Cuts could close industry early, Holden warns

HOLDEN’S new managing director has warned that the Australian automotive industry could close down earlier than expected if the federal government pushes ahead with cuts to the Automotive Transformation Scheme (ATS).

The federal Coalition announced planned cuts to the ATS as a part of the May budget, which would see the government save $618.5 million over an eight-year period by ending the scheme in 2018 – a year after the last Australian car-maker quits manufacturing.

The plan involved 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 $1.6 billion originally allocated to the scheme under the previous Labor government.

GM Holden chairman and managing director Gerry Dorizas told reporters at the Melbourne launch of a 1.4-litre turbocharged version of the Trax SUV this week that parts makers in particular would face more financial hardship if the government made the cuts to the ATS.

“Suppliers invested and based on this investment in order to break even they needed this kind of subsidy,” he said. “At this particular time they are in dire straits.”

When asked if the proposed cuts could see Holden potentially closing its local manufacturing operations earlier than its anticipated 2017 end date, Mr Dorizas said the car-maker had planned for it“That's a risk that I think everybody is looking at, especially the suppliers that are invested,” he said.

“I am not talking about Holden or any other automotive OEM (original equipment manufacturer). We are talking basically about the suppliers and that is the risk.”

Mr Dorizas added that while a sharp reduction in funding assistance would put more pressure on local car- and component-makers, he said he hoped that the cuts would be scrapped and that “logical will prevail”.

“This is the reason why we are very focussed on the supplier base because if that happens, then no-one will be able to produce, especially for the parts that are specifically in Australia,” he said.

“But at this particular time, we are very close with the suppliers so we don't foresee a problem, but you never know. This is always a risk. This is the reason why we would like the federal government to review it again.”

As previously reported by GoAuto, a number of industry bodies including the Federal Chamber of Automotive Industries oppose the cuts, with the body’s chief executive Tony Weber expressing his disappointment over the plans.

“If this cut passes parliament, it will intensify the financial pressure on the supply chain, which has already factored ATS funding into their long-term business and investment decision-making process,” Mr Weber said.

“The 70 per cent cut sends a very poor message to the global business community,” he said.

“It tells global firms that Australia will not provide the policy certainty they need to confidently invest in Australia.”

The ATS was set up under the previous Labor government to encourage diversification, competitive investment and innovation in Australia’s ailing automotive sector for the country’s car manufacturers, parts-makers and service providers.