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AUSTRALIA: The Cost of Keeping Auto Makers Local

Posted: January 12th, 2012 | Author: | Filed under: Auto Maker, Auto News, Ford, General Motors, Grilled, Holden | Tags: , , , , , , , , , , , | Comments Off

Sales of the Australian made large cars - Holden Commodore and Ford Falcon - have dropped alarmingly in recent years. The Commodore’s 15-year run as Australia’s best-selling vehicle was ended abruptly in 2011 by the Japanese manufactured Mazda3, while Ford Falcon sales plummeted to fewer than 19,000 units in 2011.

AUSTRALIA: The Cost of Keeping Auto Makers Local - Cruze Hatch Production

So Exactly How Much Does it Cost to Keep Auto Makers in Australia? Between $100 and $200 Million!?

Holden says it is getting closer to announcing co-investment from the Federal Government and parent company General Motors as it looks to secure the local manufacturing of the Cruze and Commodore beyond 2018. Ford has announced a fresh $103 million investment for it’s Falcon range of large car and Territory SUV, though the future of the Australian-built vehicles is still guaranteed only until the end of 2016.

AUSTRALIA: The Cost of Keeping Auto Makers Local

Australia’s Minister for Manufacturing, Kim Carr, and South Australian Premier Jay Weatherill have been in talks with GM at this week’s 2012 Detroit motor show as part of a political delegation seeking future support for the Australian car industry.State and federal governments could be forced to pay up to $200 million to keep Holden factories in Australia, a workforce analyst said. Both the federal and South Australian governments have indicated they will pay Holden’s parent company General Motors a “substantial sum” to prevent manufacturing from being moved offshore.

Holden wasn’t able to announce its own confirmed co-investment strategy but the car maker’s managing director, Mike Devereux, said parties are working towards an agreement.

“The discussions with the Minister and the Premier have been very positive and productive,” says Devereux. “We’re making good progress in developing a new co-investment plan to help secure a long-term future for Holden and the automotive and manufacturing industry more broadly.

Holden is reported to be seeking about $200 million from the government to ensure production of next-generation models of the Cruze small car and Commodore large car currently assembled in GM Holden’s Elizabeth plant in Adelaide.

“Car makers are investing billions of dollars to develop future vehicles, so it’s critical for Australia to have consistent and competitive long-term policies that make this country an attractive place for General Motors and other companies to continue to invest.”

Professor John Spoehr is the executive director of the Australian Centre for Labour Research. Spoehr says there are precedents for large spending to prop up the Australian motor vehicle industry.

“You can go back to the establishment of the car industry in Australia and it was done on the back of Government support and assistance so there’s really no time in history when the auto industry has existed without Government support of one form or another,” Spoehr said. “Of course, we remember that tariffs were the main form of assistance but now it comes in the form of direct grants and cash assistance.

Professor Spoehr says keeping Holden factories in Australia is crucial to the health of the economy.”It could be anywhere between $100 and $200 million.”

Sales of the Australian made large cars – Holden Commodore and Ford Falcon – have dropped alarmingly in recent years. The Commodore’s 15-year run as Australia’s best-selling vehicle was ended in 2011 by the Mazda3, while Falcon  sales plummeted to fewer than 19,000 units last year.

Holden and Ford have both received recent co-investments from the government through its $3.4 billion, 10-year Automotive Transformation Scheme that runs to 2020 – specifically the now-defunct Green Car Innovation Fund – GCIF – that saw the government provide $1 for every $3 invested by the local car makers in more efficient vehicles.

The GCIF contributed $42m towards Ford’s $232 investment in a four-cylinder Falcon variant due this April and a turbo diesel Territory launched in 2011. Holden received $149m from the GCIF and $30m from the South Australian state government to put towards local production of the Cruze small car.

Australia’s other local car maker, Toyota, has also received money from the Fund, with $35m awarded in 2008 for the local production of the Hybrid Camry.

AUSTRALIA The Cost of Keeping Auto Makers Local - US Chrysler Production Line

Australian Made! US OWNED?!

The US Government has a considerable investment in the Australian car industry, via it’s holding in US behemoth General Motors,  the US government currently holds 32 percent of GM’s common equity.  ”The government remains a reluctant shareholder and intends to dispose of its investment as soon as practicable, with the dual goals of achieving financial stability and maximizing returns to taxpayers,”said former auto czar Ron Bloom in September 2011 to a  government committee on Oversight and Government Reform.

Several documents published by Wikileaks in September 2011 gave shocking insight into the state of the Australian auto manufacturing industry at a time when it was going through upheavals following Mitsubishi’s decision to abandon its local manufacturing arm in favour of becoming a full importer.

One leaked document showed that Ford Australia had rejected offers of Australian government help to develop a left-hand-drive version of the Falcon sedan and Territory suv, turning down potentially lucrative export earnings.

Another revealed that Holden’s parent, General Motors, left its Australian branch to fend for itself as the US car-making industry collapsed in debt after buyers, spooked by the impact of the global credit crunch, shied away from showrooms.

Another leaked document revealed that after decades of strong exports, Holden now saw itself as a niche player in the US market, exporting police vehicles and muscle cars rather than passenger vehicles.

cablegate

GM Considering Holden Shut down

UPDATE: The closure of Holden’s Australian operations is one option being considered by US parent company General Motors, South Australian Premier Jay Weatherill said after meetings in Detroit overnight. Mr Weatherill, Federal Manufacturing Minister Kim Carr and Holden managing director Mike Devereux held talks with GM chief executive Dan Akerson in America’s “motor city”.

The South Australian Premier said while he strongly urged GM not to shut down its Australian arm, he conceded the option was one of several being considered by the company. ”It’s a possible scenario, and of course we’re doing everything we can to resist that,” Weatherill said. ”The truth is that car making is a global industry, so the future for Holden in South Australia and importantly the components suppliers in South Australia will involve us making sure that we’ve got a secure place in that global industry.”

The meeting in Detroit comes as Ford announced a $103 million upgrade, including state and federal assistance, to boost the efficiency of the Falcon and Territory models built in Victoria, ensuring production to at least the end of 2016. Weatherill said the State and Federal governments may also have to prop up Holden’s operations in the short-term to ensure its long-term survival.

“I think GM is committed to working with us to securing Holden’s future in Australia, and in particular the Elizabeth plant, but it will be contingent upon us reaching an agreement,” Weatherill said. ”Part of that agreement will involve both the Commonwealth and State governments making a substantial co-investment in the future of the Elizabeth plant.”

“We are prepared to make a co-investment to make sure that Holden stays here, but we don’t want it to be just a rescue package.” Weatherill said the Commonwealth will bare the substantial burden. ”We want it to be something that’s going to sustain them into the future.”

Weatherill said ”In the past there have been packages of this sort concerning the introduction of new models which have required new platforms for the construction of new models of the vehicle, but on this occasion what I’m keen to insist on is that any money that’s provided to Holden comes with some very clear commitments about securing the future for not only Holden but also the components suppliers.”

Holden employs 4500 workers in Australia, with most at its Port Melbourne and Elizabeth plants.

Jon Gee from the Manufacturing Workers’ Union’s vehicle division says Government investment will be crucial if Holden is to survive. But he says there are economic advantages to keeping the manufacturing base in Australia. ”General Motors clearly wants to build cars where they sell them. It doesn’t make sense to have two or three million cars circling the globe on ships at up to $1000 a car. It’s an amount of money you don’t have to spend,” he said.

A spokesman for the South Australian Premier has admitted Mr Weatherill was told last month that closing Holden was a real possibility, before he began his trip to the US.

In a written statement, Holden says the Detroit meeting was productive, and says the company is committed to working with Australian governments to ensure the survival of the local industry.

Manufacturing Minister Kim Carr says the high Australian dollar is placing stress not just on Holden but across the manufacturing sector. ”Our task is to ensure that we are flexible and that we are adaptive and that we are able to work with individual companies to see the industry transform itself, reinvent itself,” Carr said. ”To work to ensure that there are high-skill high-wage jobs for the future for Australian workers.”

Senator Carr says Holden must become geared to build newer energy-efficient cars to remain competitive. ”We are looking to work closely with the company to develop specific proposals about ‘next generation’ models so that we are able to look to the future with confidence and secure the future of the Elizabeth and facilities in Port Melbourne,” Carr said. ”There are 4500 people that work at General Motors and we are very keen to ensure there is a strong business case so that those jobs can be there into the future and we can see the industry as a whole prosper in what have been very very difficult times.

Senator Carr told ABC that ”These are matters that have yet to be finalised and there needs to be more discussion about the detail of these proposals but we are clearly seeing in these discussions an indication of the support and commitment to the automotive industry.”

source: abc
source: reuters
source: cablegate
source: wikileaks
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