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Inquiry receives call to nationalise car industry

Two-cents: Car-makers and other industry players have made diverse submissions to the Productivity Commission enquiry into the local auto industry.

Productivity Commission given many alternatives for car-making’s future

29 Nov 2013

CALLS to focus on design, set up tit-for-tat trade barriers and even nationalise Australia’s car-making industry have surfaced in submissions to the Productivity Commission inquiry into the automotive industry.

Submissions for the PC inquiry looking into the now shaky future of Australia’s car-making industry closed on Wednesday, and although some submissions are yet to flow in – Holden’s is one of them – most appear to be in support of maintaining it.

The commission has already logged 60 submissions.

Toyota Australia’s submission to the inquiry has given the government a huge kick over allowing other car-making countries to sell their products here under lopsided free trade agreements.

Part of that, the car-maker says, was shown when an engine export program to Vietnam was suddenly switched from Australia to Japan after the Vietnamese government introduced tariffs that favoured its Asian neighbour.

Toyota Australia earlier this year commissioned a $330 million engine-casting facility at Altona in Melbourne’s western suburbs. It already exports the engine to Thailand and Malaysia.

Toyota has also asked the government to give it more leeway in terms of managing its workforce when times get tough, and also lashed out at the inequity it saw in the luxury car tax – a financial measure that was meant to protect Australia’s car-making industry from imports.

“The luxury car tax is not a form of protection for local car makers,” its submission reads. “In fact the market share of locally built cars has dropped significantly since the LCT was introduced.

“Toyota supports the abolishment of the LCT as it is a punitive and inequitable tax paid by more Toyota customers than anyone else.”

Components maker Diver Consolidated Industries says its slow rate of diversification away from the car industry – slightly more than 70 per cent of its business is still tied in with Ford and Holden – will lead to struggles in the long-term.

It calls for more access to car-makers’ global platforms to help it build volumes to a sustainable level, and help make components makers less reliant on the fortunes of Australian car-makers.

“Of critical importance to DCI’s revenue stream over the past four years has been export business attained due to our relationships with local vehicle manufacturers GM-Holden and Ford,” the submission says.

“With these domestic customers facilitating opportunities for DCI to participate in the global procurement activities of their multinational parents, DCI has won export contracts that have and continue for products to countries such as Canada, China, South Africa and Brazil for use in the construction of motor vehicles.”

Meanwhile, interior and seating components supplier Futuris Automotive says it believes it is important to attract next-generation vehicles to be built in Australia.

It suggests that instead of raising tariffs to stem the flow of imported vehicles, the government should set reciprocal trade barriers to the countries making life difficult for Holden and Toyota.

“There is no problem scaling (tariffs) down to zero, as long as everyone else is doing the same. But clearly they are not,” the Futuris submission says.

“With the onset of the (2008) global financial crisis, many nations chose to freeze their tariff positions, and in fact some like Brazil actually raised them to offset the effect of their high currency.

“Reciprocity (except for genuine emerging countries) - you can't get any fairer than that.” The car parts maker also questions why Australia is not developing vehicles that took advantage of the nation’s vast natural gas resources.

Tellingly, though, while Futuris spells out how it is winning work for components that will be built into global vehicles such as the upcoming Everest seven-seat SUV, it says it is only “potentially” looking at supplying seats to an Australian manufacturer.

A submission from Greg Milne of the Australian Productivity Council suggests the foreign-owned Australian car-makers should be put in the hands of local management.

“Government should not be assisting companies that will only stay in Australia on terms that are not aligned with the nation’s strategic interests,” he says.

“Previous assistance to the industry has not placed it on a sound basis because the required decisions have been beyond local control.

“Some form of Australian equity and management control should be a condition of further support.” That equity would have to come from an Australian company willing to take over most, or all, the assets of Holden or Toyota, he says.

Professionals Australia, the union backing many of the Ford, Holden and Toyota design and engineering workers, says it fears for the future of local innovation.

“There is no doubt that some car manufacturers have made poor decisions in recent years – choosing to believe against all evidence to the contrary that the demand for larger cars would go against trend and defy petrol prices,” it says.

“Those poor commercial decisions of recent times should not overshadow the 100 years of successful operation for the industry in Australia.”

Economist Greg Marks says he believes tariffs are a better solution for supporting Australia’s car-making industry than subsidies.

“In particular, modest tariff increases, carefully calibrated against industry policy objectives, should be implemented as part of a strategy for long term survival and growth of the Australian automotive industry,” he says.

Peter Leahy, the managing director of South Australian car-parts supplier Plastic Products, says the loss of the car-making industry will affect more than just those directly working with vehicles.

He says his third-tier supplier business has also been producing a knob for Electrolux stoves that was sent to a Melbourne-based specialty automotive supplier for painting, and if the painting business vanished, so too would the stove knob side of his business.

Mr Leahy also warns that the shut-down of major parts suppliers in Adelaide will have a “dramatic effect” on the community.

The Productivity Commission moves into its public hearing phase early next week, with meetings in Adelaide on Monday and in Melbourne on Tuesday.

The commission will hand down a preliminary finding into the inquiry on January 31, with the full document set to be tabled in parliament at the end of March.

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