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| Car industry inquiry is likely to present Abbott with a stark choice | |
| (35 minutes later) | |
| The Abbott government's inquiry into the Australian car industry kicks off today in what might be the last hurrah for a much-loved Australian brand – Holden. | The Abbott government's inquiry into the Australian car industry kicks off today in what might be the last hurrah for a much-loved Australian brand – Holden. |
| Holden was once immortalised in song for being as dinky di Aussie as kangaroos, football and meat pies, despite being wholly owned by General Motors of the US since 1931. But the fate of the carmaker now rests on the Productivity Commission's inquiry into the shrinking Australian car industry and the response of the government to that inquiry. | Holden was once immortalised in song for being as dinky di Aussie as kangaroos, football and meat pies, despite being wholly owned by General Motors of the US since 1931. But the fate of the carmaker now rests on the Productivity Commission's inquiry into the shrinking Australian car industry and the response of the government to that inquiry. |
| The company has not yet reached the end of the road, but the commission has to hand over an interim report by 20 December and a final report by the end of March 2014. | The company has not yet reached the end of the road, but the commission has to hand over an interim report by 20 December and a final report by the end of March 2014. |
| Holden's historic rival, Ford, has already announced it will stop making cars locally by October 2016, leaving only Holden and Toyota Australia. If Holden decides to stop making cars here, Toyota is likely to follow because the crucial component supply chain would lack the critical mass to survive. | Holden's historic rival, Ford, has already announced it will stop making cars locally by October 2016, leaving only Holden and Toyota Australia. If Holden decides to stop making cars here, Toyota is likely to follow because the crucial component supply chain would lack the critical mass to survive. |
| The Abbott government has indicated that it is open to interim funding but this is missing the point. Both Holden and Toyota need long-term taxpayer assistance and industry policy for the next decade, in order to attract investment from their parent companies needed to build new models. | The Abbott government has indicated that it is open to interim funding but this is missing the point. Both Holden and Toyota need long-term taxpayer assistance and industry policy for the next decade, in order to attract investment from their parent companies needed to build new models. |
| Like everyone else, the car industry could see that the Coalition was poised to win the 2013 election. They tried to engage beforehand with the combative shadow industry minister, Sophie Mirabella, over a policy pledge to cut $500m from the main industry assistance program by 2015 while setting long-term funding after studying the report by the Productivity Commission. | Like everyone else, the car industry could see that the Coalition was poised to win the 2013 election. They tried to engage beforehand with the combative shadow industry minister, Sophie Mirabella, over a policy pledge to cut $500m from the main industry assistance program by 2015 while setting long-term funding after studying the report by the Productivity Commission. |
| They got nowhere with Mirabella, and complained of being lectured, even hectored. Along with others, the car industry quietly rejoiced when Mirabella was defeated by an independent candidate at the election, | They got nowhere with Mirabella, and complained of being lectured, even hectored. Along with others, the car industry quietly rejoiced when Mirabella was defeated by an independent candidate at the election, |
| The new industry minister, Ian Macfarlane, previously held the portfolio during the Howard government and is a rare Australian politician who has worked with his hands, being able to do a spot of welding if required. He likes the industry, visiting a new car plant in Italy out of personal interest a few years back, and even having a Holden cap autographed by the late racing driver Peter Brock. Macfarlane has so far lacked support among federal Coalition MPs on continued industry assistance, although the mood is different in the key automotive states of Victoria and South Australia. | The new industry minister, Ian Macfarlane, previously held the portfolio during the Howard government and is a rare Australian politician who has worked with his hands, being able to do a spot of welding if required. He likes the industry, visiting a new car plant in Italy out of personal interest a few years back, and even having a Holden cap autographed by the late racing driver Peter Brock. Macfarlane has so far lacked support among federal Coalition MPs on continued industry assistance, although the mood is different in the key automotive states of Victoria and South Australia. |
| Macfarlane was disappointed that the managing director of Holden, Mike Devereux, was promoted to a new international job with General Motors, based in Singapore. Devereux is a good talker and is undoubtedly pushing for Holden to stay, but he is now splitting his attention and the company is not expected to get a new full-time boss until early next year. He was further peeved when the Shanghai-based regional chief of General Motors, Stefen Jacoby, made his first visit to Australia earlier in November and did not meet him, despite the fate of the company being up for grabs. | Macfarlane was disappointed that the managing director of Holden, Mike Devereux, was promoted to a new international job with General Motors, based in Singapore. Devereux is a good talker and is undoubtedly pushing for Holden to stay, but he is now splitting his attention and the company is not expected to get a new full-time boss until early next year. He was further peeved when the Shanghai-based regional chief of General Motors, Stefen Jacoby, made his first visit to Australia earlier in November and did not meet him, despite the fate of the company being up for grabs. |
| Behind the scenes, key government figures are spinning the line that Holden has already decided to go and that no realistic package would keep. In public, the treasurer, Joe Hockey, has even tried to blame Labor for any eventual closures in the car industry. But this is incorrect, Holden and Toyota were prepared to stay under Labor's policy settings. If the industry shuts now, it is due to decisions taken, or not taken fast enough, by the Coalition. | Behind the scenes, key government figures are spinning the line that Holden has already decided to go and that no realistic package would keep. In public, the treasurer, Joe Hockey, has even tried to blame Labor for any eventual closures in the car industry. But this is incorrect, Holden and Toyota were prepared to stay under Labor's policy settings. If the industry shuts now, it is due to decisions taken, or not taken fast enough, by the Coalition. |
| The automotive sector is deeply worried by the sceptical stance of the two main economic ministers, Hockey and finance minister Mathias Cormann, and the relative silence so far of the prime minister, Tony Abbott. But the rejection of the bid for Graincorp showed that the Coalition are by no means free-market purists. Abbott and his advisers will be keenly aware of the political and economic fallout from the collapse of an industry which directly employs some 45,000 workers. | The automotive sector is deeply worried by the sceptical stance of the two main economic ministers, Hockey and finance minister Mathias Cormann, and the relative silence so far of the prime minister, Tony Abbott. But the rejection of the bid for Graincorp showed that the Coalition are by no means free-market purists. Abbott and his advisers will be keenly aware of the political and economic fallout from the collapse of an industry which directly employs some 45,000 workers. |
| Holden has its corporate headquarters and an engine plant in Melbourne, but its assembly plant in Adelaide is a mainstay of the South Australian economy. South Australia has a state election in mid-March 2014, about a fortnight after the Productivity Commission is scheduled to deliver its final report on the car industry, but the fate of Holden is likely to be clear before polling day. | Holden has its corporate headquarters and an engine plant in Melbourne, but its assembly plant in Adelaide is a mainstay of the South Australian economy. South Australia has a state election in mid-March 2014, about a fortnight after the Productivity Commission is scheduled to deliver its final report on the car industry, but the fate of Holden is likely to be clear before polling day. |
| This leaves the state Liberal leader, Steven Marshall, in a tricky position, given that his federal colleagues will see him as only one of many voices. South Australia’s Labour premier, Jay Weatherill, is vigorously arguing for continued support to Holden. If that does not work, Weatherill will blame the Coalition, a political tactic that will not fill the economic void. | This leaves the state Liberal leader, Steven Marshall, in a tricky position, given that his federal colleagues will see him as only one of many voices. South Australia’s Labour premier, Jay Weatherill, is vigorously arguing for continued support to Holden. If that does not work, Weatherill will blame the Coalition, a political tactic that will not fill the economic void. |
| The other major automotive state, Victoria, has its own election in November 2014. One of the first witnesses to give evidence to the Productivity Commission on Monday will be the South Australian premier, who has argued that the cost of industry assistance is dwarfed by not having to pay out some $21.5 billion in future welfare payments if Holden closed its assembly plant at Elizabeth in Adelaide's northern suburbs. Indeed, the City of Playford, where the Holden plant is located, already has an unemployment rate of 15.5%. | The other major automotive state, Victoria, has its own election in November 2014. One of the first witnesses to give evidence to the Productivity Commission on Monday will be the South Australian premier, who has argued that the cost of industry assistance is dwarfed by not having to pay out some $21.5 billion in future welfare payments if Holden closed its assembly plant at Elizabeth in Adelaide's northern suburbs. Indeed, the City of Playford, where the Holden plant is located, already has an unemployment rate of 15.5%. |
| The South Australian government's submission to the inquiry maps out the Australian automotive supply chain as having: | The South Australian government's submission to the inquiry maps out the Australian automotive supply chain as having: |
| • A total of 33 so-called “Tier-1 companies” directly supply Holden, Toyota and Ford and employing more than 3,700 workers | • A total of 33 so-called “Tier-1 companies” directly supply Holden, Toyota and Ford and employing more than 3,700 workers |
| • Another 719 companies employing 28,000 to 32,000 people supply the Tier 1 companies | • Another 719 companies employing 28,000 to 32,000 people supply the Tier 1 companies |
| • Only a quarter of the Tier-1 companies were diversified enough to survive if local car making ended and all 719 indirect suppliers would be vulnerable. | • Only a quarter of the Tier-1 companies were diversified enough to survive if local car making ended and all 719 indirect suppliers would be vulnerable. |
| The tricky thing about this supply chain is that thousands of jobs are located in supposedly non-automotive states like New South Wales and Queensland. Indeed, a company called Australian Arrow manages a high-volume plant in Samoa which produces electrical wire harnesses that are supplied to Toyota Australia. The Samoa plant has more than 800 workers, making it the nation's biggest employer outside of the public service. It accounts for about two-thirds of Samoa's manufacturing sector and of its exports in 2012. | The tricky thing about this supply chain is that thousands of jobs are located in supposedly non-automotive states like New South Wales and Queensland. Indeed, a company called Australian Arrow manages a high-volume plant in Samoa which produces electrical wire harnesses that are supplied to Toyota Australia. The Samoa plant has more than 800 workers, making it the nation's biggest employer outside of the public service. It accounts for about two-thirds of Samoa's manufacturing sector and of its exports in 2012. |
| The Australian Manufacturing Workers Union rallied outside the commission’s hearings on Monday and its state secretary, John Camillo, has argued more is at stake than the 7,700 direct automotive jobs linked to Holden. "The Productivity Commission must understand this the isn’t just about economics, it’s about families and communities right here in South Australia,” Camillo said. | The Australian Manufacturing Workers Union rallied outside the commission’s hearings on Monday and its state secretary, John Camillo, has argued more is at stake than the 7,700 direct automotive jobs linked to Holden. "The Productivity Commission must understand this the isn’t just about economics, it’s about families and communities right here in South Australia,” Camillo said. |
| The state's main employer lobby, Business SA, disagrees with unions about some of the solutions but it has warned that the last year was "extremely tough" with the local economy contracting by $145 million. "The immediate impact of losing Holden would be akin to several years of similar economic malaise," it says. | The state's main employer lobby, Business SA, disagrees with unions about some of the solutions but it has warned that the last year was "extremely tough" with the local economy contracting by $145 million. "The immediate impact of losing Holden would be akin to several years of similar economic malaise," it says. |
| For their part, Holden and Toyota argue that Australia's support for the automotive industry is moderate in global terms and is far outweighed by the economic activity generated. Holden reckons to have received $1.8 billion in federal funding over between 2001 and 2012 while generating $32.7 billion of economic activity. “If Holden did not manufacture in Australia, the economic activity derived from the foreign investment by GM would not go elsewhere in Australia,” the company's submission says. “In fact, it would be invested by GM in another country.” | For their part, Holden and Toyota argue that Australia's support for the automotive industry is moderate in global terms and is far outweighed by the economic activity generated. Holden reckons to have received $1.8 billion in federal funding over between 2001 and 2012 while generating $32.7 billion of economic activity. “If Holden did not manufacture in Australia, the economic activity derived from the foreign investment by GM would not go elsewhere in Australia,” the company's submission says. “In fact, it would be invested by GM in another country.” |
| Both Toyota and Holden play down the benefits of the Abbott government scrapping the carbon tax. Toyota's submission says that the impact of the tax per locally made vehicle has been widely reported to be $400 per car, but it only $115 and this had been absorbed by the company and not passed on to consumers. Holden says the carbon tax added about $45 to the cost of each locally made car, but this was not passed on. | Both Toyota and Holden play down the benefits of the Abbott government scrapping the carbon tax. Toyota's submission says that the impact of the tax per locally made vehicle has been widely reported to be $400 per car, but it only $115 and this had been absorbed by the company and not passed on to consumers. Holden says the carbon tax added about $45 to the cost of each locally made car, but this was not passed on. |
| Toyota is due to give evidence to the commission’s inquiry on Tuesday. Holden chief Mike Devereux will give evidence on 10 December. | Toyota is due to give evidence to the commission’s inquiry on Tuesday. Holden chief Mike Devereux will give evidence on 10 December. |
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