Ford Australia, Parts Makers Press for Government Support

Ford Australia tells a state inquiry an end to direct government grants to the automotive industry could be damaging to the sector and the economy.

The warning comes in a written submission to a Victorian Competition and Efficiency Commission inquiry into manufacturing.

Ford Australia wants aid to industry continued.

“Ford Australia believes this approach is potentially flawed and could cost Victoria important new investment opportunities,” writes Elly Haug, government liaison manager for Ford.

“A co-investment model of investment is highly effective in securing new business enhancements, including investment in R&D, new technology and new model programs for Victorian manufacturing, thus ensuring its continued capability and competitiveness in a global context.

“They key to attracting more investment companies resides in the development of profitable business cases,” Haug writes. “A competitive cost structure is crucial.”

Meanwhile, the Federation of Automotive Products Manufacturers (FAPM), representing more than 100 companies employing more than 41,000 people, says parts makers in Australia face major challenges.

These include auto makers’ global sourcing policies, the economic and manufacturing rise of low-cost countries, soaring input and production costs, the rising Australian dollar, skills shortages and a proposed national carbon tax.

It says in its submission that Australia is only one of 13 countries worldwide with capability in all aspects of vehicle production.

“To maintain and grow this skill base requires an Australian market with sufficient volumes of vehicle production to enable the sector to remain competitive,” it says. “We know that historically, vehicle production has been up over 400,000 units per annum, with approximately 336,000 units made as late as 2008.”

FAPM says its members generally consider the output of between 200,000 and 250,000 units a year the new reality.

“Clearly, reductions in domestic-vehicle production of this magnitude create enormous financial pressure on component companies. For many suppliers, this level of production is simply not enough to sustain their domestic capability,” it says.

The parts-makers say access to overseas markets is essential either through exports of manufactured goods, licensing technology or forming joint ventures with overseas partners for manufacture in their markets.

“Ongoing support from the Victorian government is necessary to assist automotive SMEs to build these new business relationships,” the submission says.

FAPM wants governments to play a role in attracting foreign investment in the automotive industry, saying Victoria is just one of dozens of states within the Asian region competing for investment funds from multinational parent companies.

“But we’re not only talking about foreign investment into the supply chain; other countries are trying to attract new vehicle manufacturers to boost the manufacturing capacity of their economies and take advantage of the associated spillover benefits.”

To compete with China, Thailand, Malaysia, India and Vietnam, the industry needs to work with governments to attract investment.

The FAPM says other regions and countries in Asia are identifying their competitive advantages and seeking investment opportunities to fulfill them. Australia must do the same. “We need to work to attract this footloose automotive investment to Melbourne,” it says

One suggestion is having parts makers and government foster closer relationships with Ford, General Motors and Toyota around the globe, not only to open the door to export opportunities but also to maintain their position as a supplier to Australian-made vehicles.

“There is a role for government to assist with innovation and investment attraction, as well as assisting automotive-components manufacturers develop diversification strategies,” FAPM says.