Abbott’s $900m backflip on Automotive Transformation backfires

Posted on 11 Mar 2015 by Tim Brown

The Abbott government has this week been accused of gross over exaggeration after it announced a $900m package to the Australian car industry that may only be worth $100m.

In May last year, The Automotive Transformation Scheme Amendment Bill 2014 planned to cut $500m to one of the automotive industries funding programs, the Automotive Transformation Scheme.

But the Government this week announced that it would backdown on its election commitment and would continue to fund car makers after the Senate refused to pass the cuts.

The announcement followed approval by the Expenditure Committee, which included the Prime Minister, but which bypassed the cabinet and Coalition party room.

The Federal Chamber of Automotive Industries said it welcomed the announcement of the Australian Government’s commitment to maintain the Automotive Transformation Scheme (ATS) in its original form as legislated.

FCAI Chief Executive Tony Weber said: “This is particularly important for the small and medium sized business in the supply chain, who have already factored ATS funding into their long-term business and investment decision-making processes.”

Industry minister, Ian Macfarlane presented the news and said that in total $900m worth of cuts to automotive industry assistance would now not proceed.

When is $900m not really $900m?

However, in a bizarre chain of events during the announcement to the press, it became clear that the promised $900m funding total included $400m of funding allocated beyond 2017, after which time the automotive industry will no longer be operating and therefore unlikely to access.

Backing up this assumption, Mr Macfarlane said himself that: “All money under the ATS is contingent on cars being made, on cars rolling off the end of the assembly line. When cars stop rolling off the end of the assembly line, the scheme stops.

To add to the confusion, it now also appears that the remaining $500m in assistance that Mr Macfarlane said would “flow” to the car industry is actually estimated to be closer to $100m. This is because the car industry is unlikely to access much of the fund due to the decreased workload as it winds down over the next two years in preparation for its exit.

Despite the Government’s announcements, seemingly to the contrary, it could still save as much as $400m of the $500m it had originally planned to cut from the Automotive Transformation Scheme and save a total of $800m of the $900m it detailed in its announcement as earmarked for automotive support.

In the wake of the announcement, Mr Macfarlane’s senior colleagues have accused him of botching the announcement and kicking a political own goal in the lead up to what is likley to be massive job losses in the automotive industry.

Even worse than the figures, the Australian Manufacturing Workers Union’s vehicle division spokesperson, Dave Smith, said the real tragedy that the industry wasn’t guaranteed support earlier.

“It needed to have that conversation,” he said. “This is a great industry that would be growing again at this point in time.”

“The dollar is currently at 77 US cents, and General Motors has always been able to export cars when the dollar has been that low.”

“It’s just a tragedy.”

The question is, would the government ever have released these funds if it new they would actually be used.

The only way the funds will actually be used will be if one or more of the car companies reverses its decision to leave, which seems pretty unlikley, or, seemingly equally unlikely, another major manufacturer takes their place.