Government U-turns on $500m of car industry support

THE Abbott Government has announced it will reverse a decision to cut $500 million in funds earmarked to help prop up the Australian car industry over the next two years.

The funds were to be trimmed from the Automotive Transformation Scheme (ATS) after Holden late last year announced it would follow Ford and Toyota in shuttering its Australian car manufacturing operations by the end of 2017. The $1.6 billion scheme was set up in 2011 to help Australian car manufacturers and the parts makers that supply them adapt to a fast-changing automotive market.

“A decision has been made, primarily to ensure that the industry goes the full distance in terms of its already slated closure at the end of 2017," Industry Minister Ian Macfarlane said at a press conference in Adelaide this morning, announcing the government’s rethink of the planned funding cuts.

"Whilst the decision of people like Holden to cease manufacture was a decision they made separate to anything the government did – and they are their words, not ours – we don't want anything to jeopardise the survival of the industry until Holden finally closes."

The decision had prompted fears among government backbenchers that carving up to $900 million out of industry support programs could lead to an early shut-down. Concern about the cuts ramped up after Independent South Australian senator Nick Xenophon warned of a “jobs avalanche” if the cuts went ahead as planned.

If the bill to cut ATS funding had passed, it would have removed $500 million in support between now and 2017 – as well as cutting another $400 million by closing the scheme early.

Mr Macfarlane said the coalition government had worked on the decision to reverse the funding cuts since August last year, a month before the amended ATS bill that would have carved up car industry funding was introduced to parliament and only three months after Treasurer Joe Hockey announced that to balance the federal budget, it would have to be wound up.

The Australian Manufacturing Workers’ Union (AMWU) welcomed today’s decision, saying it was a “huge win” for car sector workers despite coming 18 months too late to help the industry.

“This government delay means that the industry has stagnated further, and thousands more jobs are at risk in the components sector,” AMWU national vehicle secretary Dave Smith said.

“Without this delay, right now we’d be watching the industry transform, change and grow.

“The decline in the Australian dollar would be supporting the components sector to diversify and transform, saving thousands of jobs and growing the economy in Victoria and South Australia,” he said.

Richard Reilly, the chief executive of the Federation of Automotive Products Manufacturers also welcomed the move.

Mr Reilly said the industry lobby group that represents the small- and mid-size businesses that supply parts to Ford, Holden and Toyota, would make a statement in response to the announcement later today.

More than half of the original ATS funding was earmarked for Ford, Holden and Toyota to help them develop new products for local and export markets. However, it was tied to the car makers submitting business plans that would sustain Australian production for at least five years.

The government is expected to consider even more changes for the Australian automotive sector once a senate economics inquiry hands down a separate set of recommendations for the future of the industry by November.

Up to 50,000 workers, mainly in South Australia and Victoria, are expected to be affected by the factory closures that start with Ford next year, and Holden and Toyota in 2017.