australian dollar would be supporting the components sector to diversify and transform – saving thousands of jobs and growing the economy in Victoria and South Australia.” GM Holden director of communications Sean Poppitt said the retention of the scheme was positive news, and that it gave components- and car-makers alike peace of mind.

“Holden welcomes the announcement today by the Federal Government in relation to the Automotive Transformation Scheme and the ongoing support of suppliers,” he said.

“While the entire industry continues to face major challenges, ATS is a critical element for stability in the supply base and today’s announcement is a very positive one.

“Holden remains committed to local manufacturing until the end of 2017 and the retention of ATS has strengthened our position to do so.” Ford Motor Company Australia communications and publics affairs director Wes Sherwood praised the decision and highlighted the Blue Oval's contributions to local job creation funds.

“Ford is on track with our plan to transform our business to become the largest automotive investor and employer in Australia, and believe this ATS approach is a sensible way to help the industry’s manufacturing transition,” he said.

“Ford also is the only automaker to have contributed to the federal and state governments’ job creation innovation and investment funds that already have created more than 1200 jobs to help our manufacturing employees transition to the future.”

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