Labor calls for Aust car industry review

Speculation that Ford might shed 600 jobs from its engine factory in Geelong has again focused attention on the sorry state of Australia's car industry. Labor is calling for the Government to rethink its plans to drop some of its support for the industry but an observer says the industry needs less mollycoddling, not more.

Australian car makers are struggling to stay afloat, even though they survive behind a tariff wall that adds 10 per cent to the cost of foreign cars and enjoy billions of dollars in tax breaks and government subsidies.

Profits and local market share are falling, a higher dollar is making exports more expensive and big cars are hard to sell in a market hungry for smaller, greener models.

At stake are the 81,000 jobs directly tied up in the car and component industry, as well as perhaps 400,000 more that feed off the industry.

Car making is vital to the economies of Victoria and South Australia. The stakes are so high that governments, particularly the Federal Government, provide massive support through the 10 per cent tariff wall and as Industry Minister Ian Macfarlane points out, billions of dollars in tax relief and handouts.

"By lowering tariffs and providing the industry with $7.3 billion worth of assistance, we've allowed that industry to become internationally competitive, which in the long term will be the difference between the industry surviving and not surviving," he said.

Mr Macfarlane says the Federal Government's assistance has developed a Camry or a rear-wheel drive GMH that can be sold anywhere in the world.

"The money that we provided last year to Ford as extra assistance is specifically targeted at developing a left-hand drive vehicle along with the fact that, of course, right-hand drive vehicles can be exported as well," he said.

Inquiry pledged

But Labor industry spokesman Senator Kim Carr says it is time to recast the Government's plan to lower the tariff barrier from 10 to 5 per cent by 2010.

"What we're saying is upon that election, we will immediately establish an inquiry into all aspects affecting competitiveness of the industry," he said.

"This is something that the Government should do right now but the Government has refused to do.

"We had a parliamentary inquiry last year that on a bipartisan basis said it was time to have a look at restructuring the assistance packages.

"This Government has sat on its hands and has assumed that things that worked in the past are going to work in the future. The world is a very different place.

"The Government has already legislated for tariff reductions and the Government has said that there's no need for change. We're saying that there is a need for change and to look at the full package."

'Mollycoddling'

Institute of Public Affairs work reform unit director Ken Phillips believes that the Australian car industry has a future but what it needs is less support, not more.

"If an industry is going to survive, it survives because it's got its act together and it's not relying on government to get its act together," he said.

Mr Phillips says the future of the car industry lies within niche markets.

"China and India are just throwing all concepts of manufacturing, of business, throwing everything of the last 100 years out the door and putting it into a different scale. All we need to do in the manufacturing area is to discover niche markets," he said.

"With the scale of the markets overseas, the niche market, any niche market that you can pick is larger than the entire Australian market.

"So the future for the car sector is discovering, like everyone else, those niche markets.

"I'm not underestimating the scale of the problems they've got at the moment but if you look out into the future, there's no reason why the industry shouldn't have a long-term viable future."

source : abc.net.au