Font size: 
The money is not available immediately but will be funded over 13 years through the government’s “New Car Plan for a Greener Future,” designed to make Australian vehicles cheaper and more fuel-efficient, with low carbon-emission exhaust systems.
Prime Minister Rudd and Innovation Minister Kim Carr in a joint statement said that the government’s green investment strategy would transform Australia’s economy into a low carbon-emitting one, which would be internationally competitive in the future. “This is decisive and strong action to protect the Australian economy during the global financial crisis. It will create well-paid, highly skilled green jobs for the future,” they said.
However, the big-bucks bag comes with a precondition for parent companies of automakers based outside Australia to commit parallel investment in their manufacturing units in Australia, for a share of the mega-dollar pie. “There is a significant commitment to the industry, but we expect a significant commitment back from the industry as well. And the way in which this assistance is structured, it is provided in response to actual investments and commitments by the car companies on the ground,” Rudd said. The government expects the plan to generate A$16 billion (US$10.55 billion) in investments for its automotive industry over the life of the plan.
The A$1.3 billion (US$853 million) “Green Car Innovation Fund” is part of the new car plan, to provide assistance for new designs and the manufacture of low-emission, fuel-efficient cars and components locally. However, assistance is in the form of grants, allocated through a competitive selection process that considers the innovative, technological, commercial and environmental merits of each proposal. It is believed that the government will scrutinize the level of investment and commitment from applicants first before handing out aid.
“The Innovation Fund will see the Australian government match industry investment in green cars on a A$1 (US 65 cents) to A$3 (US$1.96) basis over a ten-year period from 2009,” the joint statement from Rudd and Carr said.
Although automakers have welcomed the government’s smart initiative to encourage funding for local production, it raises doubts as to how much a parent company will actually invest given the financial problems and declining sales in its home country. Parent companies face a dilemma in allocating extra funds for cars selling in Australia while sales may be declining on home turf. To them, this is more a cost than an investment.
This puts automakers like Ford and Holden, whose parent companies in the United States are facing serious financial difficulties, at a disadvantage to receive millions of dollars in aid. As per media reports, the former head of Mitsubishi Australia, Graham Spurling, doubts the ability of the U.S. parent companies to invest in Australia's car industry.
Top U.S. automakers are seeking a government bailout amid reports on Wednesday that millions of jobs in the auto industry and related supply chains are at stake, as General Motors is on the brink of collapse. GM is the parent company of Australia’s car manufacturer Holden.
Rudd, however, defended his plans and said car companies had publicly supported his initiative. Besides, he said, Carr had visited automakers in Detroit and Nagoya, Japan, and met local representatives who supported the investment initiative. “Each allocation of funding from the Green Car Innovation Fund as well as the Automotive Transformation Scheme will be based on actual commitments and actual investment decisions (by automakers). Here is our money, but it is money delivered in response to a real effort on their part,” he insisted.
In June, the government’s decision to give Toyota A$35 million (US$22.42 million) as an incentive to build hybrid cars in Melbourne came under fire from opposition leaders, who slammed it as a publicity stunt. They reasoned that Toyota would have made the vehicle anyway, without the added incentive of taxpayers' money. Whether the present multibillion-dollar package with its set of preconditions is another government stunt to calm automakers during a financial crunch remains to be seen.
The opposition has also criticized the government for not helping struggling car dealers that are unable to access vital lines of credit. Opposition leader Malcolm Turnbull told the media that Rudd’s Labor government was doing nothing to help car dealers and the 90,000 people in car yards hit by the credit crunch.
Industry analysts believe that the government’s car initiatives and incentives are predominantly for car manufacturers and not directly for the thousands of people in the supply chain that support the industry. Australia’s A$7.7 billion (US$4.94 billion) automotive sector is supported by over 200,000 people who are directly or indirectly part of the industry. Their future is as critical to Australia’s economic growth and exports as car manufacturers are.
The Motor Trade Association of Australia, however, has backed the government’s new car plan and aid package. In a statement released on Monday it said, “Conditional support based upon timelines and quantifiable measures is a sensible and measured response to the challenges facing the Australian automotive industry and will achieve its objectives of creating a technologically innovative, greener and profitable manufacturing sector.”
The government’s plan to protect the automotive industry is laudable. However, whether political vision translates into showroom realities and secures the future of Australia’s vehicle manufacturing industry remains to be seen.
