Government: Productivity Commission Inquiry into car industry support

Road_Warrior · 30-10-2013, 11:55 AM

The government media release today (attributed to Hon Joe Hockey MP) is here:

http://jbh.ministers.treasury.gov.au...ease/015-2013/

Quote:

The Government has long been committed to ensuring Australia has a competitive manufacturing sector, including a sustainable and profitable automotive manufacturing sector.

The Government has therefore tasked the Productivity Commission to examine the best way that the Australian Government and Australian economy can ensure the ongoing viability of the automotive industry.
This inquiry has now commenced.

The Terms of Reference of the Inquiry include examination of:

• The Australian automotive manufacturing industry's current structure, productivity, investment, profitability, international competitiveness, exports, workforce structure and practices, skills levels and long-term sustainability;

• The changing international automotive environment, including further potential for Australian made cars to be exported overseas, and the type and level of support provided to overseas manufacturers;

• The changing nature of domestic demand and consumer preferences, including demand for new products and technologies; and

• Australia’s attractiveness as an investment location for all phases of automotive manufacturing activity.

This inquiry will provide the Government with necessary information to respond to the challenges facing the car industry in a measured way that will focus on long-term sustainability and will identify options that are sustainable, accountable and transparent.

As the Australian Government, the manufacturing industry, employees and consumers need policy certainty to plan for the long term, the Productivity Commission has been asked to deliver an interim report to the Government by 20 December 2013, with the final report due to the government by 31 March next year.

The Government is already implementing significant measures that will assist the Australian automotive industry. The Government has pledged not to proceed with the previous Government’s $1.8 billion Fringe Benefits Tax hit on the automotive sector. Further, we have already released draft legislation to rescind the carbon tax. The carbon tax adds, on average, $400 to the cost of every vehicle produced in Australia.

It is vitally important that the Australian automotive industry is sustainable, internationally competitive and integrated with the broader global automotive sector.

Interested parties are invited to make a submission to the Commission. To register an interest in the inquiry or to find out more, details are available from the Productivity Commission website.
________________________________________
Attachment
Review of the Australian Automotive Manufacturing Industry
Terms of Reference

I, Joseph Benedict Hockey, Treasurer, pursuant to Parts 2 and 3 of the Productivity Commission Act 1998, hereby request that the Productivity Commission undertake an inquiry into public support for Australia’s automotive manufacturing industry, including passenger motor vehicle and automotive component production.

Background
Australian and State Government support for the automotive manufacturing industry is provided through the current Automotive Transformation Scheme, which provides assistance in respect of production and support for research and development and capital investment, through ad hoc grants provided to vehicle and component manufacturers, through tariffs and through relief from some state taxes.

With the withdrawal of some manufacturers from local production in Australia, recent uncertainty surrounding tax policies affecting the industry, variability in exchange rates and the increasing openness of Australia’s automotive retail market, the circumstances under which assistance is provided to the industry warrant review.

Scope of the Inquiry
The Australian Government desires an internationally competitive and globally integrated automotive manufacturing sector and wishes to ensure that any support for the local automotive manufacturing industry is accountable, transparent and targeted at the long-term sustainability of the sector. In consultation with a broad range of stakeholders, and in the context of the Australian Government’s desire to improve the overall performance of the Australian economy, the Commission should, in its Review of the Australian Automotive Manufacturing Industry (the ‘Review’):

1. Examine national and international market and regulatory factors affecting:

o the Australian automotive manufacturing industry’s current structure, productivity, investment, profitability, international competitiveness, exports, workforce structure and practices, skills levels and long-term sustainability;

o Australia’s attractiveness as an investment location for all phases of automotive manufacturing activity, from research and development through to production of components and vehicles;

o domestic and international demand for Australian design and engineering services, vehicles and automotive products; and

o consumer preferences, including consumer demand for new products and technologies.

2. In examining these factors, take into account the following matters:

o international automotive industry assistance arrangements, including reporting on and quantifying tariff, non-tariff barriers and budgetary assistance provided by major and emerging automotive-producing countries and the barriers and opportunities for Australian manufacturers and suppliers;

o the impact of current workplace arrangements in the industry, domestic industry assistance, government vehicle purchasing policies, the Government’s broader deregulation agenda and the taxation environment (noting fair work laws and taxation reform are subject to separate comprehensive review processes); and

o the spill-over benefits of the automotive sector, such as technology diffusion.

3. Taking into account all of the above, identify and evaluate possible alternative public support mechanisms that:

o improve the long-term profitability, sustainability and productivity of the industry;

o facilitate research into, and the development of, innovative alternative vehicle and component technologies by the industry;

o contribute to national productivity growth;

o promote mutual obligation, accountability and transparency; and

o are consistent with Australia’s international trade obligations.
including:

o retargeting of assistance, including within the Automotive Transformation Scheme; and

o introducing more internationally-competitive workplace, regulatory and taxation policies; and

o identifying any significant transition issues or adjustment costs that may arise from alternative support mechanisms or policy changes and how they might be best managed.

4. Assess the significance of the capabilities within the industry, its direct employment and economic benefits, its secondary impacts on other sectors of the economy, and quantify the costs and benefits, including at the economy-wide and regional level, of existing and alternative assistance mechanisms.

Process
The Commission is to undertake an appropriate public consultation process, inviting public submissions and releasing a preliminary findings report to the public.

The preliminary findings report should be released by 20 December 2013, with the Final report due to the Government by 31 March 2014.

J. B. HOCKEY
Treasurer

If you wanted to have your say about the state of the Australian car manufacturing industry, the for –v- against provision of subsidy (or other) support to the industry – now is your chance.

Details on how to make a submission are here
http://www.pc.gov.au/projects/inquir...ake-submission

And the cover sheet you will need to go along with it is here:
http://www.pc.gov.au/__data/assets/w...ion-cover.docx

I for one will be making a submission. Carrying on in an internet forum about the car industry or its problems or why certain things should/should not be the way they are is useless – now is your chance to get your point across to the decision makers. Unless of course you’re not really interested or don’t care either way, then this subject and the thread itself won’t interest you, so just toddle along now. There’s a good lad

Also,

Quote:

Joseph Benedict Hockey

hurr hurr

BroadyFord · 30-10-2013, 02:26 PM

Looks like Holden is gone...

:

I reckon they will announce closure within a matter of weeks.

Quote:

Kim Carr says Government playing 'chicken' with car industry

http://mobile.news.com.au/business/c...-1226749709868

SHADOW minister for industry Kim Carr says Holden's manufacturing future is "bleak" and has accused the Federal Government of "playing chicken" with the car industry by missing a critical General Motors investment deadline.

As the Productivity Commission today released the Terms of Reference for a new study into the struggling industry, Mr Carr revealed that the General Motors board met to discuss Holden's manufacturing plans within the past month, just prior to promoting Holden boss Mike Devereux to an international role based in China.

"The (General Motors) board met about three weeks ago and it discussed the Australian Government's approach, and my information coming out of that board meeting is that the mood is very bleak," Mr Carr told News Corp Australia.

"It's quite clear this government is playing chicken with the international automotive companies. This report is a giant ruse to get past the South Australian election (in March 2014)."

Mr Carr said the Terms of Reference were setting up the industry to fail.

"One could assume these Terms of Reference being so broad would take well over a year to conclude, or the Commission has already made up its mind," said Mr Carr.

"General Motors provided detailed briefings to the (Government when in) opposition. To claim that they don't know what's going on and they need further studies is, in my view, a complete nonsense."

Mr Carr fears Holden has missed an internal General Motors deadline for investment allocation for production of future models.

"There are international release dates for new models for the company's schedules around the world," said Mr Carr.

"General Motors has 168 plants around the world in over 20 countries. There is intense competition for investment.

"The international investment committee's got to make the decision to spend the money and they've already missed the window for Christmas."

Mr Carr said he believed the newly elected Coalition Government "just does not have a sense of urgency about this situation".

"Given the state of emergency in the industry you would have thought the Minister would have gone off to Detroit to at least talk to the senior management there.

"The fact remains if General Motors goes, given that the automotive industry is an ecosystem, Toyota will not be able to survive."

Federal Industry Minister Ian Macfarlane is in Japan today to meet with senior executives from Toyota.

The two most senior Toyota Australia representatives, Max Yasuda and Dave Buttner, are also in the three-hour meeting, which was due to be held between 9am and midday Japan time.

Speaking from Japan, Mr Macfarlane told ABC Radio this morning: "We're keen to ensure that Toyota understands how important it is to Australia that we maintain a car manufacturing industry in the country and Toyota play a critical role in that.

"I'll also be making it clear … we won't be able to respond in terms of any long term position until the early or mid part of 2014."

When asked about missing Holden's December deadline, Mr Macfarlane told ABC Radio: "I made it clear to Holden right from the start we're not in a position to give them an answer before Christmas. They may not accept that readily but that's the reality.

"I'm not going to put in place a long term car plan without doing a full assessment of the situation. This is the process it has to take time, we can't just throw out a heap of money and hope that we fix it because that will inevitably lead to the failure of the car industry.

"If that is their drop-dead position then I can't help them. They've known that for two months."

"Every other country in the world subsidises car manufacturers, in most cases far more expensively than Australia. We want to get all those facts on the table."

A joint statement issued by the office of Mr Macfarlane and Federal Treasurer Joe Hockey last night said the Productivity Commission would "examine the best way that the Australian Government and Australian economy can ensure the ongoing viability of the automotive industry … including a sustainable and profitable automotive manufacturing sector".

But the Terms of Reference will have the car manufacturing industry worried.

The inquiry will include examination of "international competitiveness, exports, workforce structure and practices, skills levels and long-term sustainability", areas where the Australian industry is notoriously weak.

The statement also said the independent Productivity Commission would investigate "the potential for Australian made cars to be exported overseas … and Australia's attractiveness as an investment location for all phases of automotive manufacturing activity".

Exports have been blunted by the strong Australian dollar and investment in new factories have been quashed by Australia's proximity to South-East Asian countries, where labour rates are one quarter of Australia's.

The Productivity Commission will also reassess the level of taxpayer support given to car makers in other countries, most of which manufacture more cars, create more jobs and export many times more vehicles to more markets than does Australia.

mik · 30-10-2013, 02:32 PM

These guys already know why it is not profitable to manufacture material/labor/energy intensive product in Australia, cost, but it will be interesting to see a breakdown of it.

BroadyFord · 30-10-2013, 02:35 PM

^^ Yep. 2013 will be the year in which Australia's car industry ceased forever.

Road_Warrior · 30-10-2013, 02:50 PM

My personal opinion is that this review is several years too late and will probably be next to useless. The damage has been done in the intervening years as governments didn't listen and the car makers dithered when consumer demands shifted.

I'll still make a submission, but, yeah. I guess my submission will be a bit on the cynical side.

Ford warned the federal government in 2002 in a submission to the Productivity Commission that it considered the 10% tariff and ACIS (which was linked to the tariffs) to provide the optimum balance between industry protection and market competitiveness and that any further erosion of this policy structure would leave the Australian car industry exposed to international market and economic forces, which the industry would not be able to withstand long term. Bear in mind this was in 2002. In a nutshell, Ford said that any further erosion of the tariffs would produce little benefit but significant consequences for the viability of the industry.

The Productivity Commission and the government of the day ignored what Ford predicted and carried on regardless. Guess who was right? It wasn't the government...

timeout · 30-10-2013, 07:05 PM

Who signed the last lot of one sided Free Trade Agreements especially the one with Thailand?

timeout · 31-10-2013, 05:48 AM

The more the country is sold out to cheap labour the higher the risk of not having a future to sustain the population.

You look at the protections other countries put in place to keep a constant effort for their people yet ours seem to sell us out at every opportunity under the banner of global competivness.

At some point their wont be enough money staying in the country to pay any bills. Is the plan to sell us out like Greece?

Cars trucks and buses built
overseas = no carbon tax
Australia = carbon tax, therefore instantly more expensive.

Regardless of the other crap how do you compete with that on a pure cost for dost basis you can't.

Look what Electrolux said to Orange sorry too expensive here for us Asia is cheaper.

If you do a table up with any industry that's suffering and it's the same story.

Would be interesting to see what has degraded over the last 10 to 15 years to see what's shut down and what policy was made and when.

Nikked · 31-10-2013, 07:31 AM

The review is too little, too late.

CyberWasp · 31-10-2013, 08:06 AM

By the time this review is finished it will only be applicable to empty factories full of cob webs.
Something has to be done now. Like right now.

GQ_Smooth · 31-10-2013, 08:26 AM

Quote:

Originally Posted by Road_Warrior

My personal opinion is that this review is several years too late and will probably be next to useless. The damage has been done in the intervening years as governments didn't listen and the car makers dithered when consumer demands shifted.

I'll still make a submission, but, yeah. I guess my submission will be a bit on the cynical side.

Ford warned the federal government in 2002 in a submission to the Productivity Commission that it considered the 10% tariff and ACIS (which was linked to the tariffs) to provide the optimum balance between industry protection and market competitiveness and that any further erosion of this policy structure would leave the Australian car industry exposed to international market and economic forces, which the industry would not be able to withstand long term. Bear in mind this was in 2002. In a nutshell, Ford said that any further erosion of the tariffs would produce little benefit but significant consequences for the viability of the industry.

The Productivity Commission and the government of the day ignored what Ford predicted and carried on regardless. Guess who was right? It wasn't the government...

Well put and in my opinion spot on, will be a travesty when Holden leaves and in all honesty, unless the Toyota plant can improve their quality and costs, I can't see them lasting past 2018, Toyota Australian is consistently losing export deals to other factories based on cost and quality (at least they are allowed to compete for new markets).