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Industry bodies slam new government funding boost

Slammed: The government's proposed $200 million funding boost to Australia's automotive industry has been labelled as "a shambles" and "ridiculous" by various industry groups.

Extra $200 million in government money does not dampen industry anger on FBT changes

General News logo5 Aug 2013


The Labor Party’s $200 million plan to boost sales of locally made cars has attracted derision from industry bodies and no comment from the car-makers that stand to benefit.

The three car-makers, Ford, Holden and Toyota, were unable to comment today without more details about how the $200 million would be used to encourage sales of Australian-made vehicles.

As Toyota announced a separate deal that secures its manufacturing operations in Australia for the next few years, GM Holden said it would wait until after next month’s federal election before making a final decision on its vehicle production future, which in part depends on whether factory workers agree on new employment terms (to now be voted on next Tuesday).

In addition to the cash, the government announced that regulations would be changed to make it mandatory for Commonwealth vehicle fleets to only buy Australian-made vehicles, except where special circumstances apply.

In a separate announcement, the federal government and the state governments of Victoria and South Australia announced $7.3 million of new grants under the Automotive New Markets Program.

But it was the well-meaning attempt to boost sales of the Commodore and Cruze, Falcon and Territory and Camry and Aurion that inflamed tempers, coming as it did a few weeks after the ALP’s much-criticised changes to fringe benefits tax policy.

“Frankly, it’s nothing more than a sop,” said Andrew McKellar, executive director Australian Automobile Association, which represents all seven state-based motoring clubs.

“It’s disappointing motorists have been slugged with an increase in Fringe Benefits Tax (FBT). This ($200 million allocation) does not, in any way, offset, that impact on motorists,” he said.

“The increase in FBT was a tax on newer, safer, more environmentally friendly vehicles. That’s what it remains.” Mr McKellar was referring to a tightening-up of FBT regulations that will force business users to document their business vehicle use to prove they qualify as business users before claiming tax deductions.

Previously, the Australian Tax Office would automatically grant anyone the tax deduction as if they exceeded the minimum threshold of 20 per cent of their kilometres for work use.

Many leasing specialists said the change would affect as many, if not more, low-paid workers employed by charitable organisations as it would high-paid executives who merely drive their cars to and from work.

Mr McKellar said the decision to spend $200 million to try to boost sales of locally made cars was effectively an admission by the government that it had made a mistake on the FBT rules.

“Frankly, it is chaotic and it’s a shambles and the only responsible course of action is for the Government to reverse its original FBT decision.” The Federal Chamber of Automotive Industries took a similar line, being unable to comment on a $200 million plan due to a lack of detail.

But it, too, was still seething about the FBT changes.

“We will continue to call on the Government to reconsider its decision to remove the statutory formula method for salary-sacrificed and employer-provided vehicles,” FCAI executive director Tony Weber said.

“This $1.8 billion change is damaging both our local car manufacturers and importers.” The chief executive of the Australian Automobile Dealers’ Association, Richard Dudley, said the latest policy move was a bit hard to understand, coming as it does in the wake of the FBT announcement.

“This proposal had been put forward by Treasury for more than 10 years. Peter Costello turned it down several times and now, when the Government needs some money to fund the introduction of an ETS (Emissions Trading Scheme), it just brings it in suddenly.

“What they have said is, we are going to spend $200 million, but we can’t tell you how, or when or why. It’s ridiculous.” Mr Dudley said he was keen to see anything that would lead to a sustainable manufacturing industry in this country.

“But, by the same token, these sudden policy changes are why we at the Australian Motor Industry Federation (which represents the motor trades associations around the country, including the Victorian Automobile Chamber of Commerce) have called for a Green Paper on the whole motor industry, not just manufacturing.

“The last four weeks are exactly the reason why automotive policy making is a dog’s breakfast, and it needs to be addressed.

“It was the Button and New Car Plans that addressed productivity and competitiveness and, arguably, the settings of those policies contributed to the volatile market that we have in Australia today, with 66 brands competing.

“And now, with one foul (sic) swoop of the hand of Government, they have changed the policy settings and made it difficult to sell cars. Extraordinary really.” Regulation changes to force all levels of Government to buy only Australian made cars would deliver a solid lift to the industry, said Kim Carr, the minister for innovation, industry, science and research.

“If the 100 per cent Australian-made passenger motor vehicle fleet target … was adopted at all levels of Government, sales of Australian made vehicles would increase by over 18,000 units a year,” Senator Carr said.

“This represents an 8 per cent increase on 2012 production volumes.” Senator Carr said the commonwealth government would change the regulations under the Commonwealth Authorities and Companies Act to ensure Australian-made vehicles were purchased. Exemptions would be available in special circumstances.

However, the Commonwealth Government can only control purchases by Commonwealth departments.

As far as the state and local governments were concerned, Senator Carr said the Commonwealth would continue to work with the Council of Australian Governments to persuade them to implement a similar regulation.

Senator Carr said he would decide how to spend the $200 million after he had spoken to stakeholders.

“I will continue my discussions with industry as to how this additional funding can best support growth in sales,” he said.

“We are considering a range of options and will release implementation details following further consultation.” The decision to use cash to spur sales appears to have caught the three local car-makers by surprise. None had anything to say until they knew more about the plan.

A Ford spokeswoman said the company was looking forward to getting more details about how the scheme would work.

Toyota refrained from commenting until it received more details about then proposal.

GM Holden intended to make a statement later today.

A rumored grant of $30 million to help Toyota fund the mid-life facelift of the Camry does not appear to be part of the $200 million program. It is believed that will be include in the Automotive Transformation Scheme or another arm of the Car Industry Plan.

In relation to the parts and components industry, the Government released details of the latest grants to be made under the Automotive New Markets Program, which will total $7.3 million.

The program is designed to help automotive components makers diversify their product ranges and cut their reliance on the car industry.

Adelaide’s Precision Components Australia, which makes a wide range of stampings and body assemblies as well as components for dual-clutch and automatic transmissions, has been granted $1.1 million to help with diversification into manufacturing of flat-pack unitised building sets.

Sumitomo Wiring Systems of Melbourne will receive $1.1million for the establishment of a centre of excellence.

Hirotec, the Japanese maker of mufflers and body parts based in Edinburgh North, South Australia, will receive $1.1 million for development of world-class coating technology.

Orbital Australia in Perth, developer of internal combustion engine systems including LPG fueling, will received $1.03 million for the development of engine management systems for unmanned surveillance aircraft.

SMR Automotive, Adelaide-based manufacturer of rear vision mirrors, will receive $722,700 for the development of its new coating technology that allows it to use plastic instead of glass in its products.

Melbourne’s Harrop Engineering will get $705,412 for the development of forced induction and traction control products for global vehicle platforms. Among other things, the company provides the supercharger units for the Lotus Evora.

Hella Australia, also in Melbourne, will receive $550,000 for the development of LED lighting for use by essential services/military/ heavy industry customers.

Melbourne-based plastics and rubber products group Venture DMG will get $493,350 for development of niche construction industry products.

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