Rudd announces $6bn bailout plan
November 10, 2008 by George Skentzos
Prime Minister Kevin Rudd has today announced a bailout plan for the Australian automotive manufacturing industry worth $6.2 billion, based on results from a federal inquiry led by former Victorian premier Steve Bracks.
This follows confirmation that the Government would reduce car tariffs to 5 percent in 2010 under a new 10-year plan for the industry, with many critics labelling the bailout as compensation merely aimed at delaying the inevitable.
The plan incorporates incentive for local industry to develop more fuel efficient vehicles, with $1.3 billion going towards the development of energy efficient cars.
This is a figure just shy of Holden’s highly marketed “billion-dollar baby” development costs for the VE Commodore – effectively acting as a Government-funded mulligan for poor local industry foresight.
Mr Rudd shunned warnings from the Coalition that the Government should postpone its decision until President-elect Barack Obama reveals his own plans for the dwindling US car giants.
Clive Matthew-Wilson, editor of the car buyers’ Dog & Lemon Guide, says that unless Australia is prepared to block all imported cars, our industry is doomed.
“While I sympathise with the workers and businesses who rely on the car assembly to survive, the government’s package is simply corporate welfare that will not save the industry.”
As much as we all like to believe that Holden and Ford are Australian, the fact remains their future rests with their American parents who have not made a full-year profit since 2004 and 2005 respectively.
“The U.S. government will rescue Ford & General Motors because it has no choice. However, as part of their rescue package the U.S. government will almost certainly force Ford & General Motors to dispose of their unprofitable overseas assembly plants. The Australian Ford & General Motors plants will be near the top of the list for closure.”
The looming threat of substantial job loss closer to home has allegedly forced Mr Rudd’s hand in the matter; however Matthew-Wilson tepidly suggests the bailout fund would be put to much better use if applied directly to the affected workers.
“If the Australian government simply shared the $6billion among the affected car workers, these workers could pay off their mortgages or perhaps start small businesses. At least that way the money wouldn’t be wasted. As things stand, the government’s $6billion will do nothing but fill the coffers of a few multinational corporations, while doing nothing to solve the underlying problems.”
While we are certainly a patriotic bunch, perhaps it is time to accept the fact that a Government-funded and American-owned automotive industry is never going to be a positive influence on our economy.
Print it: 
u forgot to mention Toyota will be lining up for their share of the cake too for the Hybrid Camry developed in Japan and assembled here.
Perhaps we should emulate the Japanese and only buy locally designed locally built vehicles. Apparently Hyundai are having a hard time selling anything in Japan because of this patriotism.
“Clive Matthew-Wilson, editor of the car buyers’ Dog & Lemon Guide, says that unless Australia is prepared to block all imported cars, our industry is doomed.”
Possibly the most ridiculous quote i have ever read. Perhaps Mr Dog & Lemon should have a quick look at those cars that were built in countries that blocked imported competition… Trabbants, Ladas even up until recently Protons in Malaysia. Hardly a ringing endorsement for protectionism.
The woes of Ford and Holden at the moment are more due to the ailing health of their US parents and lack of foresight in predicting what higher oil prices would do to the demand for large 6 & 8 cylinder cars, rather than the effects of competition.
Dlr1, I think his statement is more rhetorical – implying that our industry is essentially doomed.
To Realcars
Patriotism? That is totally wrong. We love European cars and buy them big numbers each year.
There are more than 10 auto mobile company in Japan.
We just don’t need crap. Design like bad copy of Japan/European maker. No significant technology advance in their engin, transmission and drive train.
Their is no reason to buy Hyundai, it is not Patriotism.
By the way, it is not just recent years. They never ever sale well in Japan. They sale under 2000 cars each year (not month) in Japan.
Talking about Australia….
Do we really need V8?
Stop making V8 locally (or large capacity non efficient engines) and import corvette and sale them cheaper.
Problem solved.
Even stop silly V8 race and bring European DTM. That’s exciting !!!
And
The Commodore and Falcon have no future. If the Govt was sensible it would stop buying them. They don’t make sense.
Some bozo will come up with the line that we need a big car for a big country, bollocks.
It is a terrible waste of money. Ford and Holden don’t deserve to be bailed out. They arrogantly continue to build large fuel guzzling cars when, for years, the market has been moving in the other direction. Rudd gets kicks out of wasting our money I think.
“Perhaps we should emulate the Japanese and only buy locally designed locally built vehicles. Apparently Hyundai are having a hard time selling anything in Japan because of this patriotism.”
In Japan, they prefer European cars like Mercedes, BMW, and Audi. They only buy locally made cars because they’re dirt cheap over there.
Hyundai doesn’t sell because it’s seen as not being as good quality as local cars.
Do you guys think before you speak.
Falcon and Commodore dont really use that much more fuel then a smaller car (Camry, Mondeo)and thats not including the LPG cars that both of these manufactures make.(these cars cost less to run then a Corolla or Focus sizes car).
Every one keeps forgetting at least Ford are going to start building Focus here soon and im sure others will follow, so please stop with the Falcon/Commodore bashing.
Plus if our industry goes we will more than likely have to put up with some U.S crap made cars.
Realcars..
Its quiet obvious you are enamoured by Hyundai.
Hyundai has no doubt improved as a manufacturer, but in no way near a threath. In a few people’s mind they seem to be a threath, but to the insiders and experts, Hyundai has a long way to go to even compete in the top 5 big manufacturers and the gap between top 3 and 4th is massive.
Now back to this,
This is GREAT for the industry, yes Ford and Holden basically gets a 5 year cushion so that they can adjust to the rest, but me thinks the “bail out” is redundant unless both manufacturers make huge changes now. Yes, of couse Toyota will get a piece of it. If Toyota can secure a fully australian designed hybrid or a small car due to this “bail out” then it secures thousands of manufacturing employees… WHO ARE AUSTRALIANS!.
Some people here think, that Toyota Camry and Aurion are built by robots, when in fact Toyota employs as much if not more than Ford and Holden in their manufacturing sectors.
Public money for private company bailouts is simply wrong. Taxpayers do not pay taxes to support the private sector. Car companies should have strategies in place to ensure their own viability just like everyone else. That money would go a long way to assist public health, education and water resources in this country, but no we have to bailout an industry so hell bent on persisting with grossly over consuming technology. The SA government with Japan bailed Mitsubishi just so it could keep its doors open in 2003 to build a car we didn’t want. If MMC had its way, MMAL’s manufacturing would have closed back in 2001 but MMAL persuaded MMC to keep going.
Then there’s the ABC child care centres……………………..
And in Japan, Hyundai do not sell because quiet frankly, as someone stated, Japanese cars are cheap, and higher quality in comparison to the rest of the world.
A Subaru WRX STi is approximately 70% of the price we pay here. A Toyota Blade or Yaris around 60% of the price we pay here also…. you get the picture. So why not?
And Euros are relatively cheap too, they “love” euro cars there believe it or not.
This new “plan” by K Rudd makes me sick. How does this help out the taxpayer? What should have been done in my humble opinion is that the 6 billion dollars should have been used to help the general public buy more fuel efficient cars. For example, people who own older cars (say more than 5 years) should have been given a cash incentive to upgrade to a newer fuel efficient car. I’m not talking about $50 off but more like 20% of the cars price. If this scheme was limited to Ford and Holden, surely they would make enough money to start funding development in other areas as well. So instead of just giving a ‘hand out’ to the car manufactures, the everyday motorists might have gotten something worthwhile out of it.
Who comes up with these ideas anyway?
Isn’t the local car industry a multi-billion dollar a year industry for Australia, that’s reason enough to save, and also the need for Aussie jobs, and Aussie pride i don’t know about you but i would rather drive a Commodore, Falcon or Aurion over any import, for the simple reason they are developed and built in Australia.
The 6 billion will ensure that we as Australia are able to keep manufacturing cars, because once we loose that ability we will never get it back, and if and when that happens it will be a sad day for all of Australia.
Only about a dozen countries in the world have the prized capacity to design and build a motor-vehicle so it makes sense for the government to fight to keep what we have but surely it would have made more sense for the government to have just bought out GMH and Ford Australia. Both parent companies seem to be in dire need of the cash. Both Ford and Holden are losing out because they continue to design and manufacture out of fashion gas guzzling large cars and why would their parent companies fund the development of an Australian designed small car when they have similar projects under development in Europe and America? If the government purchased a majority share in Holden and Ford, both companies would have the freedom to design, construct and export vehicles to suit current market trends while FMC and GM could continue to sell componants and parts to both companies. Its win-win.
Basically the crux of this whole situation is that millions of Australians have to pay ridiculously inflated prices for cars so we can keep thousands (a significant number I agree) of Australians employed in an nonviable industry. However realism is not always politically popular and thus we have the situation we are in. You cannot criticise Rudd for doing what he did he has elections to think about. The real way to sell it is to make people choose. Tell them that there will be tax cuts for low income earners or a 6 billion bailout for the auto industry. Have a plebiscite and see what happens. It will never happen but man it would be interesting if it did.
^andrew, I agree the industry here is worth worrying about but surely you realise that they, the car companies must be able to sustain their own development and not use the public purse. THEY ARE PRIVATE COMPANIES. To make the required changes to our car industry it will likely cost 4 or 5 times the bailout figure to fully develop and implement new strategies, technologies and infrastructure so its only a band aid. That planning should have begun to emerge 5 or more years ago as far as holden or ford are concerned. It’s only Toyota that seem to be having a crack at here and that’s because of Toyota in Japan. These companies have had years to consider and introduce future thinking but it’s easier to just keep going down the same old road.
It’s not fair that you & I as taxpayers should form part of the fallback measure when car company’s management make the wrong or no decisions at all. Like everything in life, you make your own choices so stand by them and don’t expect to be bailed out if & when it suits.
The old ‘ we have no plans so nothing can wrong’ doesn’t work.
PAUL,
SPOT ON!!!TO ALL THE SAM’S AND SAMR’S IN THE BLOG,PICTURE THIS-YOU ARE 6″4′ TALL WITH 3 TEENAGE KIDS 6″ TALL AND GROWING.WHAT THE HELL DO YOU BUY FOR 30 GRAND THAT FITS YOUR FAMILY.I MEAN,,,WAKE UP!!!BIG CARS SELL FOR A REASON,ITS NOT JUST FUEL GUZZLING IDIOTS THAT BUY THEM.YOU STICK TO YOUR SARDINE CANS,RACK OFF…
I’m all for local manufacturing, however I’m not sure whether this bailout plan is going to be enough.
With Australia being such a small market and with Ford and GM probably wanting to reduce and consolidate their activities, they might be forced to pull out anyway. Hopefully instead of simply closing down shop they might be able to sell off the operations and licences to build these cars to another company.
Just last night GM shares plummetted 23% in 1 day after deutsche bank cut their 12 month price target to zero. Other major international capital companies reduced the target to $1. I’m reading in the paper that even if they do get a cash injection from the US government it may only be enough to keep them afloat in the short term.
Also interesting to see that about 75% of those surveyed on ninemsn (80000, a fair sample size) seem to be against the local car manufacturers getting subsidies.
I wonder if these current events is going to pave the way for chinese cars to be the next big thing (though big doesnt necessarily equate to good). Now is probably the perfect time for chinese car companies to start pushing their products overseas.
It would be interesting to see your thought once you have read the whole package, not just a condensed press release version.
If I may be permitted to lay a few different sides of Government funding, and why this sector is important.
Firstly, can anyone tell me any Australian industry that doesn’t get government funding, hand outs, tax consessions etc? Farmers, minning conglomerates, Tourism, Medical all get grants to develop, Tax concessions and Handouts when things go bad (aka Droughts & floods and terrorism). So why the distress over the Autom otive section. Ask your local member to tell you how much Rio Tinto gets in Research Grants and Tax Concessions.
Secondly, this package is actually a very small package spread out over a ten year period, and the monies going directly to the manufacturers is even smaller. The package includes a doubling of the LPG rebate, funding for training and education, and a large slice is directly linked to the green car project (without identifyiong what desegnates a green car).
Thirdly, reading the Anti Australian, and Ford & Holden sentiments simply shows how many people really aren’t aware of what has happened in the industry. To say that the manufacturers haven’t got the Forsight is complete foolishness as 5 years ago NO ONE was forcasting the level of fuel price increases witnessed over the last 48 months. Secondly, NO One forcasted the Goevernments shift in policy to go to 4cyl fleet. Considering the Fleet was predominately 6 cyl Falcodores, hence the reasoning behind the Avalon & Aurion, then in one swift flick of a beaurocrates pen, that 30+ years worth of market was stopped.
Forthly,Fuel efficiency?? 10 years ago 10.7l/100 was the realm of Camry and Bluebird and 626. Now the least frugal Aussie 6 returns that! Oh and those mid sizers are returning 8.5> 9.5 so where’s the development? Also in that period, the safety levels of those same vehicles has NOT outstripped the Falcomocamrion, nor has the performance comfort or price. Considering that they are line ball in pricing, or dearer.
Kinetic, the only problem with giving rebates or cash in hand to the consumer is the prices of the goods immediately go up. Witness the housing market, it had an immediate increase as people had more money to spend. Same can be said with the LPG scheme. after market LPG systems went from $2800/ $3200 to $4800 / $6275. So even with the rebate people still found it expensive.
As for the reduction of Tarrifs, this globalised Market and level playing field is a furffy thought up by a previuos treasurer tha became a PM. I just love the level playing field we have with Thailand, most of the pickups on sale here and Honda’s come here without Tarrifs, but if we send a Camry Aurion Falcon or Commodore over there they get hit with the equivalent of 80% tax. And notice that none of those vehicles comming in are actually Thai companies? They are all foreign companies laughing at the stupidity of Australia. These campanies are based in countries that have Tarrifs far exceeding the lowly 5% we are gunning for, Why? to protect their industry. The money gained from the Tarrifs (in most circumstances) goes back into government bolstering of that industry not the internal black hole that our mob seem to want to keep feeding.
Anyway, that’s my rant for the day, I know that a large percentage of you will say I haven’t got a clue, but I rest easy in the fact that there are those who will read and agree.
Holden hasn’t made a profit in 5 years, yes they have spent a money on capital investment, so has Toyota and Ford, Toyota is returning profits, and I believe Ford has returned profits in 4 of the last 5 years. It’s the little things like planning that matter most.
So the VE is the number 1 seller in OZ. That’s great, and Holden is still losing money, yup that makes sense, you see this is what happens when apply a fleet discount to 87% of your sales, you don’t make full margin, in short, you struggle.
We just had 2 amazing years of car sales, AS SOON as things change we have to give a couple of billion to Holden and Ford, why, well, Holden just doesn’t make any money, even with their precious exports, not even in GOOD TIMES.
10 years ago there were 110,000 people directly employed in this industry, now there is 60,000 and that is reducing all the time, even as we type. The world wont end if Holden and Ford stop producing in OZ, it will just move on, to a self sustainable option I suspect. This is not a dying industry, the strong and profitable will survive, the others can not and should not survive by way of taxpayer dollars, its no longer the 1950’s, what exactly have they learned in 50 years…not much apart from asking for help.
Finally GM and Ford are insolvent, lets face it, after they receive a USA federal bailout all non profitable segments will be killed of…guess who that includes..
OZ cannot sustain 3 producers, the 380 is gone and its sales being absorbed by the other 3, still struggling are they not..
Frontman, how many billions of dollars have been given to this industry in the last 40 years? Can we count that high :)
Its not the industry that is dying, its GM and Ford, its time they started paying for their own mistakes, instead of us.
This bailout, won’t fix the Ford or Holden dealer networks, or the two companies attitudes to customer service. So in the end its all wasted.
Sure, in a free, open market public funds shouldn’t be used to subside anything. But in reality, the bulk of all the industries in Australia receive some sort of concession. The construction industry is artificially supported by the First Home Buyers grant and tax concessions, Private Health through government rebates, Banks are protected under the four-pillars policy and now deposits are guaranteed by taxpayers. Where is the outrage in these instances??
It seems the auto industry seems to be everyone’s favourite scapegoat.
Fact is, the Auto industry employs between 60,000 and 70,000 people, that is the equivalent of 2 of the major banks, or Telstra, or Woolies. Make no mistake, if the industry goes down it will have major social implications.
As an industry: the benefit to the wider Australian community dwarfs any subsides it receives:
“Carr notes that since 2001 the industry has received $3.8 billion in subsidies, but spent 10 times that amount on plant and equipment, R&D, wages and salaries, and taxes. In 2004-05 alone, it bought $8 billion of supplies from the services sector, produced cars worth $9 billion and generated $5 billion of exports. ”
The industry contains some of the strongest engineering capacity in the country, of which most of the other industries feed from. The Auto industry spends the most out of any industry in Australia on R&D – something like triple the amount of the next nearest. It was stated, Australia is one of only 15 countries in the world that can design, validate & mass manufacture vehicles in the world – for a leading edge industry – believe it or not we have some of the best capabilities in the world.
Lastly, just about every other country receives support in some form from their governments to support the Auto industry. The US does, Japan does, Europe does – why not here? Even the cheap labour countries protect the industry. Thailand – have a FTA with Australia which companies like Toyota and Honda utilise to bring cars into Australia tariff free, but yet to export the other way Australian cars are slugged with a number of ‘hidden’ taxes and fees which mean they are uncompetitive price wise over there.
People should get behind the industry, sure management have mad mistakes by not adjusting to changed market conditions. But in their defence, the fact is, one bad decision could cost and risk the collapse of any of the company’s locally. In that environment, management have chosen to be conservative and build what they know – rather then taking the risk on a product gamble (ie. spending huge amounts of dollars to develop a new but risky vehicle model) which could spell the end of the company if it were to fail. Such incentives announced by the government yesterday, gives the company more freedom (less risk) to do exactly that – and that is to design, develop and build innovative new cars!
Silky, there has been far less money given to the Auto industry than to the Mining and Agricultural industries in the same period. Whats more, again you chose to to ignore Toyota in your lambasting of the local industry, why is this? Toyota have invested far less into the industry in Australia over the last 10 years (or 40 years if you want to go back that far), spend far less on design and developement than the other two, essentially retuning suspension on a product does not constitue massive design and developement dollars. Where does it’s profit go? seeing as everyone is so much against the American’s taking profit?
Australia can / must sustain 3 manufacturers, whether you chose to admit it or not, Automotive manufacture is Vital to a developed country. (I really don’t have time to go into the explanation why today but just try to think for yourselves.)
Australia, in particular builds pretty much nothing else on a major scale, and this alone is why it is important. When China, India and Korea start to feel the down turn in weestern consumerism as the Global recession hits, what happens to our balance of trade as the call for minerals falls away and we are forced (due to lack of our own industry) to import more and more??
Don’t agree? Have a look at any other mineral rich country that doesn’t have a manufacutring base. Seriously, even the oil barrens have been in talks with their respective governments looking for assistance as demand has fallen over the last 4 months.
Toyota’s footprint in Australia is just as large as GM/Holden & Ford.
In term’s of manufacturing cabacity, they rival Holden as the largest by capacity, they annually produce something like 120,000 vehicles, in comparison Ford did around 50,000 this year (at reduced capacity).
Yes, Toyota Australia do only small engineering/development changes to global platforms, but remember Toyota’s development is much more global then GM/Ford.
Most people also forget about the Toyota Technical Centre (in Clayton, Melbourne) – which is seperate to TMAC. TTC Australia is one of only 5 (i think?) major development centres in the Toyota world, it employs hundreds of engineers that directly develop advanced models/tech that go into Toyota’s global platforms. For instance they are heavily involved in development of software and systems going into the next generation of Hybrid power-trains. To say Toyota’s development and design capabilty in Australia is just retuning suspension is a very large understatement of the development work they do.
Frontman, I seriously doubt that any industry has received more money that the vehicle industry.
If Toyota can’t sustain operations, same for them. But Toyota is returning profits, the company’s OZ operations are self sustainable.
Frontman, sure the entire industry is going through difficulties, but we just had 2 great years of sales and yet they are begging already. If the cost of engineering and design cannot be recovered..tone it down, do the math, do a new business plant that leads to profits not losses albeit with good engineering, whats the point..
For the record frontman, I’m not against the Americans taking profits, there have been none to take :)
I repeats, its not the industry that is dying, its GM and Ford.
“plan” not plant, oops
I totally agree with you Eveready – nice to see some logical foresight and fore thought in relation to this topic which has been discussed on this site several times.
People seem to think that the Auto industry doesn’t contribute that much to the economy.. that if/when it goes that their jobs in other industries such as finance retail tourism construction etc won’t be affected or lost.
They also think that when tariffs are reduced to 5% or 0% cars will become cheaper.. when whats more likely is that prices will remain the same if not increase because believe it or not car companies are in the business of making money making profits.
If/when the local car industry disappears we will be held to ransom by the overseas companies who will be able to name their price as we will have no other local alternative option. They have something we want – cars.. and will be able to charge a “premium” for em
Mind you as a considerable number of Aussies will be reliant on centrelink as a result of losing their jobs – [a subsequent result of the Auto industry going] there won’t be that many people who are able to afford a new car or second hand one.. not to mention running or repairing a car
“If/when the local car industry disappears we will be held to ransom by the overseas companies who will be able to name their price as we will have no other local alternative option. They have something we want – cars.. and will be able to charge a “premium” for em”
Gee have you ever heard of the concept of competition, there will be no “premiums”.
In fact due to tariffs its the OZ produced cars we have paid premiums for, and for decades.
These other affected industries are not sustained by the vehicle segment, they are directly sustained by our tax dollars which support the vehicle segment. Its not the industry that is dying its GM and Ford, don’t you get it?
Eveready, I totally agree with your comments regards TTC, it’s successful charters such as updating the Camry platform to make it stronger and better suited to TAC’s market place etc. and yes I do understand their development costs.
But don’t forget that Ford Australia is also the Design centre for the Pacific Rim. Having done total design of such vehicles as the Fiesta Sedan for India and the T6 ranger replacement as well as Control blade independant supension. GM commissioned Holden to do the ZETA platform and the Alloytech engine that were so well recieved throughout the world up until the US changed the Cafe rules and they became too heavy or not efficient enough. All centres are regarded as at the top of their game.
It is this sought of stuff that makes me laugh when we read that the Australian Dinosaurs are so far off their game etc etc.
WVB: i do agree that we shouldn’t have to bail them out, but i would rather do it once, then to lose the industry all together.
But is Toyota not doing good here because their parent company is doing so well?
Also another thing that slightly annoys me about this is how Toyota got a big slice of the green car fund , to develop their hybrid, when in reality there isn’t much required for them to do besides locally tune it and drop some new gear in their factory. It annoys me they they always cry poor, Holden and Ford get it all.
It will just be a real shame to see any of the manufactures disappear , as Mitsu did.
Andrew, I’m going to go out on a limb here and say something that I’ll really get howled down for, but look at the recent history. Toyota say they will pull out of Aust if tarrifs go below 10%. within a couple of months Toyota claim it was a missunderstanding and then a month later Vic govt gives Toyota a nice little handshake. This is followed up by exactly the same amount within the next week by our PM whilst visiting the factory in Japan………
Now I’m not much on conspiricy theories but history says…
“WVB: i do agree that we shouldn’t have to bail them out, but i would rather do it once, then to lose the industry all together.”
Andrew what do you mean once? We have been bailing these guys out for decades, tariffs, loans, they just can’t get it right, and why should they when they know the good ole taxpayers will continue funding them.
Toyota has shown you can make cars in OZ and make a dollar. Its not the industry that’s dying its GM and Ford.
“It was reported earlier today that GM shares in the United States are very likely to have no value whatsoever within a short period. And I daresay most people are well aware that GM and Ford in the United States will actually run out of funds within the early part of 2009 and be unable to pay salaries and other costs! Both companies are already laying off thousands of staff and cutting production levels”
It is madness to give them anything.
Silky (and others) Toyota manufacturing are only profitable because R&D costs are NOT applied to thier bottom line. As Eveready stated, that is quite seperate. Ford & holden add those R&D costs to their bottom lines, withou which, both companies operate at a profit.
To date the biggest chunk of the “green” fund has been swalloed up by Toyota, for a bit of factory re-tooling to build another OS developed product. That is just corporate “incentives” at work – Toyota has ‘em bluffed.
So much abuse – but so few facts.
Fact One.
If we are being ripped off here for our cars then consider that the French top seller, the Peugeot 207 sells there for EUR. 16,950 for a 1.4 HDI manual, which at today’s rate is A$32,249. In the UK the Ford Focus Zetec 1.6 manual hatch sells for STG 15,845 which is A$ 37,024. Still feeling ripped off?
Fact two.
As someone has pointed out the package is over several years and includes some funds already allocated, so it may not be so much especially in the light of
Fact three.
The car companies get a dollar only if they spend three themselves. They don’t invest – we don’t pay
Fact four.
At the moment we earn a lot of money exporting cars to the one part of the world where they dont worry about petrol cost – the Gulf. Granted this may not last long term but at the moment it is profitable for the manufacturers so why wouldn’t they continue with it for a while.
Fact five.
One of the reasons the US industry has tanked is because potential buyers can’t get credit, just like dealers here can no longer get GMAC or GE floor plan cover.
My two cents worth, for what it is worth, is that nothing would concentrate the mind of the three local manufacturers like a declaration that from some date not too far away – end 2009? – the government and its agencies would only purchase cars and light vans which will get better than say 7 litres per 100km and state and public instrumentalities would only get tax exemption on similar cars. Watch the scramble to produce Falcodores that meet that limit. For those who say that they cannot do this – think that a BMW 520I escapes luxury tax for just that reason.
Brett the costs are reported within the Toyota group, they don’t disappear as such and do reduce profits for parent company. Its just how Toyota have structured their financial and costing arrangements.
In Holden and Fords case it how they have structured theirs, no matter, both parent companies have balance sheets with billions and billions of dollars in liabilities over assets. They are insolvent.
Toyota doesn’t have them bluffed, they merely had a product which qualifies the company for the green fund proceeds. If Holden or Ford had a product they would also qualify…do they have a product, Holden’s latest fuel saving epiphany was to reduce the power of their motors, guess that does not qualify huh?
onepoppa I don’t buy my cars in europe so fact 1 has no relevance.
Fact 2 well the handout pretty much contra’s the tariff reduction to come into effect in 2010(?), so whats the point of future tariff reductions.
Fact 3 is both parent companies are insolvent, so where does the 3 dollars come from? I suspect these monies will end up in consolidated revenues..
Fact 4 is kinda odd as it implies that the middle east is the only profitable market for Holden, exactly how many do they import their? Answer – not enough
Fact 5 sums it up, nobody will fund them :)well apart from the OZ taxpayers :(
Silky,
no they don’t just dissapear, they are ammortised to where they belong – and that is not towards the small numbers of locally made Toyotas sold here.
Ford Australia have to cover the entire development costs of Falcon & Territory.
Likewise Holden footed the majority of the Commodore with GM contibuting funding for the Zeta platform.
Toyota Australia add development costs of what? A new bumper and bonnet on a US spec V6 Camry. The developement dollars do not compare. If Toyota Aus do R&D work for another arm, it doesn’t cost the profitabillity of Aus operations, it IS externally funded.
Keep spinning Silky, you MAY just convince a few.
I think that now might be a good time to get some shares in Ford.
Their share price has taken a pummelling, however if (as everyone predicts) GM is wound up, Ford would be able to snap up much of the vehicle sales, particularly in USA?
So perhaps if Ford can weather the storm they will be able to survive.
Brett you pretty much answered your own question there, Toyota development costs are not substantial therefore the amortization is not significant. Could it be, I just wonder, could it be that Toyota has a plan, you know, like how many units they will sell compared to development costs and required profits :) You know, stuff like budgets..LOL
Its not how much the development costs will be, its how you will recover those and how much money you will make, you seem to want to wear development costs like a badge of honour, sorry Brett, if you don’t plan properly they will just put you out of business. And for these 2 producers, they probably will.
As an aside lets now go into some more interesting financial detail, Toyota reported that 242 million dollar profit even though 66% of its Altona operations output…in a year where the Oz dollar has been sooo high.
How was that for spin Brett, budgeting, planning, export and exchange rates, I just reckon Toyota kno how to use these models a lot better.
“…must be exported..” oops1
Interesting anti spam = DATSUN>>>
Silky, the fact that so many here are bleeting about being overcaherged for their cars because of Tarrifs is what onepapa was simply pointing out. If you are to say taht you are being overcharged, then say that the equivelant vehicles priced over seas is irrelevant, it kind of make that commen illogical.
Your comment on fact 2 is actually correct. And it is what the 3 manufacturers have been arguing with the Government about!
Your comment on Fact 4 is also the only major market for Toyota’s Camry, so again relevance is there as I saw no mention of brand in the preceeding comment.
For Toyota having the ability to put it’s R&D into one global basket and building the same vehicle around the world allows it’s individual outlets to be profitable. TTC is part of a Global expense budget not out of the TAC budget. Kinda like a certain state government that had (not exact figures) 2 Bill surplus but no new Hospitals or Dams or anything, as well as 4.9 bill in loans. You are right, it is all in the reporting.
Sigh..Frontman, Toyota has billions in reserves unlike 2 other soon to be defunct companies I could name. Its not in the reporting, its in the bottom line, NET INCOME & NET ASSETS. Its also about knowing your market, costing, planning and monitoring of same. Its also about good and prudent management.
Listen Frontman, within a year Holden and most likely Ford Oz will be on the market, the question is, who is going to buy them? The answer is, nobody.
You guys are taking this too personal, I have said repeatedly our industry isn’t dying, its GM and Ford. For god’s sake what don’t you understand about that statement.
Dear JEYKL & HYDE,
Buy KIA CARNIVAL or similar…
And please, please learn how to type lower case.
To all who bag the local car industry, can I ask how are we are going to pay for the additional imports? Balance of Trade. Further, to reduce our industrial base how do we have any developing technology?
Silky I’ll take you up on that ["within a year Holden and most likely Ford Oz will be on the market, the question is, who is going to buy them? The answer is, nobody."]
Let’s make I’ll ante up acarto of your favourite versus a 6 pack of James Squire…….
Yes Toyota has billions in reserve, but they themselves will not remain a manufacturer in country that has no protection, and even MR07 is smart enough to realise that. Neither of the three will be “on the Market” Ford will not sell off a Ford brand! They may consider changing platforms, but you overlook the fact that Ford Aus in head of Asia Pacific. GM could not afford to lose GM-H as that is too tightly entwined with GM-DAT.
It is also interesting that everyone continues to be down on Ford, yet it is the only Major Franchise in Australia this year to have had continued growth. Albeit down on where they wanted to be, but then in a shrinking market with a massive slice of it’s core business (Govt. Fleet) taken away, it is still showing growth.
We need a local car industry to keep the importers honest. We need the imports to keep the local guys up to speed in the value and technology stakes, too.
I agree that Toyota are the benchmark locally for manufacturing, but that is pretty much the case everywhere in the world. We all have to admit Toyota have the manufacturing process nailed down to an art form, producing cars at a low cost and with quality. Ford have been trying to go down the Toyota TPS principle path, and have been getting improved results – changing things like this are not only major business process changes but massive cultural ones as well – it will take time but I hope Ford & Holden get there eventually because they DO design and build some of the best large sedans in the world!
But back to the topic,
Most people under estimate how ‘linked’ the manufacturing operations are in Australia. If either 1 or 2 of the 3 remaining manufacturers goes down, the remaining company(s) will definately feel the impact. Don’t forget, Toyota, Ford & Holden all basically share the same exact Tier 1 component suppliers, and many many more of the smaller suppliers. They rely on the same engineering companies to conduct plant upgrades, build new facilities and the same services companies to frieght stock etc. to continue there operations. The loss of one of the manufactuerers, will mean reduced volume @ the suppliers and engineering companies, reduced volumes means reduction in scale, which leads to increased costs that will eventually be passed onto the remaining manufacturers.
I suspect 2 local manufacturers is the absolute minimum to generate the critical mass of volume to make vehicle production in Australia competitive?
I’m not in favour of my tax money going to car maker salvation packages, they should have contingencies in place years ago to keep themselves viable. I can’t see Mr Rudd giving my company a bailout nor do I think I should ask for one. My employees and I either can do it… or we can’t. If we can’t… bye bye.
I’d consider a bailout it if the makers were to equally invest in the customers that actually bought vehicles from them by offering a discounted service / spare parts / value proposition that was supported by the company, and not like the blatant rip off in sales and service that occurs today. Something like 40% lower service / parts pricing over the car warranty period. It may encourage them to use my funds wisely and have them build better cars better.