South Australian Premier Threatens to Withhold GM Holden Funding

An irate South Australian Premier Jay Weatherill is threatening to withhold agreed funding for GM Holden after the auto maker announced 500 job cuts yesterday, 400 of them at its Elizabeth plant, in a bid to survive as a manufacturer.

The state premier says the company’s decision is “inconsistent with the terms agreed” for a co-investment package it negotiated last year with the federal and state governments to support GM Holden's future in Adelaide until at least 2022 and help make the transition to a high-value, advanced-manufacturing industry.

The A$275 million ($288.3 million) package is made up of A$215 million ($225.3 million) from the federal government, A$10 million ($10.5 million) from Victoria and A$50 million ($52.5 million) from South Australia.

In a statement to the state legislature, Weatherill says the contribution from South Australia was to be paid in two parts: A$25 million ($26.25 million) in 2016-2017 and the other half in 2017-2018.

“In negotiating the agreement, the state government stipulated minimum employment levels, minimum production levels and minimum local supplier content levels as terms of the agreement,” a government transcript quotes him as saying.

“We also required that GM Holden and (parent General Motors) participate in a working group to position the local automotive industry within the GM global supply chain and to assist the industry to diversify.”

Weatherill says these conditions, among a range of others, were set out in letters he exchanged with GM Holden Managing Director Mike Devereaux and were agreed to by GM International Operations President Tim Lee.

He says Lee’s letter confirmed that as a result of the government support GM would proceed with its plan to build two all-new cars at Elizabeth in the second half of this decade with investment from GM of more than A$1 billion ($1.04 billion) and that this would result in GM Holden operating at Elizabeth until at least 2022.

The parties have since been negotiating on the details of the funding agreement, which is yet to be finalized. “But the fundamental terms of our agreement are clear and in writing and expressed in the exchange of letters,” Weatherill says.

GM Holden’s announced job cuts at its plant in South Australia puts in breach one of the conditions that both parties had agreed to in the letters. “I am deeply frustrated and angered by the way the announcement of 400 jobs being shed has come about,” he says.

“I met with Mr. Devereux yesterday, where he conceded that the effect of his announcement was inconsistent with our agreement and that the matter will require further discussion. I am meeting with Mr. Devereux to commence those discussions later this week.”

Weatherill says his government remains committed to an advanced-manufacturing sector in South Australia and sees the development and production of a new model at GM Holden’s operations in Elizabeth as an important contributor to this sector.

“We will approach our discussions with Holden with a view to continuing to support this important contributor to our economy,” he says.

“However, we will not be providing financial assistance to Holden without stringent and enforceable consequences for failing to meet employment, production and local-content targets, as well as other conditions which contribute to a broader economic benefit to the state.

“Given we have not paid any funds yet to Holden, I make it clear that we will not do so unless new acceptable terms are reached with Holden.”

At the federal level, acting Industry Minister Gary Gray says the Labor government remains committed to the automotive sector. “We will work with the industry to ensure it is sustainable in a period where the Australian dollar is very strong,” he says in a statement.

"(GM Holden) also makes clear that this restructuring is part of a broader move to make its operations more competitive and ensure it is well-placed to retain production in Australia into the future.”

Gray says the automotive manufacturing industry is an integral part of the Australian economy, paying the wages of about 250,000 Australians employed either directly in the sector or indirectly in related production and service industries.

“It is a cornerstone of the wider manufacturing sector which employs around 1 million Australians and it is the base of advanced manufacturing in Australia,” he says.

“Our commitment to the sector is why we are investing A$5.4 billion ($5.7 billion) to 2020 under our New Car Plan. This will help fund investment and innovation by the car industry and it creates the policy certainty needed to support long-term investment.”

However, the opposition coalition, widely seen as the government-in-waiting with a general election called for Sept. 14, has its doubts. Its innovation, industry and science spokeswoman Sophie Mirabella says the GM Holden job losses raise serious questions about the federal government's assistance to the auto industry.

The Labor government made A$249 million ($261 million) available to GM Holden and Ford Australia with no transparent criteria and without asking for any guarantees about jobs. Mirabella says in a statement.

“Tens of thousands of car industry jobs have already been lost under Labor. The other critical industry indicators such as vehicle production, exports, R&D, turnover and productivity, have all dropped.”

She says the coalition’s “better way” includes a commitment to a review and a funding model aimed at the long-term viability of the industry, less regulation and a stable economic and policy environment that allows for consistency, certainty and confidence in decision-making.

The Australian Manufacturing Workers’ Union says the GM Holden announcement shows the need for greater government intervention to allow Australia to reap the flow-on benefits of a strong auto industry.

"These job losses show how necessary co-investment and other direct government intervention in the economy are for Australia’s car and manufacturing industry at this time,” AMWU President Andrew Dettmer says in a statement.

“The car industry is crucial for Australia’s economy, both in terms of direct employment and the thousands of other manufacturing jobs it supports as well as the advanced manufacturing know-how it provides.”

The GM Holden job losses reinforce the need for local and state governments to provide greater support to the local manufacturing and car component industries, Dettmer adds.

“A strong car industry drives training, skill development, innovation and the development of manufacturing infrastructure, greatly benefiting the whole industry.”