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Japan free trade will hurt us, says Holden

Big beef: Holden says a free trade agreement that lets Japan avoid tariffs will cause it to cut prices – the one thing it can’t afford to do.

Trade talks that swap cars for cattle pile cost pressures on Holden, car-maker says

Holden logo28 Jun 2013


FREE trade talks with Japan may further undermine Holden’s ability to keep building cars in Australia, the car-maker says.

Asked what impact the introduction of a free trade agreement with Japan would have on Holden’s ability to remain viable in Australia, the car-maker’s managing director, Mike Devereux, said it would cut into the amount of money the company could make.

“I believe that if 50 per cent of the cars sold in this country coming from Japan came with five per cent less cost, that would drive down the market price of cars and would have to make me reduce the price of my cars,” Mr Devereux said at last week’s announcement that Holden wanted to open up talks with unions about cutting labour costs.

The Australian government is deep in talks with Japan to thrash out a pact between the two countries that will open up access to the Asian partner’s $6 trillion market, particularly for agricultural products.

However, talks that started in 2007 are believed to have stalled on the question of reducing the five per cent tariff on Japanese cars sold in Australia to zero, in return for a three per cent drop in the 33 per cent excise paid on mainly fast food-quality beef exported to Japan.

News that the talks are reaching a critical stage comes at a bad time for Holden, which revealed last week that costs at its Australian car-making operations were $3750 more than the average cost across parent company General Motors’ global vehicle-making plants.

Holden’s Adelaide-based manufacturing business is expected to make a $40 million loss this financial year, costing the company about $670 a vehicle rolling out of its Elizabeth production line.

 center imageThe car-maker now wants unions representing the 1600 workers who will remain at its manufacturing plants in Adelaide and Melbourne – the latest round of redundancies has removed 400 of their colleagues – to agree to wage cuts that will help it remain viable.

The department of foreign affairs and trade told GoAuto that talks over the free trade agreement were at a difficult stage.

“The government is working hard to conclude an FTA with Japan as soon as possible,” Georgina McKeon, the executive officer of the North Asia goods branch of the department’s Free Trade Agreement Division, said.

“Considerable progress has been made but some difficult areas remain and, at this stage, it is too early to say when we might conclude negotiations,” she said.

However, Ms McKeon refused to answer specific questions about how the trade talks would affect Australian car-makers.

“In terms of the market access package on cars, negotiations are ongoing and, consistent with standard international practice, Australia and Japan have agreed to keep the details of the negotiations confidential,” she said.

“A decision on whether to accept the final deal will be based on an assessment of the total package of benefits for Australia.

“Outcomes will be made publicly available once the FTA has been finalised.” GoAuto also contacted Toyota Australia to ask what effect a reduction in the tariff for Japanese car-makers would have on its business, but the company declined to comment.

Japan and Australia have not met formally to talk over the trade deal in almost 12 months, although the department said it had held “many intersessional meetings” since the June 2012 round of negotiations.

“We don't really have anyone you can talk to about this at the moment, so will have to pass on this,” media and external affairs manager Beck Angel said.

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