News & Reviews
Last 7 Days
Expand Ad


CRUZER PAYS?

After pocketing $40 million last month to help build more fuel-efficient future Commodores, Holden sent strong signals last week that its burghers in Detroit will probably pull the pin on Australian manufacturing of the next generation Cruze – unless even more millions of taxpayer dollars are forthcoming.

Above: Cruze hatch debuted in Melbourne last week, an example of Holden’s superb design and engineering credentials. But future manufacturing appears to hang off the level of taxpayer funds Holden requires

If the government elects not to tip more taxpayer cash Holden’s way, manufacturing of the next Holden Cruze will probably move back to South Korea, with bleak knock-on effects for Holden’s manufacturing facility at Elizabeth in SA, which also makes the Commodore.

It’s widely speculated by insiders that the declining popularity of the Commodore means building it alone at the Holden plant in SA is unsustainable. Holden boss Mike Devereux is previously on the record declaring 100,000 units per annum as his targeted ‘sweet spot’ for annual factory output, to deliver acceptable economies of scale. Whipping the Cruze together here was a way to bolster the numbers – not to mention the car’s ‘Aussie made’ cred. And it’s a damn good car. No question there. The diesel manual, in particular, is a winner.

Above: Holden boss Mike Devereux says future Holden manufacturing is being squeezed by Detroit over the demise of government funding and the impending carbon tax

Commodore sales were fewer than 50,000 last year, and the long-term trend looks exactly the way you don’t want the flight plan on your Airbus A380 to look if two of those gigantic Rolls-Royce turbofans start belching smoke, and you’re hundreds of kilometres from dry land. People – especially corporate/fleet clients, traditionally Commodore’s main target market – are sprinting away from six-cylinder cars. This trend appears not to be reversing any time soon. (Government ministers still find them attractive, however.)

Holden’s most recent call for increased taxpayer funding, off the back of the discontinuation of the Government’s Green Car Investment Fund (GCIF), came just days after CarAdvice’s report on the remarkably poor health of the Australian car manufacturing industry, which is being jammed two ways, by falling sales and diminished export attractiveness. Judging from the hundreds of comments from CarAdvice readers across our three most recent reports on this issue, community sentiment over increased taxpayer funding and the future prospects for local manufacturing are overwhelmingly negative.

Above: Carmakers are monumentally browned off over the demise of the Green Car Investment Fund

Regarding axing the GCIF, even South Australian Industry Minister Tom Koustsantonis appears to be on board with killing it, telling The Australian newspaper last week, “I think the fund had run its course. I think we’ve benefitted as much as we can out of that.”

In the past week, Mr Devereux has lashed out at the impending carbon tax, too, claiming it would dig Holden $40-50 million further into the red. (Although, notionally, Holden declared a $138 million pre-tax profit last year, its actual bottom line result was a $20-million-plus loss if you discount the government funding it received and the currency windfall flowing from the sky-high Aussie dollar.) In the prior five years, the company lost well over half a billion dollars – inclusive of government funding.

Above: More than 80 per cent of cars sold in Australia are imported. Most attract a 5% import duty

Mr Devereux told the ABC recently that Australia was not a “low cost” country to manufacture cars in, and that we offered “virtually zero” import tariffs. (Import tariffs are taxes on imported cars designed to protect the local manufacturers. Import duty is currently five per cent, except for cars from countries like Thailand, with which Australia has a free-trade agreement. Thailand is the second-largest source country for imported cars here after Japan.) Duties received from imported cars here are estimated to be in the order of $750 million, which is a lot of hoot … though not in comparison to (say) cigarettes or fuel excise.

You can look at tariffs two ways. Here’s the other way: shut the factories here, ditch the tariffs because there’s no industry to protect, and your new imported car gets hundreds of dollars cheaper. Would you prefer that? Please tell us by commenting below. Are you happy to pay a premium on, say, a Mazda3 so that Holden, Ford and Toyota can insulate the factories here from global economic forces?

Above: Holden says your next new Commodore could be $1000 dearer – if the government’s hated carbon tax kicks off at $25 per tonne

Reports are surfacing that the proposed carbon tax, if it kicks off at $25 a tonne, will add $1000 to the drive-away price of a Holden Commodore. Mr Devereux recently called for “certainty” and “clarity” over the carbon tax – a position most Australians would almost certainly endorse. At least, we found out across the weekend, fuel will be exempt.

Last week, according to the official transcript, Mr Devereux told the ABC’s PM program: “We will viciously defend not just the right to build here but the right to design, engineer and build in this country.” (Although he probably actually said ‘vigorously’ with a moderate US accent, the fight could get dirty. You never know…) In the same week Mr Devereux is reported to have said that Holden is reassessing its commitment to manufacturing in Australia, a curious position from which to being a vigorous defence. The whole issue appears to hang on the level of forthcoming taxpayer funds – which Mr Devereux prefers to call “co-investment”.

In a response to Mr Devereux’s recent comments, Senator Kim Carr (the Federal pollie with, effectively, with his finger on the industry-propping-up purse strings) said the government was acutely aware of Holden’s position. “The government remains strongly committed to an economically sustainable automotive industry and to the livelihoods of the more than 200,000 workers employed in the manufacture and servicing and repairs of motor vehicles,” Senator Carr said, in a sweeping statement totally devoid of any substance.

Above: Senator Kim Carr – rhetorically committed to Australian car manufacturing…

Senator Carr’s response is disingenuous: there are not the livelihoods of “more than 200,000” workers at stake. Servicing, retailing and repairs of motor vehicles will continue unabated regardless of whether or not Holden’s manufacturing operation (or Ford’s or Toyota’s) continues. It’s the jobs of the factory workers and the component suppliers that are at risk. Holden employs more than 2000 people in its manufacturing operation, split between the car plant at Elizabeth in SA and its Port Melbourne-based engine manufacturing facility.

For argument’s sake, let’s assume 2500 Holden jobs are at risk. And let’s assume there’s a deferred ‘welfare cost’ attached to each job that’s on the line; an impost on the public purse of $50,000 per job. That’s $125 million annually in welfare payments that are deferred by those people being employed at Holden. (Similar comparisons would be possible at Ford and Toyota, Australia’s other two local manufacturers.)

Above: Strong recent signals from the Federal Government in Australia suggest that funding’s not going to be this forthcoming any time soon

Mr Devereux uses the term “co-investment” to describe Holden’s receipt of taxpayer funds. This term implies a return on investment for both parties. Holden’s return is, obviously, keeping the factory’s lights on and its doors open. Is the government’s return on investment merely not having to deal more directly with the welfare burden of 2500 additional unemployed persons? Is the taxpayer funding of local car manufacturing merely a matter of shifting (in Holden’s case) something like $150 million from the Government’s Centrelink budget to its ‘car industry support’ budget? Is that what the local car industry has beome? A means of cooking the unemployment stats? Is working at the Elizabeth merely welfare, or is there truly the prospect of long-term turnaround to self-sustainability for the industry? Please comment below with your opinion.

There is a massive moral dimension to this issue. There is a profound (and hard to quantify) collective social and individually personal burden to long-term unemployment. Especially to erstwhile willing workers. Alternative employment prospects around Elizabeth? Starkly limited: the place might as well be called ‘Holdenville’. There are the remnants of towns across the western world, left over when booms turn to busts – they’re never the kinds of places you see on the glossy holiday brochures.

Above: It’s more than just factories, taxes and grants – thousands of individual livelihoods are on the line

Holden’s employees at Elizabeth pay taxes. They buy groceries. Their kids go to school and play sport. They’re average, hard-working Aussies. These people contribute both economically and socially in a way that unemployed people generally can’t. The same is true of Ford’s employees at Geelong and Broadmeadows and Toyota’s people at Altona.

Is the net benefit to society (not just the net financial benefit) greater, having those people in jobs – even if the jobs can only exist off the back of taxpayer funding, in an industry in its twilight years? Has the local manufacturing of cars become merely a back-handed way for struggling governments to avoid seeing more hardworking blue-collar Australians join the welfare queue?

Tell us what you think on this issue by commenting below.

Above: Do you think government funding of the car industry is an appropriate use of your tax?

Instead of concentrating on local carmakers, should the Federal Government concentrate instead on the development of industries with greater long-term growth – and employment – prospects? Many brilliant ideas leave Australia for want of appropriate funding. Where should your support money go instead?

Carmakers and governments are strangely silent on the moral dimension to this story – the issue of the cumulative value to society of keeping workers in jobs. Or whether better jobs in more intrinsically viable industries should be developed as a kind of succession plan in the event that local manufacturing here fails. Perhaps this is because the respective spin doctors prefer to frame the debate in terms of a ‘return to viability’ some time in the future – but, let’s face facts, probably never. When the issue of the value of jobs does come up it’s usually played as a bargaining chip, either lobbed by a union back to a car company, or by a car company to a government. Such behaviour effectively reduces the workers merely to political pawns in a negotiation game and de-values them and their contribution to society as real people. What do you think? Is ‘jobs’ a different issue to ‘people’?

Have Holden’s, Ford’s and Toyota’s factories effectively become de facto Centrelink halfway houses propped up just to keep people in jobs – since the industries they labour in resist viability even after billions of dollars in taxpayer seed money? Has making cars in Australia become a kind of Dickensian hiding to nowhere? Does government funding of the car industry constitute a kind of back-handed work for the dole scheme? Does the government have enough fingers to plug the holes in the dyke?

Above: Is it hypocritical for the PM and other ministers to use Holden as a convenient photo-op when it suits, and then stab the process in the back by axing the GCIF just a few months later?

Does this current controversy mark a shift in policy – keeping people in jobs at any cost? Or are the Federal and State Governments and the car makers merely taking a step towards greater honesty, and admitting what’s really been going on for quite some time now?

Perhaps your view is different. Maybe you believe the local car industry is just a few more years of Government taxpayer ‘co-investment’ away from standing on its own two feet?

Above: Where do you think the brilliant Cruze hatch’s successor will be built – here or South Korea?

Should there be a use-by date on government funding? Should Kim Carr effectively say: ‘We’ll prop you up until 2020. Here’s a contract. If you can’t swim on you own by then, sink.’? What fledgling alternative industry with real jobs and economic growth potential would you like to see nurtured instead? Would this kind of ultimatum be the kind of ‘certainty’ and ‘clarity’ the car industry cries out for, in the face of schemes like the GCIF that seem to evaporate at the whim of whatever the PM feels like doing this week?

Whatever your opinion, please contribute to the discussion by commenting below. What do you want the Federal Government to do? After all, it’s your money.

 


  • axle

    Great article that has really hit the nail on the head with the unemployment cost of shutting down manufacturing.

    I know it would probably be unpopular but why don’t we protect our own manufacturers by using import tariffs like we used to. Surely all those jobs are worth it in the long run. Or are the short term votes of those of us who have bought cars built overseas more important than the local jobs?

    • Lars

      You are probably too young to remember but in early eighties Holdens and Fords were of very low quality like American cars today or even worse. Local Toyota built outdated models, always 3-5 years behind of models in Japan and Europe and all cars were very expensive at the time. So better not to turn back the time.

      • Sumpguard

        Not to mention lousy seatbelts that needed adjusting every time you got in (often none in the back), hard steering wheels, oil shockers, floaty ride ,woeful economy with the 3 on the tree transmissions ,aweful tyres ,mirrors that came loose in the wind on the ouside (left hand mirror was a luxury item)internal mirror that wouldn’t stay in position always tilting on it’s own and in many cases wouldn’t stay on the damned window and sugar glass windscreens.

        Yep, we’ve come a long way.

      • The Polarizer

        I think only a DH would want his countries manufacturing to stop just so they can have there trendy new imports cheaper.

        Total Dickheads.

    • Owen Petersen

      Great article however it seems to have missed the real issue behind what is causing not just our Manufacturing industry but all free enterprise to slowly fade into memory in Australia. We have become one of the laziest nations in the world we’ve had it so good for so long selling off resources buying in everything we want and never in the last 20 years having to take a pay cut to really deal with large scale unemployment or a crippled economy. We have been on this island shielded from the rest of the world allowing left wing minority groups to make us all feel guilty whenever some 2500 to 15000 people in a country of over 22,000,000 are not being propped up by the government on some form of welfare scheme. Lays face it we as a nation have to realize that you can’t have your cake and eat it too. We can’t all have a eight days off sick every year, four weeks paid holidays, careers leave, maternity leave, long service leave, one hour for lunch, half hour smoko, a cigarette every hour, stress leave when we don’t get our way and then only shit during company time

      • keieich

        I’ve been here for 2+years. Never been here before. Knew absolutely nothing about this place at all. I was and am an “outsider” who does compare with the place (Asia) I came from all the time. I came with a clean sheet in my mind about the way people work here and how things are run here. After this time, that sheet is somewhat tarnished. Australia needs people like you, a lot more – people who are not blind to what’s going on. Alas, you are a rare breed.

    • Jester

      If they make decent cars there would be no need for tariffs.

  • http://www.facebook.com/profile.php?id=1715760895 Charles Dean

    Does anyone else agree with me that the cruze in the last photo looks like the impreza hatch? From the side profile..

    • Sprint

      Similar from that angle but thankfully much better looking.

  • James Cortez

    Australian automotive engineers are world class, too bad it’s blue collar labors (many of them not all) are spoiled (smoko, compo, sicky etc) and this contributes to crippling the domestic auto industry. Fairly similar to those detroit auto workers

    • Sprint

      Yes, but surely that applies universally to all countries, including Germany.

      Although I suspect Japanese labor behaves little bit differently due to their unique culture.

      • Nick

        And that’s why you see the German car companies building plants in low labour cost countries like Thailand and Mexico.

  • F1

    Jesus the CRUZE is like GM’s everything..

    • pH7

      Cruze is a Korean rubbish.

  • Ford Fairlane

    750mil at 5% import tariff,put it up to 50% and reap 7.5bil.

    But our polies don’t have alot of say there just puppets.

    I just thought of a new job for Julia,Ronald Macdonalds wife,she can hand out burgers at maccas fun days,thats about her best skill and she wouldn’t needto wear a red wig.

    • bangel

      Protectionism does not work all it creates is a lazy manufacturer who hides behind tarriffs and serves up a sub standard non world class product .

      Commers and falcs are better today because of competition , the fact that fewer buyers are taking them means it time to downsize , and fit 4 cylinder engines .

      The coomer will end up a malibu and be assembled here , the falcon its gone , the mondeo is a good product to replace it .

      • Dave S

        People forget that if their is no commodore or falcon, what will that market drive? I cant think of any car that will replace an SS sedan for anywhere near that price.

        Excluding local cars, no makes cars like ours for the price. Not everyone want large FWD.

        I aslo think those numbers exclude things like HSV, FPV, Walkinshaw ect

        • Nick

          Sorry Dave, but I think the days of a large RWD platform for Australia are severely numbered. You can say goodbye to your SS, HSV, FPV, whatever.

          No matter what rhetoric comes out of Holden and Ford, they are subject to the decisions from their US parent, and they have stated again and again, that there will be one global platform for large cars. Holden may be able to hold off a bit longer then Ford, but it is coming.

          Our market is just too small for GM and Ford to continue investing in unique platforms.

        • http://www.facebook.com/priusfreezone Matthew Werner

          Theres other options out there that companies haven’t bothered to import because Commodore & Falcon have that market sown up, eg Hyundai Genesis

          • Lox

            Are Australians ready to pay 50k+ for a Hyundai? Probably not.

          • MOARCARHH

            maybe hyundai know its a dying market to get into. thats why there is no large rwd from them here in aus

      • Andrew of Newcastle

        There is a difference between protectionism and maintaining local jobs, particularly when your trading partner is a country where wages for workers are a dollar a day or a dollar per hour. There is certainly no equity in that one-sided arrangement. C’mon Bangel, I’m sure you wouldn’t work for a dollar an hour. I know I wouldn’t. The problem with the current situation is that idiot governments make decisions that effect millions of people, whilst they enjoy good incomes, fantastic work conditions and the best possible pension schemes. How could they possibly understand the impact of their policy decisions.

    • Lars

      I did not vote for Julia but it’s a bit unfair to say that she is responsible for Australians losing appetite for Falcons and Commodores. Agree however that it was silly to give money for that hybrid Camry which nobody seem to love.

      • Ford Fairlane

        I am not blaming julia for the loss of our car industry

        I just thought that she is better suited to handing out burgers.

        Atleast Mc Donalds pay for the free burgers and not us.

  • http://electric-vehicles-cars-bikes.blogspot.com/ Paul

    The bottom line is, it’s not the Australian governments fault that only 50,000 Commodores sold last year.

    Oil hit $150 a barrel as long ago as 2008 and Holden have just continued to make the Commodore a largER car with biggER engines!

    The regular cost of petrol is fairly close the the peak in 2008 so it really should be no surprize to Holden executives that large cars are in less demand, ESPECIALLY when they just keep making the thing larger!

    A joke doing the rounds is that the current model Toyota Corolla is approx the same size as the original Commodore. So the new Commodore is the same size as ?????? An SUV??

    Holden took a $40M back hander to do some underbody aero work (which it should have done years ago) yet it takes a private company to start an EV commodore project! Green car funding has gone to build a new ICE powered car that Holden have ZERO plans to make a hybrid. These guys just don’t have the guts to make the obvious but major direction change decisions.

    Holden looks to be playing the “too large to fail” card, it’s not the taxpayers responsibility to compensate corporations for bad/no decision making.

    • JEKYL & HYDE

      CHEVY VOLT MUCH?…

    • Andrew M

      Um Paul,
      The commodore engine has gotten smaller.
      It was for a long time a 3.8L, now its down to 3.6L and 3.0L.

      Also if fuel bill worries are the real issue for the turn against the commodore, then why has the SUV segment boomed in equal proportions to the commodore sales slide.

      Truth is the market is spoilt for choice.
      The commodore used to sell over 10,000 units a month, it now sells 1 third of that yet is still the top seller.
      The corolla sells today pretty much the same numbers it was 10 years ago and still its less than the commodore.

      If there was a genuine shift from a particular large can then where has it gone??
      It has been spread across the much wider choice of vehicles than what we had 10 years ago.
      Not one model alone from any category has picked up the commodores lost 6000 sales

      • Bill

        Exactly! You’ve hit the nail on the head Andrew.

        • http://CarAdvice The Salesman

          Andrew M

          The SUV segment has boomed because it offer’s comfort for families with the space of a wagon, economy of a small four and the power of a large eight cylinder engine(diesel)
          The other 6000 sales have gone to small cars.

  • DogzOwn

    How about a comparison with other car plants in the world? 50,000 per year for Commodore converts to 1000 cars per week, which compares with nearly twice as many per day for car plants elsewhere in the world. Has nobody noticed what’s been happening to Detroit, starting 40 years ago? If government fleets stopped buying local guzzler big donk dinosaurs, they’d close tomorrow, making opportunity for industries which have a future, instead of a past.

  • Tony

    Quote from above: “Reports are surfacing that the proposed carbon tax, if it kicks off at $25 a tonne, will add $1000 to the drive-away price of a Holden Commodore. …. At least, we found out across the weekend, fuel will be exempt.”

    Given that PM Gillard is a proven liar, how many people believe that fuel (a major source of carbon emissions) will be exempt? Even if exempt before the next election, might not remain exempt after that.

    • Jacob

      Arent we heading towards hybrid and electric cars which use 0 petrol?

      The price if petrol will keep going up because of Peak Oil, not because of Carbon Tax.

  • Road Warrior

    This article fails to mention that governments all over the world who have car manufacturing in their jurisdiction, support the sector in their countries in some way, shape or form – there’s nothing unique about it. The easiest way to do this is with grants.

    Contrary to your underlying view that the local car industry is some sort of massive leech on the taxpayer, the flow on effects from the R&D that is spent here, not to mention direct employment and indirect employment in the supply chain is huge. The federal government calls it a “strategic industry” for a very good reason. This point has been omitted it seems.

    The solution for local car makers is to make products that are more relevant to shifting consumer tastes and export them, and change their processes so they can meet those shifts, not close the doors on the whole shooting match and risk plunging our manufacturing sector into crisis.

    • Martin

      If it wasn’t for the strong competition in the Australian and global automotive marketplace, the Commodore would never have become a better quality vehicle. I know some people on CA happily trash the commodore but it is a great car. It’s designed and manufactured to a high standard and it’s all driven from the necessity to keep up with the competition.

      I agree that we need to protect the local industry just like every other auto-manufacturing country does, but we still need the strong competition to drive new development. Holden needs to work on the fuel efficiency, alternate fuels, export opportunities of complete known downs (so have everything built here – but have it assembled overseas in factories for oversea consumers – think IKEA) and stop blowing out the proportions of the vehicle with every new generation.

      • Martin

        *knock

  • Devil’s Advocate

    John, you hit a lot of “home truths” in this article, however I started to switch off with one of your comments which, as an engineer, I thought you would have known better.
    Your reference to the Airbus A380 and it’s “gigantic Rolls Royce turboprops” detracted from the article and to me made it lose some of it’s credibility. Turboprops are what you find on smaller aircraft like Dash 8s, King Airs or Metroliners. Turbofans are what you find on airliners like the B737, B747 or A380. I know this is a motoring site and not aviation, however I hope you can appreciate that from the perspective of an aviation industry professional, you can understand why this inaccuracy has had this effect on me. Thanks for your time.

    • http://www.caradvice.com.au/ John Cadogan

      G’day DA,

      You’re absolutely right. And, you know what? I knew that. (How embarrassment…) It’s pretty hard to write 1400 words and get them all right. Thankfully it doesn’t affect the underlying story. But you are absolutely correct. I’ve changed it, and thanks for the heads-up.

      Sincerely,

      John Cadogan
      Editor

      • Nick Car

        Great article John.

        It is great to have a car web site doing some commentary rather than just reporting.

        What I find surprising is that there is no mention about the unions in the article. Is the automotive union not revelant any more. Why are they not protesting to Canberra to save the automotive industry? Why are they not saying the a carbon tax will hurt local industry?

        The only reason GM survived from bankruptcy is due to the power of the unions (of course some may argue that they were also the reason for the bankruptcy).

        I suppose that at the end of the day a carbon tax will effect every manufacturer in Australia. Manufacturing is a declining industry here and will decline at a quicker rate with further additional costs.

        Eventually there will be no car manufacturing industry here (it will be impossible to compete with Thailand, China and India), and eventually there will be no manufacturing industry. We will only be digging holes in the ground and exporting material to overseas.

        It’s all very sad.

        And surprisingly even with this bleak scenario the Greens probably will think that our carbon footprint is still to high.

  • Matthew

    I agree with alot of the points being made above. RoadWarrior has it right with the knock-on benefits from having local manufacturing.

    Adding to Tony’s comment about the carbon tax not being on fuel, I believe Gillard said only “hardworking Australian Families, Small Businesses and Tradies” are exempt – i.e. not the fleet buyers who favour Commodores (albiet in lower volume than before). Some consistency in policy would be nice. We seem to try prop up local manufacturing in one way, then hammer it in another. How about some reasoned and committed support, in whatever form it comes. Lets be clever for a change – have the Government think about the consequences of what it does – rather than destroy industries through poor decision making and then throw money at it as “compensation”.

    John, love your editorial comments and your segment on 2UE over the weekend.

  • http://Audi Robj

    The capacity expansion plan of Shanghai GM (Shenyang) Beisheng Auto Co., Ltd. has received approval for its proposed expansion plans. Construction of the extension may start as early as July this year.

    The expanded capacity includes 300,000 vehicles and 450,000 engines. The total investment in the project will be 7 billion yuan.

    The capacity of the Beisheng plant is currently 200,000 vehicles, It mainly makes Shanghai GM’s Chevrolet Cruze. It’s also Chevrolet’s third largest production base globally. The capacity expansion will help Shanghai GM fulfill its sales target of 2 million units in 2015.

    http://www.chinacartimes.com/2011/06/28/shanghai-gm%E2%80%99s-capacity-expansion-plans-approved-may-start-construction-in-july/

  • Fred

    Australia used to make / build a lot of stuff…Good and bad.

    Life as we know it will go on even after GM Holden, Ford AU and Toyota AU pull the pin.

  • eveready

    Good article and you are correct on many points.

    One comment I can make is that you have grossly underestimated the impact on jobs. 2500 may be the figure at Holden’s assembly plant – but the knock on effect to the supporting industries is many times greater.

    There are many many thousands in the supplier chain, logistic providers, specialist engineering companies and contractors.

    Other questions we need to ask ourselves are:
    Is the automotive industry in Australia receiving any greater assistance in comparison to competing countries around the world? Korea, US, Germany, Thailand all have some level of protection. Australia arguably has one of the lowest import tarrif rates of any in the developed world.

    Secondly, is the automotive assistance as a proportion of jobs/other metrics any greater then other industries in the Australian economy? Mining, construction, banking etc.. all have government assistance, grants, tax or excise exclusions of some kind supporting the industry. Why is the automotive industry always pointed out?

    It’s a very complex issue…..sadly its always dumbed down by people who have not idea how the industry really operates.

    Again, good article, great to see someone actual try to write about the issues surrounding the industry with a bit more thought then most others I have seen.

  • http://www.caradvice.com.au/ John Cadogan

    Eveready,

    I take your point on those workers in other supplier industries ‘upstream’ of the factory. Very hard to quantify those numbers. I think the biggest problem is the tremendous reduction in sales for Commodore and Falcon, which starkly affects the economies of scale for all suppliers. If that trend continues I doubt any degree of government assistance will help.

    Fantastic other points as well. Thanks for taking an interest in CarAdvice and commenting.

    Sincerely,

    John Cadogan
    Editor

    • Karl

      John, according to the Bracks automotive review, the Australian automotive industry employs over 64,000 people (note that was in 2008).
      If we assume there’s 47,000 people currently employed in the industry, each paying $8,000 p.a. in tax equates to $376 million p.a. in revenue for the government.
      That’s before you take into account all the other strategic revenue from the economic activity generated by the industry.

      People who complain about ‘their tax’ subsidising car production need to understand that they are paying *less*
      tax because of the automotive industry.

      It’s also worth keeping in mind that the Japanese are spending $1.72 billion over five years to subsidise their car industry. The vast majority of car producing nations do this.
      Those countries actually understand how valuable an automotive industry actually is.

      • Patrick

        Granted Karl, but again there is this assumption that all those 64,000 people employed in ‘the industry’ do is work on locally produced cars.
        Many of these people work in dealerships, logistics,etc.
        Given that more than 85 per cent of all cars sold here are imported, surely it stands to reason they spend the majority of their time working on imported cars.

        • Karl

          Patrick, that employment is *only* associated with vehicle manufacturing.
          In the article, senator Carr says that over 200,000 people are employed in the “manufacture and servicing and repairs of motor vehicles”.

          • Phil

            Karl a figure of 64,000 employees whom are only associated with manufacturing cars here could not possibly be correct.

            The total annual ouput of all our car manufactuers is about 150,000 cars (and rapidly falling!). Using your figures, that means only 2.3 cars are produced per employee per year.
            If we assume the employee is paid $60,000 pa + associated employee costs of another $20,000 (9% super, training uniforms, recruitment etc), that means for every 2.3 cars sold, the manufactuers need to make up $80,000 just to cover the manufacturing employment costs!
            If we assume the average car in question is sold for $35,000, that would mean that every single dollar from the sale price, would be entirely swallowed up by the manufacturing employees salary!

          • Karl

            Phil, as I said above, that was in 2008.
            I estimated current employment at 47,000.
            Australia produced 239,443 cars in 2010.
            Therefore 239,443 divided by 47,000 = 5.09 vehicles per employee (or to put that into perspective, buying a locally produced car keeps someone employed for two months, less for a Cruze obviously).
            You need to understand these numbers are straight out of the Bracks car review. If you don’t believe me than read it yourself!

    • Seano

      John if as a nation we imposed a 15% import duty on cars made in no free trade partner nations rather than a 5% and said all revenue rased from the extra 10% would be spent on roads wouldnt that help the local industry and give the Govt roads some much needed funding? Also in the states the have 1% car loans ect, if we had that on Australian built cars only wouldnt that also help the industry? The Govt could give the loans out and take the 1% profit, Govts can give loans the qld govt did it for air cons in the late 90′s.

  • Owler

    So the money we gave to holden last year as taxpayers; $99.6m (ACIS), $3m (SA Govt.), and 1/3 of the $149m Green Car Innovation Fund, overall totalling $152.27m
    In return, they provided $125m worth of jobs.

    I’m all for having a local manufacturing industry, but I think that if they can’t stand on their own two feet, we shouldn’t be providing them with the cash. The federal government should not be an employment industry.

    • http://Audi Robj

      yes, everyone can work in Macca’s or be on Centrelink. How much does CentreLink cost us each year?

      • ST

        You’re assuming all the factory workers have only the skill to flip burgers.

    • Andrew M

      Those emploees will also pay approx 25 million in income tax along with company tax from related suppliers etc

  • M

    I vaguely remember that when they originally developed latest Commodore model, the advertising said they spent 1 billion on developing the model. Was this funded by the government as well, or did they do their own R & D. If they did it themself, why do they need assistance now. If the government has been providing assistance in recent years, does this mean that they have been having problems selling enough for a while now, and they may have closed the plant a few years ago if the support was not provided. I am not sure whether the government supported the Mitsubishi 380 model. I think the government paid them large amounts of money as well, and they shut the plant down anyway.

  • Tony

    Hyundai’s biggest car factory in Korea produces 1 million vehicles a year. The recent new car factories in China and Thailand typically churns out 400,000 vehicles a year. Ford is currently on track for around 16,000 Falcons on an annualised basis – I am relying on memory and could be wrong, but the trend for the past 5 years have been downward.

    In a way, Australian car buyers have already been voting with their car buying decisions. Over 80% of new car sales are imports (YTD this year). The “local cars” are relying on fleet sales (to the government sector and to the taxi industry). If the market share of imports continue to rise to say 90%, is there any viability left for local production, even assuming there is any viability left today? Even if more taxpayers’ money are used to keep them running, where will the excess production be kept and for what purpose? The vast majority of taxpayers already buy imported cars. With current FX rates, the importers can easily reduce prices by $1,000 (on average) to lift their value for money, if they want to. With the carbon tax, the locals will be disadvantaged while the imports will be unaffected. The writing is on the wall.

  • Octavian

    It depends on how much Australians want Australia industrialised. If people do then increase import tariffs to 20%, hire some world class car designers to design five different body styles of cars, tell the workers in the factories that this is a fight for re-industrialisation to defend off the imports.

  • Spectre

    A front wheel drive Australia – can somebody fetch a bucket.

    • BoatAnchor

      So many arty-farty whiny limp-wristed manscaping metrosexuals around these days its hardly a surprise. I bet half of them couldnt even refill their windscreen washer bottle or wouldnt want to dirty their manicured hands.

  • Andrew M

    Gee I Love it when comments I get thumbed down for become true.

    Ive said many times before the Cruze wont be viable once the initial government grant runs out.
    They would have been better off just sticking with the Commodore and battling with that old stick.
    There is more profit margin on a commodore than a 20K small car.

    People said ford were dead for axing the Focus, and double dead for trying a 4cyl Falcon, and triple dead for not exporting.

    Holden will lose money on the Cruze, lose money on the export plans because of the aussie dollar, and wont gain any love from fleets which have a 4cyl only policy.

    Ford on the other hand axed the Falcon export plans when the dollar started to climb, axed the Focus plans after better evaluation and a climbing aussie dollar and have now thrown their dollar behind a 4cyl Falcon which is said to have fleets nodding along with an new LPG Falcon and Diesel Territory in one last bid for survival.

    Ford and Holden couldnt have taken any more different paths.
    Holden went for the big hoorah look at us, while Ford scaled down and went the tried and tested business path.

    That very same conservative and controlled approach worked well for Ford US during the GFC.
    Everyone laughed at Ford US pre GFC like everyone is laughing at Ford Aus pre the upcoming industry shakeup.

    Personally I hope the industry stays (tax grants or not).
    Maybe they should put another 5% on the import tariff and use that additional 750 million as the car industry purse.
    I doubt another 5% on a Hyundai getz would slow their sales

    If anyone is about to sneak out the back door I reckon it will be toyota…

    Now ill wait for the thumbs down

    • Hung Low

      Could not agree more, especially with Toyota!
      But I suspect the power is in the hand of the 3 manufacturers here if the government does not keep up the handouts.
      It is all too easy to shift their manufacturing to Thailand or China for higher profit margins, lower wages/conditions, lower taxation etc!

      I myself do not see a problem with my taxed dollar going toward sustaining the manufacturing industry in Australia, even if it runs at a loss and ask for a top up, it still will be more of an advantage than 1000′s of unemployed relying on the welfare!
      We already pay 70% of our taxed dollar on pensions why increase that?

      • bangel

        FUNG ,yep they tried that in the good old soviet union , gone and forgotten .

        Its a tough world , no room for dreams of past glories .

        We have enough wasted tax dollars now with socialist experiments .

  • John

    Thumbs up from me. I disagree in raising the tariff, but understand totally where you are coming from. At least ford is giving it a shot. The falcon is a failure but the new ecoboost might be able to give the ol girl a shot in the arm!

  • Shak

    I think that last idea is very good. Give them a deadline similar to emissions targets. If they aren’t profitable by then and cant make it on their own, then tough luck. Thats capitalism for ya. tell them that effectively if you can keep proving to the taxpayer that the projects that you are asking money for will genuinely innovate(ie EcoLPi, EV etc) then you will receive money up till this point, otherwise tough luck.

    • Andrew M

      Shak,
      I thought initially maybe they should lay down the facts and tell it how it is, but then in thinking back to the real topic. The auto industry (with funding or not) is part of our identity and it still will serve a purpose of providing jobs etc.

      If the government is really concerned about pegging back some “wasted” tax dollars than there are many other places I’d be starting first.

      If I can see them tighten the screws on other genuinely wasted money then maybe I might sing this tune, but till then, if I rate the auto industry against other strains on the government purse and base a judgement on that, Ill still back it

      The auto industry is a good strain on the purse compared to other things

      • Shak

        I never said they were a strain. Im just saying that we dont seem to have very much innovation at all in our industry. Like i said, i would love to give them taxpayer money, and therefore have them as a strain on the governments purse, but only if they are genuinely deserving of it.

  • Old Dog

    Am I happy to pay a premium to prop up foreign companies. Nope.

    Am I happy to let the government give these companies my tax dollars to subsidise research to benefit these companies to help the pay back their debts elsewhere in the world? No.

    Should these foreign companies pay our engineers out of their own pockets if they want our skills? Of course.

    Is the end nigh for holden, ford and toyota in australia? Yep

    Am I concerned about the workers in the factories. Of course.

    Is there hope? Possibly. But manufacturing costs, especially where change is frequent, is all about volume.

    What’s the answer? A new ‘australian’ car brand that receives all the dosh/fleet sales? Model sharing? Export agreements? Starting to sound like a quasi communist state.

    Sink or swim i recon, let the market decide.

  • Mick

    The government makes quite a lot of money through tax from all parts of the manufacturing, from raw materials and parts sourcing to the final product. If you actually calculate the tax generated from each vehicle manufactured (including the final sales tax and on road costs) I think people will be staggered.

    The fact is, imported cars don’t have anywhere near the amount of tax generated throughout the manufacturing of the car in their local country. A realistic approach to supporting the local industry is a 50 percent across the board (from all steps of input into the vehicle) tax cut. Thats right, 50 percent! Now that may cost the government a tidy sum of money, but without the manufacturing in the first place it will mean a whole lot less money they will be getting (including income tax)! and more pressure on centrelink, and retraining these workers for other jobs that don’t exist! or at least exist in their area.

    This 50 percent tax cut, which includes business tax cut of parts manufacturers, sales tax of these components, bsuiness tax of the factories, electricity tax cuts, etc, and also a reduction of tax implied for registration on Australian manufactured cars will lead to a signficant boost in sales – on the condition that these companies pass on say, at least 90 percent of the money saved). This will make local manufacturing more competitive for exports too, regardless of the high Australian dollar. If you look at the market, if they sell twice as many cars locally, a very easy feat with this suggestion, the government makes back all that tax money! Realistically though, across all the models (Commdore, Cruze, Falcon, Territory, Camry, Aurion), there is actually room for local production sales to more than double. More money for the government, local jobs saved, a significantly better trade balance (importing more value than we’re exporting is a common thing for Australia and its a very bad thing!), and it will make Australia competitive for export markets. If Australia manages to export an additional say, 100,000 vehicles a year, it would be a huge boost to Australia, and a drop in the ocean on a world scale so we wouldn’t really be seen as a bad threat.

    If we lose local manufacturing, you can absolutely guarantee the cost of imported cars will increase, perhaps significantly, not decrease even if there were no tariffs!

    • bangel

      Competition between importers means that prices wont rise , do you think they are going to sit done and illegally fix prices , dream on .

      Simple facts crummer and falcon too big , make/assemble smaller cars like the cruze , end of story .

      • Hung Low

        Less profit margin in small cars, more competition in small cars.
        No point increasing overheads such as staff, equipment etc to increase the production numbers to sell a greater number of small cars to make up for a smaller profit margin.

        • bangel

          Fung true if your selling crudes , but upper value small cars such as golf , lexus , focus , A3 ,etc are profitable , imports are amotised over millions not 50,000 , and i bet there is bugger all profit in a crummer , GMH profit come from its daewoo imports .

      • chook

        bungel…..just because you say something is a fact doesnt actually make it a fact . Will you hold it against me that im 6 foot 4 inches tall and so i need to actually fit in a car with the seat all the way back without my head hitting the roof . The falcon serves this well …or am i possibly a so called bogan for being tall ?

        • Phil

          Chook, if you actually went out and looked, you’d find that a large range of small cars actually have better head room than a Falcon and just as much front seat fore & aft adjustment (though with compromised rear legroom).

          • chook

            Then how can i tow and carry passengers ?. Some of us have a genuine need for what a falcon (or commodore)can do . I do also drive various smaller cars at work but they just dont feel right , and I also feel less protected in the event of getting T-boned by some drunk .

        • bangel

          Chicken iam 190cm and fit comfortably in a GTI , the snug seats might be a problen for a fat bogan , but remember my car is probably as big as a 1980 crummer inside .

          Old falcons have less protection than a late model small euro , 5 stars

    • Phil

      Toyota stopped local production of Corollas about 10 years ago. The first imported cars were priced the same as the local ones had been.
      Today a imported 1.8L Corolla is about $2000 CHEAPER than a Australian manufactured 1.8 was 10 years ago despite todays corolla being signifigantly larger and the average salary having increased by about 20%.

      New Zealand used to manufacture falcons up to the early 90s. When they stopped and began importing Falcons, there was no change in price. Today, there is no change in price either – in fact at the current exchange rate, a RRP Falcon is actually cheaper than one in Australia.

  • Jen

    Fabulous story

  • Tommy Gunn

    What needs to be ascertained is what is the true Tax payer contribution to locally manufactured cars, both at Federal & State levels. Double what your estimates are!
    Simple facts:
    Locals are less than 11% of total sales.
    Locals sales are 70%+ Fleet, Rental or Govt. (Subsidised?)
    Holden, Ford & Toyota are amongst the biggest IMPORTERS (Subsidised?)
    Nissan left Australia, sell more and employ more, the same is happening with Mitsubishi.

  • http://www.facebook.com/priusfreezone Matthew Werner

    Potectionism doesn’t work, examples in history for that. Putting up tarrifs would also be illegal under free trade agreements we have signed. R&D centres will be what is left. Manufacturing costs are too high in Australia for the vehicles we produce… if they profit margins on each vehicle like German products (Merc, Audi, etc), then things would be different

  • paulb

    The news for the local industry seems to be going from bad to worst.The market is oversupplied with vechles,at last count over 300 models available.
    Any one who drives a local vechle these days is accused of being a bogan.If Australians wont support the local industry,we will become an even larger dumping ground for prototype crappy overpriced imports.
    Hate to say it but its now inevitable the local industry will dissapear in a decade.I also believe at some future point another manufacturer will have a go in AU.

  • Tony

    Quote from media report today: “Latest sales figures for June reveal Mazda sold 4212 Mazda3, last month (up by more than 14 per cent) against 3809 Commodores (down by almost 19 per cent).

    Ford Falcon, continued its slump, dropping by more than 30 per cent last month with just 1847 sales to give it an overall ranking of 11th on the new-car sales list. So far this year, sales of Ford’s large car are down by more than 43 per cent compared with Commodore’s 9 per cent fall.”

    The trend is clear. Ford Falcon is nearing extinction.

  • Spectre

    Its possibly simpler than you think to prop up the aussie car industry. Make it law that 60% of ALL government fleet vehicles be 5 seat mono-fuel LPG powered with a range of 600 km per tank with a full size spare (underfloor)being mandatory.

    Its not discriminatory (in the first degree) – Any company may compete but it’s likely that Falcon/Commodore/Territory will be the the most suitable and possibly the only contenders and will be producing cars supremely suitable for the Australian market.

    John Cadogan, could you please tell me why this idea would not work?

  • Chris

    How Ford keep the local factory going is beyond me.

    How they can survive on a meagre 3000-3500 sales a month is the big mystery card.

    No factory is sustainable on those low sales.

  • http://caradvice bluey of toorak

    If the Falcon or Commodore were not around anymore, imports won’t become cheaper. All that will happen is that the medium to large imports will increase in order to make more room and profit margins for the booming small car market,

  • Ann Knowles

    I for one would be prepared to pay a bit more to support local industry. the ONLY reason I don’t drive a local is I do 40,000 km pa & consequently fuel economy is important, so I bought a diesel, if the Commodo had a diesel then I would be pleased to have one

    • Trouble

      Territory or Cruise Diesel? liLPG Falcon? Camry Hybrid?

  • Tommy Gunn

    The key issue is that when Holden and Ford were making hundreds of thousands of $$ their “imported” management ignored the obvious consumer trends for more compact cars. They refused to invest in the right R&D. The money left OZ.
    Should we continue to bail them out for poor management decisions?
    Put the money into creating a Research/Engineering centre of excellence in OZ to supply Thailand (Free Trade Agreement),Korea (FTA coming) and other “start-up” developing countries like China. That’s where the money should go.

  • http://CarAdvice The Salesman

    Australians are more than intelligent and skilled enough to realize a market change and adapt quickly to it, so far, we just haven’t.
    Once upon a time Australians would travel big distances by car, so we required big comfortable road cruisers. Holden and Ford were Aussie made by perceivably Aussie owned companies and therefore these companies held the monopoly and there was no end in sight of their total and complete dominance.
    So, what’s happened? The population increased and moved to cities. We don’t drive distance as much as we used to.
    If you want to go interstate it is cheaper and much quicker to fly than drive. This means you can spend more time relaxing during your holiday than driving an endless highway with board and restless children and a wife who can’t read a map (very stressful).
    Add to this cost of ownership, cost of living and you can see how the evolution and development of a new car market has come about.
    All you need to do to convince yourself this argument is true is to look at current car sale trends.
    So, why don’t we, us Aussies. Start making cars that the market wants? Simple right? Or, open our borders to immigrants to increase the population and, as apart of a “Welcome to Australia” package (offer) force them (as part of citizenship) to buy a locally made car. Presto! About 300 million should do it.
    Alternatives to car manufacture? Corn.

  • http://google chris washington

    im a small player in the car industry,have been for forty
    years ive seen it all,but $40 mill is enough.
    if detroit or anywhere else cant help.so be it.
    taxpayers shouldnt have to pay any more to this industry.
    washo.
    sydney

  • offroadbob

    Here is a novel idea: how about keep the government out of the car industry. Let consumer demand dictate who is successful, and let the industry compete for our business. Quality would improve, costs would fall. Think I do not know what I am talking about? Look at your mobile phone now and compare it against phones 5, 10, 20 years back. The same thing would work in the car business. What is your view?

    • bangel

      Those days are over iam afraid ,this is the nanny state , with the looney socialist/green party dictating to the govt .

      They will go on throwing money at the dead horse , when really the damn yanks should put up the money or get out .

      If both GM and FORD had read the market better they would have switched to smaller fuel efficient cars earlier .

      Now they go begging to govt to fix their problems , capitalists begging from socialists , what will they ask for now the $23 ton carbon tax hits them .

  • Aussie bender

    The government should slap a 10% import tariff on the Cruze if GM decide to pull the plug on local production.

  • Carter

    If falcon and commodore weren’t around anymore. why would ford gm or anyone else send anything to fit into our life style, our roads our needs ?. the fact holden ford build cars in this country for it’s people, it’s environment. means others who send or build here need to build up to or near the same spec – handling offerings that they have. once gone why would they even need to change a thing. just send it over the way they build it overseas.
    it will become i-phone. it’s built for you to fit into its style, not the other way around.

  • customer

    Hi all,

    Its good to see quite a lot of facts and political decisions being discussed. However, I think there is definitely one thing that’s being missed here….Does Holden actually manufacture all its Australian car parts in Australia. And does Chevrolet manufacture all its parts for its USA models (actually Australian brands). And few of the comments raise a talk about the government funding for the research for economical vehicles. Well if that’s the case why is it being branded differently for models supplied or exported overseas. Why is it that cars like Dodge which cost in the 20K to 30K range in USA cost about 10K more here in Australia? Dealers are the once to blame including the high costs of the Holden cars. The actual cost of a car really falls within an average Australian’s budget but the dealers profits puts these prices at a range unreachable to common Australian.

  • sequential

    Love our Aussie cars especially their space and comfort on long drives, but and its a big but, the frustration of poor customer support, shocking build quality, low resale value and their stubbon reliance on old tech engines has taken its toll. If they had both developed a twin turbo six diesel and a decent seven seater /wagon with an interior capable of staying together for more than two years they would be selling ten fold now.
    Instead they still provide appalling build quality, pathetic customer care and dinosaur engines.
    Look at the not so new Territory Diesel an old tech 2.7 lt from the old L/R Disco 3, hardly stunning stuff and it looks no different to the last model.
    Yep a turbo diesel Commodore or Falcon now wouldn’t that be nice.