$275 Million Holden Support Package: Questionable

Australian car industry support package remains highly discriminatory and questionable

GM Holden got what it wanted today: a $275 million taxpayer-funded government grant in exchange for ongoing operations at its Elizabeth, SA manufacturing plant, which builds the Commodore and Cruze. It’ll never have to be repaid – it’s not a loan; Holden boss Mike Devereux pulled me up on that at today’s press conference. And he was quite right. Loans demand repayment; grants don’t.

Above: One other these places is a taxpayer funded, subsidised welfare operation. The other is Centrelink

Whatever strings are attached to the grant in what Mr Devereux calls “binding agreements” between GM Holden and the Federal, Victorian and South Australian Governments will forever remain secret, despite the fact that this is public money we’re talking about here.

This grant, which is really just the glace cherry on the icing sugar on a postcode-sized cake of ongoing multi-billion-dollar taxpayer handouts to the Australian automotive industry is, like all its predecessors, highly discriminatory. It's a joke - but the Australian taxpayer should not be laughing.

Thousands of Australian businesses struggle every day to compete against the vicissitudes of currency and global competition. Only the local auto-industry sits upon such a taxpayer-funded pedestal.

The grand high poobahs of ‘negotiating’ these co-‘investment’ ‘opportunities’ on behalf of the taxpayer were then Federal Industry Minister Kim Carr and Jay Weatherill, the SA Premier, who jetted off to Detroit in mid-January to be told by the Americans how much it would take to secure the medium-term future of Australian car manufacturing. According to Coalition MP Jamie Briggs, that’s it – that was their entire negotiating gambit. ‘Tell us the number; we’ll write a cheque.’ Briggs: “This negotiation technique appears to be akin to playing poker with all your cards on the table.”

“This negotiation technique appears to be akin to playing poker with all your cards on the table.” MP Jamie Briggs

That $275 million is $110,000 for each of Holden’s 2500 manufacturing employees. Over 10 years, it’s a lot cheaper than Government welfare.

In comparison, other industries attempt to produce a world-class product in the belief that the world will beat a path to their doors. These American multinationals instead extort money in exchange for the purported ‘survival’ of jobs. Mr Devereux claims GM will tip $1 billion into the deal, and the payoff to the taxpayer will be a $4 billion injection into the economy – an estimate he says is ‘low-balled’.

According to MP Jamie Briggs, the taxpayer has already tossed a monumental $12 billion at local car manufacturing in the past decade, and there is (prior to this deal) another $500 million in taxpayer funds “budgeted into the foreseeable future” to ‘save’ this industry.

the taxpayer has already tossed a monumental $12 billion at local car manufacturing in the past decade, and there is (prior to this deal) another $500 million in taxpayer funds “budgeted into the foreseeable future” to ‘save’ this industry

Mr Devereux says co-‘investment’ is merely something governments everywhere do if they want to luxuriate in the possession of a local car industry – a protection necessary to ‘save’ local manufacturing from the mining boom’s high dollar and the industry’s low tariff protection. Briggs: “This is to say that we should follow the fiscal policies of governments that have driven their nations into such debt that they have reached the point of potential default, risking global economic Armageddon.”

Ford Australia, which secured the short-term future of the Falcon via another wonderful co-‘investment’ ‘opportunity’ that cost the taxpayer $54 million, has a small problem: nobody, statistically, buys Falcons any more. Anyone selling a Falcon these days knows how a Taliban fighter with a Kalashnikov in Afghanistan feels when an Apache helicopter darts over the horizon and locks on with a Hellfire missile: it’s all over.

Commodore sales have been cut approximately in half in a decade, and are still heading decidedly south. Mr Devereux told me today this is principally the result of increased choice in the marketplace. Apparently, back then, there were about 140 different cars you could buy; now, there’s more like 230. More choice equals less market share for everyone. Simple. Except…

Well, I’d submit the other reason Commodore sales are heading down to the deep-ocean outfall is that the car isn’t world-class, and drinks like a sailor on shore leave – something business customers in particular, with increasingly green agendas, find untenable. And there are so many other wonderfully built, greener and well equipped cars you can buy.

Mr Devereux said he was confident Commodore sales had pretty much stabilized. So that’s good. I forgot to ask if that confidence in stability was inspired by the Commodore’s 2011 full-year sales, because Commodore sales have actually fallen another 20.3 per cent so far this year…

If you’re in an aircraft doing what Commodore and Falcon sales are doing I doubt even Chuck Yaeger could get you out of it.

"What [have we] gotten in exchange for that? We've got an industry that isn't capable of standing up to world competition" - Professor Henry Ergas.

Two groups that are unlikely to be doing handsprings after today’s announcement are unemployed former GM workers in the USA (given they’re at a loose end in their homeland and 14 per cent of the global GM workforce is propped up in a place they probably can’t spell) and anyone in the mining sector here, which is about to be whipped extra hard by the Federal Government for doing spectacularly well, when underachievers like Holden and Ford keep getting free handouts for doing poorly.

Henry Ergas is the professor of infrastructure and economics at the University of Wollongong. He told the ABC: "Every Australian is being forced to pay for a Holden even if they have chosen not to buy one. And what do we get in exchange? We're getting a small number of jobs being purchased at an extremely high price, with not only the consequence of burdening the taxpayer, but also starving our booming resource and construction industries that desperately need skilled labour, starving them of the labour they need and of labour they could pay for standing on their own two feet, rather than at the taxpayer's expense."

But according to Julia Gillard, it's a 'strategic investment, right? Prof Ergas: "Well, that argument has been run for many, many years, since time immemorial in this country the car industry has argued for special favours, and it's received those special favours - billions of dollars in assistance year after year. And what has it gotten in exchange for that? We've got an industry that isn't capable of standing up to world competition."

Still, at least it’s all over until 2022, right? The $12 billion we already spent, the $500 million already budgeted, the $54 million we just spent to ‘save’ the Falcon that nobody wants, and the $275 million subsidized welfare package for Holden, which we all agreed to spend today. That’s it, right? Auto industry: saved. That's a relief...

Well … not exactly. Apparently, and it came to light in today’s press conference, there’s another co-‘investment’ ‘opportunity’ looming. Today’s $275 million co-‘investment’ ‘opportunity’ was just for the Holden Manufacturing plant in Elizabeth, SA. This new co-‘investment’ ‘opportunity’ is at the Holden engine plant in South Melbourne. (It's always good to keep something in reserve.)

There is only one way this can end, and in my view it can’t end soon enough.

A minister will doubtless jet off to Detroit shortly, there to be instructed firsthand by a senior GM executive what ‘investment’ amount will be sufficient. The only way you can prevent it is by visiting your local Federal MP and telling them you've had enough - and given enough.