Auto industry was set to invest $3.8 billion

AUSTRALIAN car–makers and parts suppliers had been prepared to invest about $3.82 billion on new models to be developed in the five years to 2017-18, federal government budget papers have revealed.

It is unclear how much of that amount – if any – will remain under the Automotive Transformation Scheme (ATS) that last night was killed off from 2018 by the federal government.

Treasurer Joe Hockey said cuts to the ATS would save the government $619 million over eight years from 2013-14, while leaving $1 billion in assistance over five years.

According to the budget papers, the car industry investments under the ATS were for models to be brought to market by 2021.

Ford, Holden and Toyota have all now announced that they will quit manufacturing in Australia from between 2016 and 2017, with Holden shelving plans for two all-new local models and Toyota axing a planned new Camry/Aurion.

Budget papers released last night show the government wants to focus on industries it believes have a higher value-add than automotive.

Grants under the ATS are usually made at the rate of one government dollar for every three dollars invested by the car-maker or parts-maker.

In Budget Paper Number 2, where the plan to shut the ATS is outlined, the government claims there will still be $1 billion available under the ATS out to 2018.

It shows the industry planned to invest $731 million in 2013-14, $820 million in 2014-15, $895 million in 2015-16, $815 million in 2016-17 and $557 million in 2017-18.

The papers also showed that, under a grant separate from the ATS, Toyota was planning to spend a total of $79.5 million on a major facelift for the Camry and on supplier development, with the bulk of spent this year and next.

Ford Australia was also set to invest more than $200 million in its current models, with $70 million spent in 2014-15 and $160 million to following year. This spending was under the Victorian Innovation and Investment Fund.

Both these projects are expected to go ahead.

In place of the ATS, the government has introduced the Manufacturing Transition Grants Program, which will involve only a fraction of the money that was available under ATS. The largest part of this scheme will be $20 million for an Automotive Diversification Program.

Incorporating $16.9 million of unspent funds from the cancelled Automotive New Markets Initiative, this scheme has been designed to help component suppliers make the change to new products and markets.

In addition, there will be $15 million made available over two years from 2016-17 to extend the Automotive Structural Adjustment Program to help automotive workers made redundant to find other employment.

The federal government’s swing away from the car industry to other industries is explained in the Budget Paper dealing with industry minister Ian Macfarlane’ s portfolio.

In particular, the statement indicates that the government believes the car industry is not a high value-add industry.

“The Department of Industry’s Australian manufacturing needs to move from traditional manufacturing to knowledgeintensive competitive industries in areas of global growth,” the statement says.

These knowledge-intensive industries include food and agribusiness, mining equipment, technology and services, medical technologies and pharmaceuticals, oil and gas and advanced manufacturing.

“The Manufacturing Transition Grants Programme will support Australian manufacturing transition itself into areas of higher value-added activities and become more outwardly focused,” the statement adds.

“The Growth Fund will help industry transition from car manufacturing to the highervalue manufacturing sectors of the future.”