Economist Slams Government Aid to Oz Auto Makers

An economist attacks Australian government aid to auto makers, and singles out Ford as being undeserving of taxpayer support because of its lack of commitment to the country’s automotive manufacturing industry.

Economist Nicholas Gruen, who worked in the office of then-Industry Minister John Button in the 1980s and helped develop the policy to deregulate manufacturing protection, tells the Australian Financial Review there should be a radical recasting of auto-industry assistance to support investment by emerging producers from India and China.

Gruen, now CEO of consultancy firm Lateral Economics, says those companies are coming to access skills, technology and market know-how in the same way Japanese auto makers did in the 1960s and ’70s.

“We should only be giving money to companies that have a strategic interest in developing Australian assets,’’ he says.

“Ford is not such a company. For a decade or more they have been in a risk-minimizing, retreat-managing mode in Australia and have been collecting tips from the government on the way out.

“We should have more self-respect than to be offering money to a firm that has shown it doesn’t particularly want to be here.”

Gruen calls Canberra’s automotive industry strategy unimaginative. “We certainly should not be bailing out the least competitive of the manufacturers,” he says. “By that, I mean Ford.”

Gruen says it would be far better if the cash had gone to support the sale of Ford’s Melbourne and Geelong plants to an Indian or Chinese player that could add Australian-made large cars to their product ranges.

“Ford, I guess, was interested in its Australian assets in the 1950s and ’60s, but times have changed. Today it is interested in its assets in Europe and America and Asia. It isn’t interested in some strange collection of industrial assets at the bottom of the world making a strange car for a relatively small market.”

The new debate comes as the Australian government seeks a court order to permanently suppress 39 ministerial memos, briefing papers and background material the Industry Department mistakenly sent in uncensored form to the Financial Review under a Freedom of Information request.

The newspaper says the documents include information on the government’s A$34 million ($35.2 million) subsidy to Ford and a A$275 million ($284.9 million) payment to GM Holden earlier this year, as well as on billions of dollars of budget payouts scheduled over the rest of the decade.

Former Automotive Industry Authority Chairman Bill Scales rejects Industry Minister Greg Combet’s claim the documents contain commercially sensitive information disclosed to the government by the three local car makers, Ford, GM Holden and Toyota.

Scales, now chancellor of Swinburne University of Technology, calls the secrecy around such company-specific handouts “outmoded and schizophrenic’’ and tells the newspaper it is simply unbelievable that the foreign-owned auto makers would disclose truly confidential information to governments.

He says company-specific taxpayer handouts to the foreign-owned companies demand a higher level of transparency and public disclosure to guard against “the insidious corruption of our important public institutions.’’

Companies receiving such subsidies should agree that all information about the amount, rationale and economy-wide benefits of the handouts be made public.

Writing in the Australian Financial Review, he rejects the Industry Department’s argument that releasing the information could damage Australia’s international relations. He also dismisses arguments that Ford, GM Holden and Toyota did not already have significant information about each other’s Australian operations.

“This means that sensitive information is not only difficult to keep confidential,” he says. “It is often deliberately shared between competitors for good commercial reasons.”