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PC report branded unacceptable

Final report: The Australian Industry Group said the PC report into the automotive industry could have a disastrous effect on local parts-makers if the government adopts its recommendations.

Productivity Commission report recommendations could spell the end for parts makers

General News logo27 Aug 2014

By IAN PORTER

AUSTRALIA'S peak manufacturing body has slammed the Productivity Commission’s (PC) final report on the assistance to the car industry for deliberately underplaying the impact of the industry’s closure.

In addition, the parts industry says it fears that immediate cuts of $500 million in assistance from the Automotive Transformation Scheme (ATS) will send the industry to an earlier death than the car-makers.

The Australian Industry Group economist Julie Toth said the PC's report seriously underplayed the impact of the end to car making in Australia and should be treated with caution.

“In particular, the commission has failed to acknowledge that the situation facing the auto sector is not just another minor 'adjustment' in the economy it represents the virtual closure of an entire industry,” she said.

“This will happen within a relatively short span of time and it will affect a large number of businesses, employees and communities.” Ms Toth said it was disappointing and disturbing that the commission failed to make any practical recommendations to help with the transition of the industry and the economy.

“In fact, the commission recommends that the government should do nothing in response to the looming closure of this industry, and nothing to assist either the businesses or the retrenched employees, beyond the ATS scheme as it currently stands and the general assistance measures that are currently available to all unemployed people.”

Ms Toth said this lack of advice on how to deal with this large and disruptive “adjustment” effectively undermined the value of the report.

There is no suggestion as to how Australia should make the most of the capabilities, skills and experience that have been accumulated in the automotive supply chain.

“Once those capabilities are lost, it will be difficult if not impossible to recreate them,” she said.

Ms Toth suggested that the PC's estimate that only 40,000 people would lose their jobs and that one third of them would never find employment was not a realistic assessment.

“This dire forecast is probably a 'best case' scenario in the current Australian jobs market, so the Commission's recommendation that our Government should do nothing in response to it - either to assist businesses to retain more jobs or to assist the individual retrenched workers - is unacceptable.”

The PC report said “up to 40,000 people” might lose their jobs as a result of the closure of car manufacturing and parts plants. It said the job losses could be staggered over several years.

Federation of Automotive Products Manufacturers chief executive Richard Reilly said the PC neglected the impact of policy change during this critical period of transition.

He said the government’s $500 million cuts to the ATS in its first budget would have a profound effect on the component sector from 2015.

“Reducing funding of the ATS by 66 per cent in 2015 will have serious implications for the continued operations of many firms within the automotive supply chain,” he said.

The comments back up the view of GM Holden chief executive Gerry Dorizas, who warned earlier this month that the budget cuts could force parts-makers out of business before the specified closing dates for the manufacturing operations of Holden, Toyota and Ford.

Mr Reilly dismissed the estimate by the PC that any effects of the government’s budget cuts were “likely to be limited”.

“(The cuts) will remove $500 million from the ATS in calendar years 2015, 2016 and 2017, leaving less than 50 per cent of legislated funding for the industry.”

The budget papers released earlier this year showed that car- and parts-makers were prepared to make investments in new models totaling $3.82 billion in the five years to 2017-18.

Mr Reilly said members of the FAPM were “extremely concerned” that their competitiveness would be undermined by the withdrawal of the $500 million in investment assistance.

Federal industry minister Ian Macfarlane said the government would work with companies and workers to help them capitalise on “new opportunities” in a diverse range of industries.

Mr Macfarlane said the ATS would continue until the end of 2017.

“This will help secure local manufacturing and give automotive businesses and workers time to adapt in the lead up to the closure of manufacturing by Ford, Holden and Toyota.”

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