Oz Sees LPG as Answer to GM, Ford Exits

Australia begins planning for life after GM Holden and Ford with a proposal to build world-class conversion facilities in Victoria and South Australia to supply next-generation liquefied-propane gas vehicles to the local market, including SUVs, small cars, light-commercial vehicles and hybrids.

The Victoria Automotive Chamber of Commerce and Gas Energy Australia tell Victoria Premier Denis Napthine at a state government automotive industry roundtable that three plants, in Melbourne and Geelong in Victoria and Adelaide in South Australia, could produce 45,000 next-generation vehicles and create more than 500 jobs.

VACC Executive Director David Purchase says the initiative would require industry and government cooperation to create a niche manufacturing capability for the Australian auto industry that would be sustainable in the long term and make LPG vehicles a viable alternative for new-car buyers.

“These vehicles are not the LPG-converted vehicles we know now,” Purchase says in a statement. “The vehicles rolling off the new production lines will utilize the most advanced LPG technology and include production of LPG-powered hybrid vehicles.”

The production facilities would operate in association with a new national Center of Excellence to be established in Melbourne and provide the research and development to deliver a wide range of next-generation LPG vehicles, such as is available in Europe.

The center would use displaced high-end skilled labor and involve training production protocols, accreditation and product certification.

Gas Energy Australia Director and CEO Michael Carmody says this is an opportunity to create world-class LPG manufacturing facilities, using European and American production methods.

The proposal comes after GM Holden’s decision to end vehicle production in 2017 with the loss of 2,900 jobs.

Meanwhile, Prime Minister Tony Abbott announces in Canberra a A$100 million ($89 million) fund to support initiatives in regions facing pressure in their manufacturing sectors after GM Holden and Ford shutter plants.

The fund, administered by the Department of Industry and commencing in 2014, will provide support for existing component makers in Victoria and South Australia to adjust their business output or business model to non-automotive and overseas customers.

Grants will be available to both existing and new businesses that establish or expand manufacturing operations in the two states, with preference for those companies that employ former automotive workers. The funding also will aid the commercialization of R&D in the automotive component manufacturing sector, leading to new products or processes.

“The Australian government will contribute A$60 million ($53.4 million) to the fund and the Victorian government will contribute A$12 million ($10.7 million),” Abbott says in a statement. “The remainder will be drawn from the South Australian government, and our expectation is that Holden will make a contribution. GM Holden has indicated it has set aside at least A$100 million for costs relating to the wind-down of its Australian manufacturing obligations.”

Industry Minister Ian Macfarlane later tells a news conference he has had initial discussions with GM Holden and that it is receptive to contributing to the fund.

“We'll get down to the detail with them, but the company understands its responsibilities in terms of the workers, and bearing in mind that the company is planning to continue to operate until 2017, it's a process that we can manage,” he says.

Abbott says the government plans to develop a national industrial investment and competitiveness agenda to help the auto industry transition from heavy industrial manufacturing to higher value-added production.

“The federal government understands that South Australia and Victoria have acute pressures due to the departure of Holden and Ford,” he says. “Still, they are not alone, and Australia’s manufacturing industry faces challenges across the board. Industry policy in Australia must become proactive to ensure that our manufacturing industry is competitive and incentivized to create jobs and investment.”

Abbott has ordered two reviews, chaired by Macfarlane, that will encourage investment and innovation in high-growth sectors in the affected regions, further invest in infrastructure to boost productive capacity, support the diversification of automotive supply chain companies and support the training and redeployment of workers displaced by closures.

“Australia must develop a plan for the future if we are to sustain and grow our manufacturing industry for the future,” he says. “Our challenges are greater than the departure of key automotive players and affect all states and territories.”

Abbott will chair a taskforce, made up of the treasurer, industry minister and minister for trade and investment, that will make recommendations to the government by the end of June 2014 regarding the proposed national industry investment and competiveness agenda.

“We will do what we can to ensure that Holden and Ford workers move from one good job to a better job when they leave those companies in 2016 and 2017,” he says. “That means ensuring they get the best possible economy in which to move.”

Macfarlane tells the news conference he will have meetings with industry groups and companies through January.

Abbott signals that subsidies for troubled industries are a thing of the past under his regime. “No country has ever subsidized its way to prosperity,” he says. “It is profitable, private businesses which are the engine of the prosperity that all of us enjoy.”