Oz Auto Industry Decries Planned Cuts in Subsidies

The Australian auto industry is warning of serious consequences after the federal government introduces legislation to slash A$900 million ($795.3 million) in subsidies for the country’s automotive-supply chain.

Federal Chamber of Automotive Industry CEO Tony Weber says the move will hit the 45,000 workers directly employed and more than 100,000 workers indirectly employed in Australia’s automotive sector.

The Automotive Transformation Scheme (ATS) is a legislated entitlement scheme that provides assistance for the production of motor vehicles and engines, investment in R&D and in plant and equipment.

Weber is calling on the Parliament to reject the legislation, saying it is important the government realize the impact any cut to the ATS would have on the auto-supply chain, which already has  factored ATS funding into its long-term business plans.

“If the amendment bill passes Parliament, it will reduce the Automotive Transformation Scheme by A$900 million and intensify the financial pressure on the automotive supply chain, at a time when they are trying to transition their operations into new business area,” Weber says in a statement.

The legislation comes after the government announced this year’s budget would cut A$500 million ($443.5 million) from the ATS in 2015-2017 and the program would be abolished at the end of 2017.

Introducing the legislation, Industry Minister Ian Macfarlane told Parliament that in light of the decisions by local automakers GM Holden, Ford and Toyota to cease manufacturing in Australia by the end of 2017, the government determined that it was appropriate to terminate the ATS on Jan. 1, 2018.

“The total amount of capped assistance for stage one will be reduced by A$200 million ($177 million) to A$1.3 billion ($1.15 billion) for 2011-2015 and stage two by A$700 million ($621 million) to A$300 million ($266.1) million for 2016-2018,” Macfarlane says.

Despite these reductions, Macfarlane says, funding of about A$700 million ($621 million) remains available under the ATS to support vehicle manufacturing and supply-chain companies over the four financial years from 2014-15.”

“Passage of this bill provides certainty for ATS participants about the level of assistance available for the final three years of the scheme, which will assist their future business planning and decision-making,” he says.

Labor Party Member of Parliament Antonio Zappia says the government led by Prime Minister Tony Abbott simply does not understand the importance of R&D to Australia's future.

“It now is turning its back on research and development dollars that car makers were putting into this country,” the South Australian MP tells Parliament. “And many of the research and development dollars from the car makers in turn were flowing on to other industry sectors that benefited from that investment.

“We are going to lose all that, because the government has no interest in car makers in this country.”