Here we are again, just over three years on from the last effort to save the automotive industry …
In November 2008, it was an extension of what became the Automotive Transformation Scheme to 2020, a Green Car fund (since mostly nixed in budget cuts) and some structural adjustment support for component manufacturers. Total cost over a decade: several billions of dollars, to support around 50-60,000 jobs.
This time around there are rather fewer zeroes, but the sums are still big enough: $100 million to Holden from the federal government; $34 million in existing funding to Ford from the ATS. Plus whatever the state governments of South Australia and Victoria end up kicking in. Nevertheless, Kim Carr returns from Detroit with the future of the car industry secured — at least for a couple of years, until another crisis demands another handout.
Still, not bad for a minister supposedly such a dud he needed sacking by his prime minister.
Three years ago the Rudd government’s car package unleashed a firestorm of criticism about “new protectionism” from the commentariat (including from me). This time around, the ennui is palpable. Fairfax’s Ian Verrender did sterling work yesterday, yet again demolishing the argument for why we need a car industry. But for politicians, it’s irrelevant, and it doesn’t seem to matter which side they’re on.
Liberal frontbencher Andrew Southcott was backing the package today in the pages of The Australian Financial Review. The last Liberal to suggest governments were being too generous to the car sector was Joe Hockey a couple of years ago, and he copped a frightful pillorying from his colleagues for it. The car industry qualifies as “strategic” for politicians in a way that, say, nothing in the textile, clothing and footwear industry does. Only the other heavy manufacturing industries, steel and defence manufacturing earn similar levels of public support.
For Labor, the importance of the industry to both the Australian Workers’ Union and the Manufacturing Workers’ Union means additional pressure to open the chequebook.
Such assistance of course is exactly what the government has been advised by Treasury not to do — support those industries under pressure from the resources boom in an effort to delay or prevent structural change in the economy. The problem is particularly acute for the automotive sector, which has been hammered not just by a high dollar, or input costs inflated by the resources boom, or even subsidised foreign competition, but by Australians themselves who have turned their backs on the traditional big family car offerings local manufacturers continue to push at them, in favour of smaller vehicles.
The structural change the automotive sector faces is at least as much a reflection of its own failure to understand its customers effectively as it is external factors — a classic example of how protected industries lose their capacity to innovate. Or, more correctly, it’s that automotive manufacturers have directed their skills into securing further support from government, and playing governments off against each other, rather than more effectively meeting consumer demand or reducing costs.
Other parts of the manufacturing sector have got on with dealing with the challenge of the resources boom. The manufacturing sector has lost tens of thousands of workers in the last three years, but has maintained levels of overall output, suggesting the sector has been lifting its productivity in response to the challenge of the higher dollar. But the automotive sector continues to be shielded from that process by taxpayers (and, let’s not forget, car buyers, who still face 5% tariffs on imported vehicles).
The only way this process will ever end is when General Motors and Ford eventually overplay their hands and demand too much to continue their Australian operations. Then a government will be forced to call their bluff, or they’ll close and move on.
When that happens, depending on the overall employment situation, we might look back and wonder why we didn’t do it when the economy was in a robust condition and unemployment was low.
You also forgot the perpetually protected aluminium industry which the Grattan Institute wrote: that because the smelters are so old and inefficient that if they stopped being subsidised and closed down to have their market share replaced by existing smelters overseas – would see a significant drop in global C02 emissions…
Quite right.
On Monday Crikey posters sought protection for farmers and food manufacturers to protect ‘food security’. On Tuesday governments announced more protection for 1 car manufacturer, with presumably more to come. Keene anticipates more protection for steel and defence manufacturing. As the protected sectors multiply they increase pressure on the remaining efficient parts of the economy, and of course cost all consumers and taxpayers.
Car protection costs $300,000 per job per annum.
It’s a price which is not worth paying.
It will be cheaper to retrain and even relocate the car workers.
Once again BK has hit the nail on the head. Australia should have at the most one car manufacturing plant and it should be producing electric vehicles and/or other “green” cars that will be needed in a world that won’t be using much of coal or oil (too expensive in the near future). One does not need a degree in economics to conclude that propping up a specific industry like petrol guzzing cars is uneconomic let alone foolish from an environmental view. Plan now to reemploy car workers – using the money to be invested in “saving” GM or Ford. There is something grotesque about governments giving these bastards hand-outs when they can’t even run their own industry properly. But as BK says – they can’t do that unless they feel directly the cold winds of change. Let’s get on with it now.
GM, Ford: The ultimate corporate welfare queens. They don’t even make vehicles which Australians want to buy-on a permanent bailout trajectory!