Automotive manufacturers thinking twice about Australian investment after Green Innovation Fund scrapped

The future of Australia’s automotive industry is in doubt, after the major manufacturers said the Government’s decision to scrap the Green Car Innovation Fund has led it to reconsider its commitment to local manufacturing.

According to The Australian Financial Review, GM Holden, Toyota and Ford have met with Prime Minister Julia Gillard and Opposition Leader Tony Abbott over the prospect of Government compensation and investment.

Andrew McKellar, chief executive of the Federal Chamber of Automotive Industries, says the outcry from business “reflects an important message”.

“That is multinational companies, when they are looking at future investments in Australia, want to have a degree of certainty about the policy environment they face.”

“They want to know that when decisions are taken, they are there for the long-term, and are not changed just after a short period.”

The issue at hand is the scrapping of the Green Car Innovation Fund. This was to deliver $1.3 billion in order to push forward the construction hybrid and electric cars, with companies to receive a dollar from the government for every $3 put into construction.

However, in January the prime minister announced the scheme would be scrapped in order to fund compensation for those who suffered under the natural disasters in January.

CommSec economist Craig James says the issue prompts questions about how other industries are going to handle the introduction of a carbon tax.

“This sparks further discussion about whether this is one of the industries that will be affected…what will happen to the steel industry, for example? This is something that has wide implications and the government can’t afford to take it lightly.”

GM Holden chairman and managing director Mike Devereux told the AFR that manufacturing plans could be in doubt as its parent General Motors is yet to make a decision on the company’s future.

“We cut a deal with the prime minister of the country in the Lodge back in 2008, showed our business plan, as did Ford, as did Toyota, made investments and then midway through…the rules of the game changed.”

“So it certainly worries a multinational parent when sovereign risk begins to be something that is – bandied about in terms of doing business with Australia.”

Devereux said he had met with Gillard and Abbott to broker a deal.

Innovation minister Kim Carr was contacted by SmartCompany this morning, but a response was unavailable before publication. The minister is currently in the United States.

FCAI’s McKellar says the industry simply wants certainty over whether it can continue to depend on support.

“I think the industry very much appreciates the fact there has been a long period of strong bipartisan commitment to investment in Australia but there have been on occasions decisions where outcomes or policy arrangements have been in place, but only for a short period.”

“This is a concern, and for those who support the Australian industry and investment in Australia, it is important we have an effective operating environment here.”

CommSec’s James says there are several knock-on effects that would hurt the economy if major manufacturers decided they could no longer invest as much in Australia as they have done previously.

“There is a direct impact on jobs, and the knock-on effects are regionally specific. You have parts manufacturers, domestic manufacturers and so on that are part of the industry as well.”

“Such a move would have impacts on confidence levels that are more community-wide implications. And if we lose investment in the car industry, what does that say about our economy?”