Government finalising car rescue plan

The battered car industry this week expects good news as the Federal Government puts the final touches on a 12-year, $2.5 billion plan. The plan that is also expected to provide assistance for the 2008-09 financial year will likely incorporate recommendations from the Bracks review to provide restructure funds for car parts suppliers, worth between $60 million and $80 million.

The restructure of the sector has been dragged down by lack of financing and employee costs and the industry’s unions fears that lower production from companies such as Ford, GM Holden and Toyota will see employees stood down without pay.

Australian Industry Group chief economist Tony Pensabene says despite the industry’s need for assistance, the package is really about “the medium term” health of the car industry, and necessary for restructure.

“There’s a high acceptance it’s important to have an automotive sector as a spin off to the rest of the economy, and it also provides jobs.”

Pensabene also says the main focus of the assistance is for companies looking to restructure, which is harder to accomplish in the current downturn.

“It’s a grant program, it’s pretty flexible… there needs to be some assistance. Compared to what other countries offer and the importance of this sector in our economy… I think the funds that the industry is looking for are reasonable.”

John Mellor, publisher of GoAuto.com.au and motor industry analyst, says the package will encourage research and development, which is necessary for the industry’s growth.

“I think it’s fascinating that the car industry is changing very rapidly from simply a manufacturer to the designer and developer of cars, and this is very significant. It’s happened because the government assistance focus moved to research and development projects, particularly those that were likely to increase exports.

“These people add diversity – and the more we invest in research and development, the more we discover and develop and the more we are going to become respected by overseas car companies. Therefore, the more work will come our way,” he says.

“The way forward for the car industry is innovation. If they go ahead with this package, we’ll have bought into that.”

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