Green cars in poll test

LUCRATIVE government funding for ‘green’ vehicle technologies has emerged as a key battleground in the lead up to both the Australian federal election on August 21 and the Victorian state election on November 27.

The shadow minister for innovation, industry, science and research, Sophie Mirabella, this week confirmed to GoAuto that if elected in 32 days, a federal coalition government would slash $278 million from the Labor government’s Green Car Innovation Fund (GCIF).

Australia’s peak automotive industry body, the Federal Chamber of Automotive Industries (FCAI), declined to comment this week, but the Federation of Automotive Parts Manufacturers (FAPM) warned that any funding cuts would have a negative impact on Australian component suppliers.

The green-car funding cut was originally announced by shadow treasurer Joe Hockey in May, as part of a range of cost-cutting measures revealed in the opposition’s response to that month’s federal budget.

It will follow the federal government’s own $200 million cut in forward estimates for the 10-year GCIF, which was a centrepiece of the Rudd government’s 2007 election campaign.

As part of the May budget, the federal Labor party said it would reduce GCIF spending by $200 million over three years from 2011 to 2014 – reducing it from $1.3 billion over the full 10 years from 2009 to 2019, to about $1.1 billion – after fewer than expected applications for green funding.

Documents released by the shadow treasurer and shadow finance minister on behalf of the Coalition in May show an Abbott government would axe a further $278 million from the green fund over the next four years, reducing the total GCIF spend to about $822 million.

From top: Then prime minister Kevin Rudd launches the Camry Hybrid, Ford's EcoBoost engine, industry minister Kim Carr and shadow industry minister Sophie Mirabella.

A spokesman for the shadow industry minister today confirmed that figure would remain unchanged if a Coalition government was elected next month, although changes would be made to the cost reductions announced for each financial year, which originally included $52 million in 2010-11, $87 million in 2011-12, $78 million in 2012-13 and $61 million in 2013-14.

Confirming that debt and deficit would be the key issues of the election campaign, opposition leader Tony Abbott this morning announced that – in addition to the $46.7 billion in savings it has already promised – a coalition government would make a further $1.183 billion in budget spending cuts.

No further cuts have been announced for either the GCIF or the $3.4 billion Automotive Transformation Scheme (ATS), which forms part of the federal government’s $6.2 billion automotive industry assistance plan for the next decade, and the opposition has committed to honouring all GCIF contracts already awarded by the federal government.

The latest breakdown of GCIF spending cuts shows just $22 million will be cut from the current financial year, with $76 million to be cut in 2011-12, $99 million to be cut in 2012-13 and $81 million in 2013-14.

At the time, incumbent industry minister Kim Carr said the GCIF cuts originally proposed by the opposition in May would create a $10 million shortfall in meeting the government’s existing contractual obligations in this financial year.

“They would have to break contracts and they could offer no other grants ... this just proves their hostility to a modern industry,” Senator Carr told Fairfax in late May.

Speaking at Ford’s Geelong facility earlier this month, Senator Carr said Mr Abbott’s proposed budget cuts would slash the fund that helped keep the region afloat during the economic downturn.

“The Liberals will slash funding for the Green Car Innovation Fund by 50 per cent each year for the next four years,” he said.

“If you hurt Ford, you hurt Geelong. This is one of the most reckless cuts you could make to the Geelong economy. The EcoBoost (engine) is very much about securing the long term future of Ford in Geelong. Geelong is an automotive powerhouse and we will work hard to keep it that way.”

The FCAI has sought clarification on the opposition’s proposed GCIF cuts from Ms Mirabella but declined to comment on today’s official confirmation of the total $278 million cut in green-car funding.

“We are concerned the sorts of cuts outlined by the opposition will have an impact on contracts with companies that have already been entered into,” FCAI chief executive Andrew McKellar told Fairfax at the time the cuts were proposed.

“If that is the case, it would send a very adverse signal to international investors, so we need to clarify their intention. We want to understand what they are trying to achieve with these savings.”

Some analysts say the industry should think itself lucky the cuts from both sides of government have targeted the GCIF – applications for which remain open following an extensive media campaign, with each grant starting at $100,000 and being capped at $300,000 – rather than the broader and more lucrative ATS pool.

But FAPM chief Richard Reilly told GoAuto that any cut in green-car funding would have a negative impact on component suppliers in the Australian motor industry.

“Any sort of reduction in the Green Car Innovation Fund, which was obviously established to encourage R&D and the establishment of innovative projects, will affect the supply chain as one of the key beneficiaries of the fund – there is no doubt about that,” he said.

GoAuto understands that while more GCIF applications have been received, less than six have been approved since the fund opened for applications in April – including two from parts suppliers and three from car-makers including Toyota, GM Holden and Ford.

So far none of the local manufacturers have applied for the maximum grant of $300,000 under the GCIF rules, but if they did so under a Coalition government one of them would miss out on the full amount given the opposition total proposed GCIF spend would be significantly less than $900,000.

Mr Reilly said he did not believe any green-car funding contracts were in danger, but points out that any reduction in the GCIF pool will reduce opportunities for parts suppliers.

“There have been some issues with the program in terms of the uptake of it not being as well subscribed as anticipated at its launch, but I think that if further monies are proposed to be taken out of it then that certainly will affect the supply chain and the applications for funding because obviously the pool of money will be less.

“I’m not aware of any contracts being in danger. If the contract is written between the company and the commonwealth then I would have thought they will be honoured.

“(But) there will be less opportunity for manufacturers within the supply chain. Certainly any sort of reduction in the Green Car Innovation Fund will have an effect on the supply chain.

“The moneys that are in the GCIF are money that the supply chain knows about. There have been a number of applications awarded and quite a number of further applications are currently in the pipeline being looked at, so any future reduction in GCIF will have an impact in R&D and innovation in the automotive sector,” he said.

Holden is understood to have applied for about $149 million in green-car funding – almost half of its theoretical entitlement – mainly for development of the local Cruze that will be launched with an efficient 1.4-litre turbocharged engine and made at Holden’s Elizabeth plant in South Australia.

Ford has been the second biggest applicant, with about $100 million in grants, mainly to engineer the imported 2.0-litre turbocharged EcoBoost four-cylinder engine into the rear-drive Falcon for launch in 2011, along with a turbo-diesel Territory and a liquid-injected LPG six-cylinder engine for Falcon.

Toyota was the first company to take advantage of the GCIF when it received about $35 million for the Camry Hybrid that went into local production at Altona in Victoria late last year before a local launch in mid-February.

Victoria’s Labor government has now attempted to drive a wedge between business and the Liberal party, which has labelled the Camry Hybrid as a flop, in the lead-up to November’s state election.

Treasurer John Lenders has written to Toyota to reassure it of the Brumby government’s continued financial support of the company’s plan to produce 10,000 hybrid Camrys a year at its Altona plant, which falls within the federal electorate of prime minister Julia Gillard.

The hybrid Camry has attracted less than 3000 customers in Australia after five months on sale, including just 657 private buyers – well down on the Japanese brand’s original forecast of a 40 per cent private buyer take-up.

As of April, just 1686 Camry Hybrids had been sold but specific sales figures for the petrol-electric Camry (as distinct from the mainstream petrol version) have been removed from the FCAI’s official VFACTS sales report since then.

“Unfortunately, I have been forced to write this letter after the state opposition criticised our investment support for the production of the hybrid,” Mr Lenders told Toyota Australia president Max Yasuda on Friday.

“'We are proud of the fact that we have a strong working relationship with Toyota and that this has protected Victorian jobs. I hope this new stance from the opposition does not impact upon any further investment decisions by Toyota,” he said.

Mr Lenders’ letter was prompted by an attack from opposition manufacturing spokesman Ryan Smith on premier John Brumby's decision to back the Camry project with a financial assistance package believed be worth up to $35 million.

Mr Smith accused Labor of “blowing” public money on the Camry Hybrid “experiment”, which he said had fallen well short of Toyota’s sales targets despite substantial federal and state government support and '.”

a climate of booming car sales”.

“'It is clear that John Brumby failed to do the work required to make sure this project stacked up before he spent $35 million to ensure a series of self-promoting photo opportunities,” said Mr Smith.

“'Toyota is only committed to the hybrid Camry for as long as they are selling, and with dismal sales figures, John Brumby’s claims about supporting local jobs with this project are looking more and more shaky.

“'Victorians understand, accept and support comprehensive and well-monitored grants programs to help business, but they also expect government to be accountable on whether their money is being spent properly or wasted.”

The federal shadow industry minister echoed Mr Smith’s comments, saying a combined $70 million from both the federal and state Labor governments for the Camry Hybrid represented a flagrant waste of tax-payers’ money.

“Amid a string of overblown claims, industry minister Kim Carr originally claimed there had ‘never been a plan more important to car making’ than the one his government devised,” said Ms Mirabella, Mr Carr’s opposite number in the federal Coalition.

“He also said that schemes like the Green Car Innovation Fund were ‘the future of Australian motoring’.

“But the future is clearly looking bleak if the best Labor can do is come up with a scheme that has so far cost taxpayers a whopping $53,272 (and Victorians double that at $106,544) for each private purchase of the Hybrid Camry.

“Labor all but acknowledged the serious flaws in the program with a cut in this year’s budget, but needs to join with the Coalition in committing to further reductions.

“The Australian automotive industry has received bipartisan support from governments over many decades – but the seemingly open-ended and poorly targeted spending that is currently at the heart of this program is unacceptable.

“Mr Carr has regrettably spent much of his time as a minister scaremongering and spreading misinformation about the Coalition’s past and present policies, particularly on manufacturing.

“It’s unfortunate for Australian taxpayers that he hasn’t devoted nearly the same amount of energy to evaluating his own policies.

“Otherwise, he would have taken action to stop yet another poorly designed Labor program that continues this Government’s reckless spending.”