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Monday, November 10, 2008

D-Day for Australia's auto industry

The Australian car industry will find out this morning whether it will get the $2.5 billion in extra assistance over 10 years recommended by the former Victorian Premier Steve Bracks.

The government's response to the Bracks Review will be outlined by the Prime Minister and the Industry Minister Kim Carr to an audience of invited guests at the Automotive Centre of Excellence at the Docklands at 10.00 am.

It comes as new survey singles out Victoria as the only state in which business investment has already turned down.

The Access Economics Investment Monitor says the value of investment projects in Victoria slipped 1.8% in the 3 months to September while nationally it grew 7.3%. Business investment in Victoria has been growing at only half the national rate for past year...

"Investment in Victoria is spluttering as the state struggles to avoid shedding jobs," said Access director David Rumbens. "Work underway includes upgrading the West Gate to Monash Freeway link, the dredging of Port Philip Bay, a low-emission coal-fired power plant in the Latrobe Valley and the conversion of open channels to pipelines in the Wimmera Mallee, but it's likely to fall away after that."

"The Victorian government says it's very interested in public-private partnerships, but how interested is the private sector going to be?"

"Going back 5 years or so there were big expansion plans by the motor vehicle manufacturers, and even up until recent months, we're not seeing that anymore. We are seeing small scale investment, just to replace existing production lines."

Asked whether today's automotive assistance package was likely to make much difference, Mr Rumbens replied that it would not.

"Australia has found itself in a position where it is producing cars that aren't popular, it is facing increased competition from China, and worldwide demand is turning down."

The government has before it a recommendation to create a $60 million to $80 million automotive industry restructuring fund that would help firms merge and pay the entitlements of redundant workers made redundant. The Bracks Review has also recommended up to $2.5 billion of continuing assistance over 10 years and endorsed the scheduled halving of the car tariff from 10% to 5% in 2010.

In July Ford announced that it would close its engine assembly plant at Geelong at the cost 600 jobs and in February Mitsubishi announced that it would close its last remaining plant in Adelaide at the cost of 1,000 jobs, abandoning manufacturing in Australia.

The parents of both Ford and General Motors are in trouble in the United States with some analysts predicting they will go bankrupt within a year.

Toyota is the strongest of the 3 remaining Australian manufacturers. The government has given it $35 million from its Green Car Fund to help it build a four-cylinder hybrid version of its Camry at its Altona plant from 2010.

The acting chief of the Federation of Automotive Products Manufacturers Barry Comben said he had high expectations of today's announcement.

"The minister has been strongly supportive in all of his public utterances, he talks very passionately about the industry and it is logical to expect him to support the bulk of the recommendations."

"But we really don't know. We will have to wait and see what the day brings. I've had no information from government sources," he said.

Access Economics found that the total value of new investment projects planned or underway in Australia reached $644 billion in September, a new record high. But its says since the end of September the global environment has turned "decidedly nasty," and that the days of Australia's great investment boom "are now numbered".

The Reserve Bank will reveal its forecasts in its 60-page Quarterly Statement on Monetary Policy late this morning.