From The Australian today comes news that Holden is threatening to close its Elizabeth production plant unless it receives an additional $60 million of assistance from the Federal Government:
HOLDEN wants up to $60 million in extra federal taxpayer-funded assistance as it intensifies contract negotiations with Labor before Kevin Rudd sets a new election date.
South Australia’s Labor government yesterday warned the carmaker could announce the closure of its northern Adelaide plant by the end of the year, with Holden understood to be demanding more than the $275m it was promised last year to secure its operations in Australia until 2022.
Holden also wants to revise an enterprise bargaining agreement with the unions, involving pay cuts of up to $200 a week for production workers. The carmaker’s behind-the-scenes push for increased taxpayer assistance will reopen a policy divide between the Rudd government and the Coalition, which wants to reduce auto industry assistance by $500m…
The Australian understands the company is now seeking up to $60m more from the state and federal governments to honour the commitment to build the new models [i.e. the Cruz and the Commodore].
Threatening to close its Elizabeth plant in the lead-up to the upcoming election unless it receives more taxpayer assistance is is a clever negotiating ploy by Holden. Following the recent announced closure by Ford, the Labor Government would be loathe to see another local car manufacturer fall. $60 million seems a small price to pay to secure votes across South Australia, particularly in light of the Coalition’s rumblings that it would reduce automotive assistance.
Whether it’s a good policy for Australia is another matter. Despite the billions of dollars of taxpayer support already dolled-out, local auto manufacturers remain on life support, and it is questionable whether providing further assistance will only delay an inevitable closure. The global automotive industry is, after all, facing massive overcapacity, with KPMG’s 2012 Global Automotive Survey forecasting the global industry would be 20% to 30% oversupplied in 2016.
That said, in the event that the Australian dollar does fall significantly (as we expect), the local car industry could regain some competitiveness. Although it remains to be seen whether is would be enough to end the procession of subsidies.
