Back in January we posted ‘The Cost of Keeping Automakers Local’ Reporting that sales of the Australian made large cars - Holden Commodore and Ford Falcon - had 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.
And asking the question: So Exactly How Much Does it Cost to Keep Auto Makers in Australia? This past week Australian Government has answered the question by handing General Motors Holden more than $AU275 Million.
The Australian government reckons it has avoided a “knockout blow” to the manufacturing sector by giving $215 million in assistance to General Motors Holden. The car maker will also receive $50 million from the South Australian Government and $10 million from the Victorian Government.
The $275 million package will be handed over in return for a $1 billion investment from Holden to make two new car models at its Adelaide plant, with a guarantee the carmaker will maintain its Australian operations for at least the next decade.
Unions and industry bodies have welcomed the deal, which Prime Minister Julia Gillard says will save thousands of jobs.
“In January this year we were at real risk that there would be no more Holden in Australia, that we wouldn’t have Holden here producing motor vehicles,” she said.
“That wasn’t acceptable for me as Prime Minister and it wasn’t the right thing for the nation’s future.
“It would’ve been a knockout blow for manufacturing in this country, given the importance of the auto industry to all of manufacturing.”
Snapshot: Australia’s automotive industry
- The Federal Government budgets more than $3.5 billion to its New Car Plan to support the industry
- More than 1 million new vehicles sold annually
- Toyota has the lion’s share of the market, selling 21 per cent of new vehicles hitting the road.
- Next is Holden with 13 per cent, with Ford on 9 per cent.
- In the passenger car market, imports outsell locally-produced vehicles by nearly 4 to 1.
- Australia’s vehicle and components exports are worth more than $3 billion annually.
- The Middle East (44 per cent) is Australia’s biggest automotive export market.
All figures as of 2010. Click here for more info
The Australian Government says the sector employs 55,000 people in Australia and supports another 200,000 jobs
Holden employs 4,600 people nationally, including about 2,400 in Adelaide and around 2,000 in Melbourne. Last month it announced the high Australian dollar had forced shift changes at its Elizabeth plant in Adelaide and 100 casual positions would have to go. The Elizabeth plant manufactures all of Holden’s Australian-made vehicles, while engines are made at a factory in Port Melbourne.
South Austalian Premier Jay Weatherill believes the co-investment will see Holden and its workforce remain in South Australia beyond the next decade.
“Today we’re able to say that we’ve secured their future for the next 10 years, but [also] into the future, because part of this agreement involves us making the sort of changes together with the company which will secure car manufacturing at Holden for the long term.”
In January, Mr Weatherill, then-manufacturing minister Kim Carr and Holden chairman Mike Devereux met GM executives in Detroit to nut out the assistance package.
This weeks announcement has failed to win a guarantee the company will not shed any more jobs.
“It’s going to be a decision at the time,” Mr Devereux said. ”Right now we think we have a pretty strong business model. We’re proud of our workforce in Adelaide and the entire Holden team and we’re going to run a smart business to make money for the long term.”
The Federal Government says the pressures on the car industry, particularly the high dollar, are likely to cause “restructuring in the coming period”. It has extended its assistance program to retrain car industry workers who lose their jobs by $15.6 million. The federal and Victorian governments will also provide an extra $35 million to help component manufacturers increase overseas sales.
The Federal Opposition says it is not “averse” to supporting the car industry, but wants to know the details before it commits to honouring the deal if it were to win government.
Industry spokeswoman Sophie Mirabella says the Government has had a “shambolic” approach to helping the industry. ”There needs to be certainty and clarity and transparency, and they’re not onerous or high benchmarks when Government funding, when taxpayers’ dollars, are involved,” she said.
Greens spokesman Adam Bandt says federal government assistance should be given only if car companies promise to adapt to electric vehicles. ”There’s an innovation problem in Australia’s car industry – the Greens stand beside government support for sectors doing it tough, but it must come with conditions, it must come with an innovation impetus and it must involve a shift to electric,” he said.
Toyota has the lion’s share of the market in Australia, selling 21 per cent of new vehicles, while Holden is next with 13 per cent.
Spending breakdown: The New Car Plan
The Federal Government groups its assistance to the car industry under the umbrella of what it calls its New Car Plan. Before today’s announcement the spending included:
- $3.4 billion on the AUTOMOTIVE TRANSFORMATION SCHEME (ATS) supporting research and development “while also requiring eligible companies to demonstrate an environmental commitment”. The cash is budgeted forward until 2020-21.
- $116.3 million on the AUTOMOTIVE INDUSTRY STRUCTURAL ADJUSTMENT PROGRAM (AISAP) the program focuses on “mergers and consolidation” in the components sector while “providing training and assistance to displaced workers.”
- $20 million on the AUTOMOTIVE SUPPLY CHAIN DEVELOPMENT PROGRAM (ASCDP) to help suppliers integrate supply chains at home and overseas.
- $10.5 million to expand the LPG VEHICLE SCHEME to provide cash incentives to drivers who opt to buy new LPG-fuelled vehicles.
- $6.3 million to set up an AUTOMOTIVE MARKET ACCESS PROGRAM (AMAP) to send trade delegations to lobby for Australian interests overseas.