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Expanded $6.2b car industry blueprint released

Grand plan: Senator Kim Carr and prime minister Kevin Rudd.

Big boost to the Green Car Fund highlights the government’s new car plan

10 Nov 2008

PRIME minister Kevin Rudd has emphasised the government’s commitment to Australian automotive manufacturing by personally announcing its new $6.2 billion car industry plan in Melbourne this morning.

As expected, the new industry blueprint largely rubber-stamps the recommendations made by the Bracks Review, which were presented to the government more than three months ago.

Underlining the prevalent theme of the presentation – which is titled ‘A New Car Plan for a Greener Future’ – it includes expanding and more than doubling the Green Car Fund from $500 million (from 2011-2016) to $1.3 billion (now starting in 2009 and extending to 2020).

Import tariffs will halve from 10 per cent to five per cent as scheduled from January 2010.

However, the local industry will be compensated by an even greater than expected level of government assistance under the Automotive Competitiveness and Investment Scheme (ACIS) and its replacement from 2011, to be called the Automotive Transformation Scheme (ATS).

ACIS will be boosted by $79.6 million in 2010 to smooth the transition to the ATS, which will provide a total of $3.4 billion to the industry from 2011 to 2020.

Ford Australia had an extra reason to celebrate with the announcement that buyers of cars with factory-fitted LPG systems will now – with immediate effect – receive the full $2000 government rebate that was previously only paid for after-market conversions.

Previously, Holden buyers received the full $2000 because LPG Commodores were technically fitted post-production while Falcon buyers received only $1000 because the Ford system is fitted on the production line.

Ford can expect a boost in sales of its dedicated LPG Falcons, which are priced $1400 above equivalent petrol versions.

The prime minister said that the new car plan includes $3.2 billion in net new funding on top of the $3.0 billion already committed by previous and current governments.

And, despite opposition spokesman Tony Abbot questioning if the car industry would “ever be able to stand on its own two feet”, the PM renewed his commitment, saying that manufacturing would always be supported by the government as long as he is the prime minister.

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“We believe this industry has a future, and a big future, in Australia’s economy of the 21st Century,” said Mr Rudd.

“Australia needs a green car industry that manufactures the fuel-efficient, low emission vehicles of the future and that creates the well-paid, highly-skilled green jobs of the future.

“We do not have to choose between having a growing economy in the short term and a green economy in the medium to long term. We can work effectively to develop both and that’s a large part of what today’s package is all about.

“This is a first class industry which demands support for the future. This industry is a powerhouse of exports and innovation and it’s also part of the climate change challenge we face for the future as well.

“The automotive industry has a key role to play responding to climate change. The industry must reduce vehicle emissions by producing smaller, lighter, and more fuel efficient vehicles that produce fewer greenhouse gas emissions.

“Faced with this complicated set of industry challenges – markets, economies, and the environment – some might say it’s not worth trying to have a car industry. That is not my view. It is not the view of the Australian Government and it never will be the view of any Government which I lead.” Presenting its new policy at the Automotive Centre of Excellence at Docklands, the government summarised the car plan as consisting of: • A better-targeted, greener, $3.4 billion assistance program, the Automotive Transformation Scheme (ATS), running from 2011 to 2020 • An expanded $1.3 billion Green Car Innovation Fund brought forward to 2009, running over 10 years and requiring a 3:1 investment by recipients • Changes to the Automotive Competitiveness and Investment Scheme in 2010, consistent with the Bracks review proposals, to smooth the transition to the ATS ($79.6 million) • $116.3 million to promote structural adjustment through consolidation in the components sector (from 1 January 2009) and to facilitate labour market adjustment (from 1 November 2008) • $20 million from 2009–10 to help suppliers improve their capabilities and their integration in complex national and global supply chains • $6.3 million from 2009–10 for an enhanced market access program • A new Automotive Industry Innovation Council, bringing key decision-makers together to drive innovation and reform • A $10.5 million expansion of the LPG vehicle scheme, to start immediately, that doubles payments to purchasers of new vehicles using LPG technology. Federal industry minister Kim Carr said that the release of the new plan today marks a new beginning for the Australian automotive industry and is designed to attract long-term investment.

“The world is in crisis and the government is focused on shielding Australia from the worst effects of the storm outside,” said Senator Carr.

“We are acting decisively to address today’s challenges, but that doesn’t mean we lose sight of tomorrow. It doesn’t mean we lose sight of the country’s long-term needs. That includes the need for a strong, efficient, creative manufacturing sector, which is essential to a balanced economy and the lifeblood of communities around the country.

“That’s what the government wants – but we won’t get it by standing by and watching from the sidelines. You need a plan, a vision of the future, a solid partnership with industry and, above all, you need investment.

“The package we are announcing today is all about attracting that investment. It’s about greening the industry, strengthening the local supply chain, boosting skills, increasing international engagement and, most importantly, creating jobs.

“The challenges facing the car industry have sharpened in recent months, but they are not new.” Senator Carr said that the changes made as a result of the review would not only see the industry through the present tough times, but “make it stronger in the decades to come”.

He said that the government has provided $3.8 billion to the car industry under ACIS between 2001 and 2007, but that the country had been repaid ten-fold through capital investment, research & development and employment.

“That’s a great return, but it is only part of the story,” said Senator Carr.

“The automotive industry is the mainstay of families across Australia – it employs 60,000-plus directly, but the total number of workers who owe their jobs to car-making is at least 200,000 – and this is a plan for them.

“It is also a plan for every Australian who wants to buy a car that is easier on the environment and easier on the wallet, and it feeds directly into the government’s efforts to beat climate change, to beat the global financial crisis, and to make Australia stronger, smarter and fairer.

“This is a new deal for Australian car-makers and a new deal for Australian car-buyers.

“It reflects our determination to create high-quality, high-skill, high-wage jobs – the kind of jobs Australians want for themselves and their children – and it reflects our belief in innovation, which is the key to giving Australia a winning edge in global markets.” The full transcipt of prime minister Kevin Rudd's speech follows.

"First of all thank you very much Kim, our industry minister.

He has just said some nice things about me. Now let me just make this very plain.

This minister is passionate about manufacturing and passionate about the Australian auto industry and I have got to say we would not be here today were it not for his deep engagement with each of you from industry, from the unions and from the associated research institutes across the nation – here in Melbourne, Adelaide, elsewhere and beyond.

So mate this is very much your work, I really appreciate it, you have been there with your sleeves rolled up.

You know there is a lot of gloom and doom out there, but on days like this what we are doing is, in the midst of a global financial crisis, rolling up our sleeves and coming out in support of Australian manufacturing and the Australian car industry for the future. That’s why we are here.

At a time of global financial crisis the government today takes further decisive action to support Australian industry, to support Australian jobs. Because we believe this industry has a future and a big future in Australia’s economy of the 21st Century.

We take decisive action to build an internationally-competitive, green economy for the future.

Australia needs a green car industry that manufactures the fuel-efficient, low emission vehicles of the future and that creates the well-paid, highly-skilled green jobs of the future.

We do not have to choose between having a growing economy in the short term and a green economy in the medium to long term.

We can work effectively to develop both and that’s a large part of what today’s package is all about.

Australia must have the green industries and green jobs of the future.

I know in the United States some have advocated a ‘green recovery’ achieved through investments in energy efficiency and renewable energy strategies.

One think tank in America – the Political Economy Research Institute – has estimated that there are two million jobs to be had in the US through a green recovery.

I believe that Australia needs green investment as well.

And the automotive industry is critical to a green investment strategy for the nation.

The automotive industry is already a cornerstone of manufacturing.

Consider the numbers again, they command respect, more than 60,000 people employed directly in this industry. Altogether 200,000 Australians employed directly and indirectly in this industry.

Some $8 billion worth of gross domestic product, $5.6 billion worth of exports, our largest manufacturing export and among our top 10 exports period and some 3,000-plus researchers working in the field.

This is a first class industry which demands support for the future. This industry is a powerhouse of exports and innovation and it’s also part of the climate change challenge we face for the future as well.

Transport is responsible for 14 per cent of our nation’s greenhouse gas emissions.

That means we need to transform the industry if we’re going to improve our long term climate change performance.

As I indicated before more than 3000 researchers and technicians are now working on new technologies.

We have seen some of that work here this morning as I walked around and spoke to the lads and the lasses from Deakin, from Monash, from our older established automotive parts industries and companies, the work that they are doing as well as our big three manufacturers and the extraordinary innovation which they are representing in their product lines for the future.

This is an exciting industry to be in and I believe it has an exciting future.

We will need literally thousands more Australians to become green car workers if we are going to transform the industry for the long term future.

We won’t transform this industry by a combination of slogans or ideology.

What we need is innovative industry. We need a supply chain working together. We will need a supportive policy framework. We also need an automotive industry vision.

And that’s why I am here today to launch a New Car Plan for a Green Future for Australia.

Before going onto the detail of today’s announcement, it is worth us understanding the unique economic times in which we live.

We currently have the worst economic conditions in the global economy for many, many, many decades. We have the worst financial crisis since the great depression.

Since the global financial crisis began, more than 25 banks around the world have failed or have been bailed out.

The US and Europe are on the verge of recession. Growth in China has been slowing dramatically.

The Australian economy is sound but we will not be immune from the impacts of the global financial crisis.

There are no easy solutions and no quick fixes to this global financial crisis.

But it is important to have a rational grounds for confidence in the future and this industry, the auto industry is part of that future and part of the reason why we should remain confident about our future.

This is going to be a long, drawn out crisis which will have a real impact in Australia.

There will be slowdown, there will be increased unemployment.

The government has already taken decisive action and early action to protect the economy and all Australians during this crisis.

We have guaranteed bank deposits, we injected $10.4 billion into the economy to stimulate growth through our economic security strategy, we will bring forward major investment in infrastructure, in roads, rail, ports and boost economic activity in these critical areas that our economy will need for the future, and we are investing in the capital needs for our education system and our hospital system as well.

These are all part and parcel of our economic strategy to see Australia through these tough economic times, driven by the global financial crisis.

The next step in our response to the global financial crisis is to build the low-emission, green economy of the future.

By implementing a green investment strategy today, we can transform our industry and create green jobs for tomorrow.

Today, at this the Cooperative Research Centre for Advanced Automotive Technology, we have a ‘Green Car Showcase’.

It is a window into the future of the automotive industry and a window into the future of our economy.

It’s a future in which we should have absolute confidence - fuel-efficiency technologies, low-emission technologies, better designed and safer vehicles.

By creating these technologies and using them to manufacture vehicles in Australia, we can have the green car industry of the future. And we can be world leaders in this.

Getting there won’t be easy – it will be hard.

That’s why we’re here as the government, in order for us to go forward together arm in arm. This must be a partnership between Government, our researchers, business, industry, unions, workers, apprentices - a national effort in support of an important national industry.

If you think of how hard this country has worked to build the automotive industry we have today, it gives us real hope of what we can build with a green automotive industry for tomorrow.

Here is an important fact which all those less familiar with the industry should focus on: Australia is one of only about 15 nations in the world today that can create a motor vehicle from scratch — taking it from the drawing board through to the showroom floor. One of only 15 nations in the world.

The 60 years since the first 48-215 Holden came off the production line in 1948 have seen dramatic changes in automotive technology, in the structure of the industry and in the way in which we design industry policy.

In Australia, we’ve abandoned economic protectionism as a plank of industry policy. Tariffs and quotas are no longer industry policy levers. We’ve embraced international competition. But through the Button car plan of the Hawke Government we had the policy foundation for the industry to survive and to prosper. We intend to continue on that path.

Today, the Australian automotive industry faces a whole new set of market, economic and environmental changes and challenges.

The domestic market for cars has become more fragmented. Australian car makers do battle in a very crowded field with 60 other car brands. Consumer preferences have shifted away from family sedans to both smaller vehicles on the one hand and four wheel drives on the other.

Higher petrol prices have driven expectations of more fuel efficient vehicles – for smaller cars, but also more fuel-efficient medium and large vehicles as well.

Competition from regional players has become intense. Up until a couple of months ago, the exchange rate was at levels that made exporting very difficult. It’s true that the recent exchange rate depreciation improves the prospect of the automotive export industry.

But it’s hardly a welcome development when it’s associated with a global financial crisis that is hammering the parent companies of local manufacturers restricting access to credit from auto finance companies and plunging the global economy into a recession.

The sector is also at the epicentre of the long term challenge of climate change. The industry knows that the transport sector produces 80 mega tonnes of carbon dioxide emissions every year. That is 14 per cent, as I said before, of Australia’s annual greenhouse emissions.

Between 1990 and 2006, transport emissions grew by over a quarter.

We clearly have to turn these trends around if we are going to tackle climate change. The automotive industry has a key role to play responding to climate change.

The industry must reduce vehicle emissions by producing smaller, lighter, and more fuel efficient vehicles that produce fewer greenhouse gas emissions.

Faced with this complicated set of industry challenges – markets, economies, and the environment – some might say it’s not worth trying to have a car industry. That is not my view. It is not the view of the Australian Government and it never will be the view of any Government which I lead.

I don’t believe that car making is yesterday’s business, or something better left to the Germans and Japanese. But I also don’t believe that industry policy is about ‘saving’ the automotive industry.

It’s about helping to transform the industry to meet the challenges of the future. It is not about passive assistance. It is about active support for innovation and change.

That is why I say that in the 21st century, innovation policy is industry policy. Innovation policy is industry policy. They are the same thing for the economy of the future.

Let’s again consider what is at stake with this important automotive industry.

This industry is worth almost $8 billion worth of value-added business.

64,000 directly employed, three-quarters of them in Victoria and South Australia, 3,000 researchers, technicians and other supporting staff in undertaking R&D.

The auto industry also creates in other industries from iron, steel and rubber to mechanical repairs, wholesale trade and business services, many, many other jobs. An estimated 200,000 owe their jobs directly and indirectly to this industry.

In the future, the industry will have more ‘green car’ jobs: manufacturing cleaner engines, fuel cells, and batteries installing turbo-charging and direct-injection systems designing lighter and more fuel efficient vehicles.

The Australian automotive industry already invests over $600 million a year in R&D – and that will grow over time.

GM Holden has a regional design and engineering centre. Ford has a design and engineering ‘Centre of Excellence’.

Toyota’s regional technical centre contributes to Toyota’s global platforms.

Building the modern car integrates just about every advanced technology we use, from microchips to composite materials.

That is why the automotive sector is a cornerstone of Australian manufacturing, worth as I said before more than $5 billion a year in exports, making it one of our nation’s top 10 export industries.

All this spill-over activity means that having an automotive industry makes economic sense for Australia.

Australia can enjoy the benefits of a prosperous automotive industry.

But it needs national policy vision. That is why today I am pleased to launch the Australian Government’s New Car Plan for a Greener Future.

The New Car Plan for a Greener Future is a bold plan to transform the Australian car industry. Transformation so it can become more competitive.

Transformation so it is more responsive to changes in the pattern of consumer demand. Transformation so it’s better equipped to respond to the challenge of climate change. And transformation so it is more integrated with global markets and supply chains.

The New Car Plan for a Green Future will ensure that car-making goes on contributing to Australia’s prosperity in the future. The New Car Plan for a Greener Future is a 13-year, $6.2 billion automotive industry vision.

It is about strengthening the economy against the global economic downturn.

It is about creating the new green jobs for the future. The New Car Plan for a Greener Future has at its core, competitive, fuel-efficient, low-emissions vehicles, produced right here in Australia.

The centrepiece of our plan is an expanded and extended Green Car Innovation Fund. The Green Car Innovation Fund is now a 10-year, $1.3 billion initiative.

It will foster investment in research and development and plant and equipment for green vehicle technologies.

The Green Car Innovation Fund will be brought forward to operate from 2009 so we can start work on the cars of tomorrow today. That is what we are on about, sleeves rolled up, getting on with the job and getting on with it now.

Through an average 1:3 co-investment ratio, the Green Car Innovation Fund will generate over $5 billion in investment over the next 10 years.

Second, we will invest $3.4 billion between now and 2020 in a new Automotive Transformation Scheme.

Through this scheme we will co-invest in industry research and development on a 1:2 basis and in new plant and equipment on a roughly 1:7 basis.

The scheme provides investment certainty for the sector and improves the industry’s competitiveness long term. This scheme is designed to help the industry reinvent itself. The Automotive Transformation Scheme will generate at least $12 billion in investment by 2020.

$12 billion for the Automotive Transformation scheme and an additional $4 - $5 billion from the Green Car Innovation Fund. $16 to $17 billion in investment in the future, that’s why the Government is in this industry with you.

This is a massive investment for the future. We have also taken the policy decision to proceed with the cut in automotive tariffs from 10 per cent to five per cent in January 2010.

With this move Australia will have the third lowest tariff regime in the world amongst economies with a well developed automotive industry. This means cheaper cars for Australian motorists.

It is also a clear signal to overseas governments that our country believes in free trade. I don’t believe we can or should shield our industry from free trade and open markets. I believe we must secure the industry’s future with open markets through global integration and innovative capacity.

Our New Car Plan for a Greener Future also recognises that there are substantial pressures on the automotive supply chain. That is why we’ll immediately establish from this month a $116 million structural adjustment program.

It will promote strategic consolidation to achieve scale economies and productivity improvements.

It will also provide for labour market adjustment where, if appropriate, fair and reasonable assistance will be made available to employees made redundant through automotive restructuring.

The New Car Plan also includes: a $20 million program to help suppliers integrate into a complex global supply chain $6.3 million investment in an enhanced market access program a $10.5 million expansion of the LPG vehicle scheme that doubles payments to $2,000 to purchasers of new LPG vehicles.

We will also establish an Automotive Industry Innovation Council to provide high level advice on the sector’s strategic direction. The Plan I am launching today is a strong endorsement of the recent review of the automotive industry by the panel led by Steve Bracks. And again I thank him for his work.

The work done by the review team laid the foundations for the policy package I am unveiling today. The New Car Plan for a Greener Future is the next step of decisive action being taken by this Government in the midst of this global financial crisis.

To support our economy during the global economic downturn. To support jobs in our economy during the global economic downturn. To build a green car industry and create the green car jobs for the future.

It is part of our green investment strategy, it is part of our manufacturing strategy. Both with an eye firmly fixed on the future and fixed on the future with confidence. This is decisive action today in order to build a great and prosperous industry for tomorrow.

I said before I became prime minister of Australia that I did not want to be Prime Minister of a country that did not manufacture any more. I meant it then, I mean it now and I mean it for the future.

It is with great pleasure therefore that I officially launch this great new green car plan for a greener future for Australia."

Read more:

Suppliers still under a cloud

Holden and Ford to get greener

Local car suppliers shed jobs

Go global, says Carr

Economists say Bracks tariff modelling is wrong

Federal industry review finally revealed

Big Three take tariff fight to Canberra

The Road to Recovery podcast series

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