CANBERRA – Australian Industry Minister Ian Macfarlane warns Australia's car industry has reached a "low-water mark," below which it cannot survive.

On the eve of his trip to Tokyo to seek greater Australian involvement in global supply chains, Macfarlane tells the Melbourne Age newspaper the country's domestic auto makers – Ford Motor Co. of Australia Ltd., GM Holden Ltd., Mitsubishi Motors Australia Ltd. and Toyota Motor Corp Australia Ltd. – have an obligation to use Australian-made components and provide technical help to domestic suppliers in return for the billions of dollars worth of help they have received from Australian governments.

Ian Macfarlane

He says taxpayers have contributed A$7.2 billion ($5.5 billion) in subsidies over the last 15 years to the four auto makers, and it is time that they make a bigger commitment to use components supplied by local manufacturers.

"It is very hard times, and as a government we have got to call in some favors," Macfarlane says in the report. "I'm not guaranteeing success, but I'm going to have a damn good go."

With some new Australian-built models now using just 56% local content, Macfarlane says the common view is that "if you get below 50% local content, it's easier to bring the car in fully assembled." (See related story: Australian Suppliers Face Tough Times Ahead)

"This is the low-water mark for the Australian car industry,” he says.” I mean Victoria is half the car industry in Australia, and we can't afford to see the car industry not improve. It's not going to be easy; it's going to be very hard."

Macfarlane says the government had believed the industry was set for the future two years ago with the release of a new 10-year car plan.

"But the new issue is China,” he says. “We can't afford to lose contracts in local cars to overseas components, and that's what the emphasis is at the moment: to turn that around. It's quite a task."

Macfarlane made his comments after announcing a A$108 million ($83 million) scheme aimed at spurring greater investment in research and development by the country's four domestic auto makers.

In a statement, he is calling for funding applications from Ford, Holden, Mitsubishi and Toyota for projects that are expected to focus on emerging technologies in the automotive industry.

“The Motor Vehicle Producer Research & Development Scheme is part of the government's A$4.2 billion ($3.2 billion) post-2005 assistance package for the Australian automotive industry, which is designed to keep it internationally competitive,” Macfarlane says.

“In this round, there is A$108.6 million ($83.1 million) available for R&D projects that will help to further bolster the industry and focus on areas such as fuel economy and low emissions.”

The scheme is competitively based, and successful projects are rewarded with 45 cents for each dollar spent on eligible R&D. Applications for funding close Nov. 30.

Three local projects, worth A$41 million ($31 million), were awarded funding in April for work on state-of-the-art engine initiatives, fuel economy and emission improvement projects, vehicle safety and intelligent systems.

“We will be delivering the message in person to the decision makers in Tokyo – and Detroit next year – that Australian manufacturers deserve greater consideration in global supply chains, because of our proven ability to supply competitively,” Macfarlane says.

“This is about promoting one Australian auto and components brand, based on our ability to produce quality and innovative products. I think it's a message which needs to be heard firsthand in the overseas head offices.”