December 10, 2013
The signs are pretty clear. The Abbott Govt's position is clear.
There will be no more public subsidies for an unprofitable car industry that requires corporate welfare to survive in Australia. If it was to remain in Australia GMH would have to do so by relying on its own resources, not public funds. The Abbott Government is pulling the plug. So let the domestic car industry close. Hockey's argument is that Australia’s long-term economic prosperity will be best served by the efficient allocation of resources, primarily via flexible market forces.
The economic reality is the high Australian dollar, almost no tariff protection, large car sales have nosedived in the domestic market, and export markets have dried up largely due to the unexpected strength of the Australian dollar that has made imports cheaper and exports tougher.
If Holden goes in 2017, Toyota will follow it out of manufacturing in Australia, since the critical mass in the supply chain is lost. A network of suppliers would then collapse. So we have a declining manufacturing sector that is the unavoidable consequence of the resources boom. Does the decline in local auto manufacturing matter in an open, competitive, flexible economy?
Well, what isn't going to happen from an Abbott Government is a commitment to more specialised, highly skilled and knowledge-intensive Australian manufacturing sector. The future for manufacturing is one driven by high skills, knowledge-led innovation. That presupposes a highly skilled workforce. That isn't going to happen under an Abbott Government.
According to GM in Detroit, Australia was suffering a severe case of ''Dutch disease'' - an economic malaise by which a mining boom had pushed up the local currency and wages for industrial workers.Without government assistance, GM's head office in Detroit had decided that making cars in Australia no longer added up - to the tune of $3750 a car per year.
Devereux, the GMH managing director, told the Productivity Commission he did not have to eliminate the entire $3750 gap, just enough to keep his masters happy. What Holden needed was a further commitment of $150 million a year from the government through to 2020 - roughly $2000 a car built. With that, Mr Devereux could get the numbers to work. In return, Holden would continue making the VF Commodore and Cruze in Australia until 2017, and then commit to build GM's next generation global car in Adelaide until 2020.
GMH needed a public-private partnership over the long term to be able to be relatively competitive. They had brokered an enterprise bargaining agreement with the unions that enshrined a three-year wage freeze and won an extra 16 minutes of work time per employee a shift.
The Abbott Government refused to come to the table. Instead, Acting Prime Minister Warren Truss and Treasurer Joe Hockey launched an attack on GMH in parliament. Detroit pulled the plug. Their political strategy was to ensure that they were not seen as culpable for the decision and not on dealing with its consequences. The Coalition had no alternative plan in place to deal with either the political or policy fallout of the GM Holden decision with respect to the workers, the components industry which relies on the car manufacturers and the state economies in Victoria and South Australia.