Goodbye GM, hello Rudd Car

[Sprint XR8]

Oliver Hartwich | March 17, 2009
Article from: The Australian
http://www.theaustralian.news.com.au...1-7583,00.html
IT was meant to be a bold statement in troubled times when Prime Minister Kevin Rudd and Industry Minister Kim Carr launched their New Car Plan for a Greener Future last November. The Government hailed the decision to provide $6.2 billion to the Australian car industry as "the most comprehensive plan ever devised for this vital sector of our economy". Their plan was designed to cover the industry until 2020. Only four months later, it is obsolete and dangerous.

The plan did not make sense when it was launched and makes even less sense now. It should have been obvious that the Australian car industry was facing existential difficulties. German newspapers were already discussing the end of General Motors' Opel and Vauxhall when Rudd was presenting his grand car plan.

It is odd, to say the least, to exclude petrol from the planned emissions trading system while trying to make transport greener by giving subsidies to domestic car producers. You don't have to be Einstein to realise this amounts to nothing but old-fashioned protectionism hiding behind a green smokescreen.

The Government has a far easier option to make us drive more fuel-efficient cars. Instead of paying GM Holden or Toyota Australia to develop four-cylinder or hybrid engines, simply scrapping import duties and abolishing the luxury car tax (which strangely sets in at about the price of a European premium sedan) would make Australians think twice before buying a thirsty Holden Commodore rather than a more fuel-efficient BMW, Mercedes or Honda.

The drama surrounding Holden's US parent, GM, makes the Government's plan look ridiculous. What's the point in planning the long-term future of a sector when one of the biggest players may go under next week?

When they launched their car plan last year, Rudd and Carr emphasised how important car manufacturing was to Australia. Rudd declared only about 15 nations in the world today could create a car from scratch, and Australia had to be one of them.

With such naive political backing the troubles of GM will be an enormous challenge not only for Holden but for the Government.

European politicians were far quicker to realise a GM insolvency would render their local GM subsidiaries unviable. In Germany and Britain, the homes of GM's Opel and Vauxhall, they feared a collapse of GM would lead to the collapse of the local car industry.

For months German and British politicians, trade unionists and car workers have been desperately trying to find a way to separate their companies from the moribund GM, only to discover that this is close to impossible. Not only do their cars share technologies and platforms with other GM companies but even the patents developed in Germany for Opel have been transferred to a US company, which in turn used them as collateral for the US Government's emergency loans to GM. So the taxpayer subsidies Rudd is giving Holden may end up in the coffers of its ailing parent in Detroit.

This leads to the next problem, the role of the US Government in GM's future. When the US Government agreed to provide emergency funding, the 294-page legal document outlining the terms and conditions contained a clause that in effect put the US Government in charge of GM's strategic policy. It says any transaction in excess of $US100 million ($152 million) must be approved by President Barack Obama. Moreover, in its restructuring plan, GM states that without Australian taxpayer support the company will quit the Australian market. So the fate of Holden must be on the agenda when Rudd meets Obama in Washington next week.

GM's auditors have raised substantial doubt about the company's ability to continue as a going concern. An insolvency would almost inevitably trigger the liquidation of GM's foreign assets, including Vauxhall, Opel and Holden. But it is unlikely that in the present economic climate -- with global excess capacity in car manufacturing estimated at 20 to 30per cent -- a private investor would be brave enough to buy these failing companies. And if Vauxhall and Opel are too small to survive as independent entities, then Holden won't succeed either.

When Rudd finally realises the dire straits Holden is in, he will probably nationalise it faster than you can say Commodore. So, after the Rudd Bank prepare for the Rudd Car. Then, just like their European counterparts, Rudd and Carr will find themselves in difficult negotiations with GM to do a deal that will depend on Obama's approval.

Committing $100,000 of taxpayer money to saving each job in the car industry was already a prodigious waste of money but this will look cheap compared with the cost of nationalising Holden. In time, Australians will come to rue the day Rudd decided to treat the car industry as an issue of systemic significance.

Oliver Hartwich is a research fellow at the Centre for Independent Studies. His paper No Particular Place To Go: The Federal Government's Ill-Conceived Support for the Australian Car Industry is published by CIS today.

[plext]

Oliver Hartwich is also a German and surprise, surprise, continually banging on about how much more efficient BMW, Audi/VW and Mercedes are, he's done it in the past and will continue to do so. To see him do it again here astonishes me not at all.

One must question just how "independent" this Centre for Independent Studies really is. Personally, I take anything he spouts as Goebbelesque at very best.

[XR Martin]

Removing import duties and LCT? Australia has the Worlds lowest automotive taxing for a country with its own Auto industry....

[Iggypoppin']

Biff. another blow.
and just where does Ford feature in this? I have been led to believe ford is well placed to ride out this storm(not without casualties but without a bankruptcy!) Note: no money borrowed thus far....

[Sprint XR8]

With No Particular Place to Go: The Federal Government's
Ill-Conceived Support for the Australian Car Industry
http://www.cis.org.au/issue_analysis/IA108/IA108.pdf

[Dave_au]

Originally Posted by XR6 Martin

Removing import duties and LCT? Australia has the Worlds lowest automotive taxing for a country with its own Auto industry....

Really? Do you have a link? (not having a go - I'm quite curious myself to see where the other countries sit)

[ebxr8240]

Sheesh the previous pollies have really stuffed up ha ??

[Wretched]

Originally Posted by Dave_au

Really? Do you have a link? (not having a go - I'm quite curious myself to see where the other countries sit)

same here. I am hearing from one side that we're too protectionist and others stating we're not enough.

[mustang70]

Originally Posted by plext

One must question just how "independent" this Centre for Independent Studies really is.

The Centre of Independant Studies is a Liberal think tank


"Australia-based policy institute which emphasizes the role of the free market in an open society and other voluntary processes in providing many of the ...etc"

There's not alot independant about them,not critisizing them, but think tanks are usually one sided, and quoting them in an argument against Labors Automotive policy is about as useful as quoting a Labor think tank on Liberal's policy

[vztrt]

Originally Posted by XR6 Martin

Removing import duties and LCT? Australia has the Worlds lowest automotive taxing for a country with its own Auto industry....

Have a look in there (you will need to enter your name)
http://www.apectariff.org/
H.S code 8703


Japan has no import duties on their imports.
China is all over the place 38.7% to 270%.
USA flat rate of 2.5%
Thailand is vague so could be 5-40% (I know Australia has a FTA with them but engines over 3L and we get stung)

[cosmo20btt]

Originally Posted by coupex

Oliver Hartwich | March 17, 2009







For months German and British politicians, trade unionists and car workers have been desperately trying to find a way to separate their companies from the moribund GM, only to discover that this is close to impossible. Not only do their cars share technologies and platforms with other GM companies but even the patents developed in Germany for Opel have been transferred to a US company, which in turn used them as collateral for the US Government's emergency loans to GM. So the taxpayer subsidies Rudd is giving Holden may end up in the coffers of its ailing parent in Detroit.



When Rudd finally realises the dire straits Holden is in, he will probably nationalise it faster than you can say Commodore. So, after the Rudd Bank prepare for the Rudd Car. Then, just like their European counterparts, Rudd and Carr will find themselves in difficult negotiations with GM to do a deal that will depend on Obama's approval.

Committing $100,000 of taxpayer money to saving each job in the car industry was already a prodigious waste of money but this will look cheap compared with the cost of nationalizing Holden. In time, Australians will come to rue the day Rudd decided to treat the car industry as an issue of systemic significance.

Forgive me for being naive, but in his statement the reporter states that the patents are used as collateral, Holden doesn't have a patent as the VE is based on the Cadillac chassis. Besides 3 months after the election Rudd commited the money to the 3 Aussie car makers, Toyota at the time felt it was going to make a Hybrid anyway even without federal help, so money was not the issue then. And Fords agreement was to keep the Geelong plant on after 2013.

[Wretched]

Originally Posted by vztrt

Have a look in there (you will need to enter your name)
http://www.apectariff.org/
H.S code 8703


Japan has no import duties on their imports.
China is all over the place 38.7% to 270%.
USA flat rate of 2.5%
Thailand is vague so could be 5-40% (I know Australia has a FTA with them but engines over 3L and we get stung)

Thank you for that link.
Very interesting data, basically China, Malaysia and a couple of others have very tariffs but the main players USA, Japan, etc do not. Australia is in between with room for movement.

[SSbaby]

Not so fast...

http://www.bloomberg.com/apps/news?p...RiU&refer=home

Like others have noted, you have to question the author's motive for writing such a slanted article.

And, there is no such thing as an 'independent viewpoint'. It's usually about who pays for the researcher's funding... to get the message across... and I have no idea who that would be.

When you look at the possibility of diminishing local manufacturing, it's not just about dollars and cents (maybe that should be 'sense'?) it's about the benefits it provides to the country as a whole. Australia would be one very boring place if we only bought imported goods... and vastly less skilled as well.

Often reading such one sided articles serves to sway people into believing there is really only one side to a coin.

[Bossxr8]

The FCAI reply.


http://www.goauto.com.au/mellor/mell...25757C001DF5C5

[Bossxr8]

Originally Posted by cosmo20btt

Forgive me for being naive, but in his statement the reporter states that the patents are used as collateral, Holden doesn't have a patent as the VE is based on the Cadillac chassis. Besides 3 months after the election Rudd commited the money to the 3 Aussie car makers, Toyota at the time felt it was going to make a Hybrid anyway even without federal help, so money was not the issue then. And Fords agreement was to keep the Geelong plant on after 2013.

The VE is not a Caddilac chassis, it was designed by Holden.

[cosmo20btt]

Originally Posted by Bossxr8

The VE is not a Caddilac chassis, it was designed by Holden.

I'm sorry your right, they run the GM zeta platform not the Sigma chassis. At the time of reading (that was a couple of years ago) Holden was told that they had to use it, but went their own way.

[Road_Warrior]

That's not a very well written report. Use of emotive words and terminology and selective quotation of facts and statistics only serve to further your own agenda, or that of the writer(s).

They have all but glossed over the fact that Ford and Holden ARE bringing smaller, more fuel efficient locally made cars to the market (no mention of local Ford Focus production anywhere in the report) and no consideration has been given, at all, to the budgetary constraints that local car makers operate under from their overseas parents.

Instead, the report writer ****s and carries on about hybrids and "ohhh Australian made cars are so thirsty" and "European cars use less fuel and shouldnt be subject to tarrifs and LCT so are therefore better" but has ignored the use of alternative fuels in Australia such as LPG - with the emerging new-generation LPG systems and new factory fitted systems that are just around the corner, the green credentials of large cars will be brought back to parity with smaller ones.

[GK]

Originally Posted by Road_Warrior

That's not a very well written report. Use of emotive words and terminology and selective quotation of facts and statistics only serve to further your own agenda, or that of the writer(s).

Sounds like you're describing Paul Gover! LOL!

Actually no, Paul just runs down almost everything offered by Ford.

I did see the billboard the other day advertising the new Fiesta. "Simply the best in it's class!" The owner of said comment? Paul Gover!

Before you flame me for suggesting such lies, it's true! LOL!

GK

[Road_Warrior]

Paul Gover is a journo, so I would expect him to be a dribbler. But this mob purport themselves to be an 'independent think tank' yet their report shows them to be anything but. They more or less dismiss the reliance that thousands of Australians have on the auto sector with throw away lines like "oh they can be retrained". Comments like that demonstrate a really poor grasp of how the industry works and more to the point, how people work.

[SB076]

Yep, too many people have absolutely no idea on a particular industry but feel the need to offer their advice no doubt gained from their vast experience and knowledge - always good for a bit of a laugh - just a pity that in some cases their so called expert advice is paid for with tax payers money.

[XR6_190]

Originally Posted by coupex

The Government has a far easier option to make us drive more fuel-efficient cars. Instead of paying GM Holden or Toyota Australia to develop four-cylinder or hybrid engines, simply scrapping import duties and abolishing the luxury car tax (which strangely sets in at about the price of a European premium sedan) would make Australians think twice before buying a thirsty Holden Commodore rather than a more fuel-efficient BMW, Mercedes or Honda.

What a ridiculous comment, people who buy Falcons and Commodores usually cannot afford an equal in size BMW or Mercedes, that is why they buy Falcons and Commodores, even without all of the taxes, they would still be well beyond most Aussies reach, not to mention the price of any options and servicing. You can't tell me the $60,000 price difference between a Ford G6E and a Merc E280 Avantegarde is all taxes and duty?

This bloke must be more out of touch with the common man than QE2.