Banks shun manufacturing sector as another car parts company collapses

Federal Industry Minister Kim Carr says banks are shunning manufacturing companies, putting more struggling automotive parts suppliers at risk of collapse.

Federal Industry Minister Kim Carr says banks are shunning manufacturing companies, putting more struggling automotive parts suppliers at risk of collapse.

Karr told a conference organised by the Australian Manufacturing Worker’s Union that the negative image of manufacturing as a dying industry was severely damaging its growth prospects.

“We can’t allow the furphy that manufacturing is in terminal decline to gain ground,” he said. “It… affects the industry’s capacity to attract bank credit, new investment, new technology and new jobs.

“There are very disturbing signs that banks are trying to minimise their exposure to manufacturing in general and the automotive sector in particular.

“The last thing we want is already vulnerable component suppliers being forced to borrow from non-bank lenders at higher interest rates.”

Carr argues that the sector is actually growing, with the national accounts released last week showing manufacturing production grew 4.6% in 2007-08 and manufacturing employment has increased by 24,300 since last November.

But Carr’s speech came on the same day as Victorian components supplier Teson Trims was placed in voluntary administration, putting the jobs of 130 workers at risk at the company’s plants in Melbourne and Euroa in central Victoria.

Administrator Grant Thornton will keep the company running for at least four weeks while potential buyers are sought.

The credit crunch has forced banks to tighten their lending practices and reduce exposure to weaker sectors of the economy, such as financial service, property and manufacturing.

Carr says he will continue to push a positive message about the car industry to help restore confidence and hopes the Government’s $3 billion car plan will also be taken as a sign the industry is far from dead.

“One of our objectives in developing a new car plan is to turn business confidence around by demonstrating the Government’s support for the industry.”

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• Car parts sector stalling on profit margins of just 3%