Car-making inquiry sets March 2014 deadline

HOLDEN and Toyota should have an idea of their car-making future before Christmas, with the Productivity Commission finally setting its terms of reference for a review into the industry.

The commission has set a December 20 deadline for what it says will be an interim report, while the deadline for the final document – and the deciding factor for Australia’s two remaining car-makers and their hundreds of car-parts suppliers – to arrive by March 31 next year.

A joint statement from federal treasurer Joe Hockey and industry minister Ian Macfarlane said the Productivity Commission inquiry would investigate the most effective way “the Australian Government and Australian economy can ensure the ongoing viability of the automotive industry”.

The government said it would take into account the findings of the inquiry in determining future policy direction for the local automotive manufacturing industry.

Speaking with Fairfax Media this morning, shadow industry minister Kim Carr questioned the timing of the final report, which falls two weeks after the crucial state election in South Australia, the base of Holden’s manufacturing operations.

“This is a ruse to get Holden to hold off announcing it’s withdrawing from Australia until after the election is out of the way,” Mr Carr said.

“The board of General Motors is aghast at the Coalition’s decision not to back a contract signed by the previous government.”

The government said in its statement it had already pushed for a number of policy changes it claimed would assist the local automotive industry, including the promise to not implement the previous Labor governments proposed changes to fringe benefits tax.

“Further, we have already released draft legislation to rescind the carbon tax.

The carbon tax adds, on average, $400 to the cost of every vehicle produced in Australia,” the statement said.

The scope of the inquiry, as set out in the terms of reference, seeks to ensure “any support for the local automotive manufacturing industry is accountable, transparent and targeted at the long-term sustainability of the sector”.

Items to be examined include the examination of regulatory factors that affect the current structure of the industry, productivity, investment, exports, international competitiveness and long-term sustainability.

Australia’s ability to attract investment for research and development as well as production of vehicles and components will also be examined, as will local and international demand for Australian design and engineering services.

Buyer preferences and demand for new technologies and products will also be looked at.

In examining these factors, the inquiry will then take into account international industry assistance, including tariffs, government spend on industries in emerging and major markets, workplace arrangements and the tax environment, while government vehicle purchasing policies will also be considered.

Once this has been taken into account, the inquiry will then look at possible “alternative public support mechanisms” that boost long-term profitability, productivity and sustainability, facilitate research into alternative vehicle technologies and contribute to national productivity growth.

The inquiry will assess the capabilities in the industry, its direct employment and economic benefits, secondary impacts in other industry sectors and quantify the costs and benefits of the existing and alternative assistance measures.

The Commission has invited submissions from interested parties as a part of the public consultation that will be included in the report.

Mr Macfarlane confirmed the Productivity Commission inquiry during a tour of Toyota’s Altona factory in October, shortly after the Coalition took office following a Labor rout in September’s federal election.

While the previous government had committed to ensuring significant co-investment with the automotive industry, the coalition made a pre-election commitment to withdraw $500 million from the $1.5 billion pool allocated to support the industry.

During a factory tour at Toyota last month, Mr Macfarlane suggested the government could look at reversing its pre-election promise to withdraw the $500 million.

The minister is currently in Japan holding talks with Toyota management and outlining the terms of reference of the Productivity Commission inquiry.