Economists and unions dispute effectiveness of Holden package

Updated March 22, 2012 12:56:00

Unions and representatives of the automotive industry agree that the Goverment's assistance package will make Holden more globally competitive and will provide jobs. But an industry economist says there's no reason to support an industry that can't stand on its own two feet.

Source: The World Today | Duration: 4min 26sec

Topics: automotive, business-economics-and-finance, government-and-politics, sa, australia


ELEANOR HALL: Representatives of the automotive industry say the Government's assistance package will make Holden more globally competitive. The unions say it will help employment security in the industry and in the broader economy. But an industry economist says there's no reason to support an industry that can't remain competitive on its own.

Timothy McDonald has our report.

TIMOTHY MCDONALD: Holden's main factory is in South Australia, but many of the components are made in Victoria; the Victorian government will also be putting in some money.

The Premier, Ted Baillieu, says it's a sound investment.

TED BAILLIEU: We think manufacturing's important, obviously for the jobs, but also for capability. And I've said before, we need to anticipate future movements in the dollar, and I don't want to be in the situation where, in 10 years time, we say, 'Well, what happened to that industry?' when we could have maintained some capability. And that's what this is about.

TIMOTHY MCDONALD: The unions too, agree that the package will help workers both in the industry and elsewhere.

Paul Bastian is the acting national secretary of the Australian Manufacturing Workers Union.

PAUL BASTIAN: So this is a really good news - piece of good news for - not just auto workers, direct auto workers, but indirect auto workers. There's 200,000 that rely on the auto sector, so this is great news: it's great news for Holden workers, great news for all of those that work in the auto sector. And it's going to provide some certainty and security for a key sector of our manufacturing industry. So it's very welcome news, and it's what governments should be doing.

TIMOTHY MCDONALD: The Federal Chamber of Automotive Industries says the package will help Holden make what are known as global platforms, which are cars that are manufactured in many countries, but are essentially the same vehicle.

The CEO, Ian Chalmers, says often, Australian car-makers are competing not so much with each other, but for with other branches of their own company elsewhere in the world.

He says this latest package shows that Holden has been successful in putting their case to General Motors' head office in Detroit.

IAN CHALMERS: Well, I think the case has been successfully made to Detroit, that General Motors will manufacture global platforms for at least another 10 to 15 years here in Australia - in Melbourne and in South Australia, in Adelaide. So that's a battle that's effectively been won for the next extended period.

But beyond that, it's not just about the big assemblers, the big plants that General Motors owns here in Australia, but it's the hundreds of companies, individual, separate companies, that manufacture small, or sometimes quite large, assemblies; but they are the component manufacturers that supply components to the companies which actually assemble and build the cars.

TIMOTHY MCDONALD: But not everyone's convinced. Henry Ergas is professor of infrastructure economics at the Smart Facility at the University of Wollongong.

HENRY ERGAS: Every Australian is being forced to pay for a Holden even if they have chosen not to buy one. And what do we get in exchange? We're getting a small number of jobs being purchased at an extremely high price, with not only the consequence of burdening the taxpayer, but also starving our booming resource and construction industries that desperately need skilled labour, starving them of the labour they need and of labour they could pay for standing on their own two feet, rather than at the taxpayer's expense.

TIMOTHY MCDONALD: What about the argument that it's a strategic industry, and that having this industry indeed helps others downstream? Do you think there's any merit to that?

HENRY ERGAS: Well, that argument has been run for many, many years, since time immemorial in this country the car industry has argued for special favours, and it's received those special favours - billions of dollars in assistance year after year. And what has it gotten in exchange for that? We've got an industry that isn't capable of standing up to world competition.

TIMOTHY MCDONALD: That's a position with which the automotive industry strongly disagrees. Ian Chalmers says car companies receive some form of government assistance in almost every country where there's manufacturing.

But Henry Ergas says that for some companies, like BMW and Audi for example, that level of assistance is far less significant.

ELEANOR HALL: Timothy McDonald reporting.