Suppliers still under a cloud
BY DAVID HASSALL | 11th Nov 2008
The acting chief executive of the Federation of Automotive Products Manufacturers (FAPM), Barry Comben, said that, while he is pleased with the long-term outlook as a result of the Rudd government's new car plan, the downturn in sales of locally-manufactured cars will have a devastating affect on many of his 176 member companies.
He believes that the government’s initiatives may come too late to save some of the parts suppliers that are already on the brink of collapse.
“We’re very concerned about the short-term struggles that many suppliers are battling with in the remainder of this year, next year and into 2010,” Mr Comben told GoAuto.
“The paradox is that we’ve now got a plan that does give certainly after 2010. The uncertain period is in this next 18 months to two years.
“We have had discussions with the government about a variety of ideas that are described as short-term stimulus measures, but frankly it’s very difficult to identify specific measures that don’t cause difficulties for Australia’s international trade obligations, that are not discriminatory.” Mr Comben said that FAPM was having on-going discussions with the government but that it was difficult to provide support while remaining compliant with the World Trade Organisation guidelines.
“We’ve accepted the package and support the package, but in the interim period we think there is room for some other assistance and interventions to be given, and that’s on on-going dialogue with the government.
“While there are some elements in this package that will be delivered in this interim period, the bulk of the assistance will not be accessible until beyond 2010.
“The challenge for the industry is to survive the next 18 to 24 months, so we think it’s unfinished business to find measures that will support the increased production of Australian-built cars, which will generate the flow-through of components as a direct result.” FAPM was formed in 1958 and its 176 member companies currently have sales of over $8.5 billion and employ more than 40,000 people.
However, the government and the car-makers are encouraging rationalisation of the suppliers to eliminate duplication and reduce costs through economies of scale.
As well as providing $20 million over four years under the Automotive Supply Chain Development Program (ASCDP) to ‘upskill’ parts makers and make them more internationally competitive, the government’s newly-released car plan has allocated $116.3 million through the Automotive Industry Structural Adjustment Program (AISAP) to help suppliers with the costs associated with relocation and merger costs, including redundancy payments.
The government has emphasised that the AISAP scheme is not designed to prop up failing companies and that industry minister Kim Carr will only support transactions that will make the car industry stronger.
Assistance is available to workers who have been made redundant from November 1 this year and companies can apply for structural adjustment assistance from January 1, 2009.
“If you look at the structural adjustment program, this will encourage mergers and acquisitions (and) we recognise that consolidation is needed in this sector,” said Mr Comben.
“There are areas where there’s a great deal of duplication and fragmentation, so the opportunity exists to bring multiple firms together that have complementary skills and resources, and make a stronger, more viable business unit as a result.
“It’s very encouraging for us to hear from the FCAI, Ford and Holden about their confidence to invest. The supply chain in Australia is made up of quite a significant number of international firms and we think that this package, taken in its entirety, is going to send a positive signal to the boardrooms of our companies, which will encourage investment in the future.”
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