industry
12 Nov 2008
Another Joyride For The Car Industry
This week federal Minister for Industry Kim Carr released a $6.2 billion automotive industry assistance package. What it is about cars that so fascinates politicians?
Cars. You probably own one. If you live in the suburbs, you actually need one. And apparently if you are the Prime Minister of any self-respecting industrialised nation you need the ability to make one.That's why industry policy is back under the Rudd Government. And when it comes to industry policy in this country, one industry gets very special treatment.
The idea that governments can and should support specific industries — often ones that are shedding jobs, and thus hurting voters — is not one that many economists support. It's long been out of fashion at places like the Productivity Commission and the Treasury. Let the free market operate, say the neoclassical types like Sinclair Davidson.
But with Kevin Rudd and Kim Carr at the wheel, preferential industry policy is on track. The Rudd Government seems determined to pick winners, if necessary by throwing taxpayers' money at multinational corporations in the hope that they'll create wonder products like green cars or clean coal power plants. "I don't want to be a prime minister of a country that doesn't make things any more," Rudd told the 2007 ALP National Conference.
Politicians, especially Labor politicians, are perennially fascinated by manufacturing. It has traditionally created the kind of well paid, unionised jobs that are disappearing so fast in rich countries like Australia and the US. Indeed, the ALP has a history of industry policy that dates back to the foundation of the party itself: the notorious White Australia policy, for instance, was championed by the Queensland ALP as a way of keeping cheap "coloured" labour out of the country to prop up working class wages.
In the 1980s we had John Button. The Hawke government's charismatic industry minister spent several years and billions of dollars coming up with the "Button Plan" for the Australian auto industry. The idea was to reduce automotive tariffs and get manufacturers to share costs. Australian consumers got the dubious benefits of "badge engineering", where the same car was sold by two different manufacturers under different brands. Remember the Holden Apollo? No, I didn't think so.
Industry policy, 2008 style, is represented by the auto industry assistance package announced by the Rudd Government on Monday. It's a 12 year, $6.2 billion handout that aims to prop up Australian car manufacturers at a time of global over-capacity in the industry.
Any way you look at it, this is a risky policy. Twelve years? Can Ford and GM even last 12 weeks? The giant US manufacturers have been smashed by the American recession and are burning through their cash reserves at the combined rate of $US1 billion a week. Detroit's Big 3 have long relied on gaz-guzzling tracks and SUVs and ruinous credit incentives to get US consumers to buy. That's not working anymore and their proposed saviours — fuel-efficient small cars and the much hyped Chevy Volt — may not arrive in time to save either company. One of Barack Obama's first decisions is likely to be whether to bail out the big US auto companies.
What is it about cars, roads and freeways that so fascinates Australian politicians? Even under John Howard, the Australian car industry received plenty of preferential treatment, and Australia's premiers and mayors are still addicted to a freeway-building fetish that flies in the face of any sensible analysis of our carbon-constrained future.
The problem, of course, is voters. Australians love their cars and they hate sitting in traffic. We have an unashamed love for car culture (who doesn't love the parking scene in The Castle?) and motor sports remain big drawcards on our sporting calendar. We also have an aggressive automotive lobby led by state-based motoring clubs like the NRMA, RACV and RACQ which has only recently begun to be balanced by cycling, pedestrian and public transport users groups.
In many ways, cars have become fetish objects in Western societies, much more significant and electorally sensitive than their declining economic and social significance warrants. When was the last time you heard a politician stand up for the hairdressing industry? Service sector jobs employ many more Australians than the manufacturing sector, but somehow they don't capture the glamour of "making things."
It's time Australians debated the merits of automobiles more generally. Cars are wonderful devices for personal freedom and mobility. But they can also be a cage with leather seats, condemning workers and families who live in the sprawling outer suburbs of our cities to spending years of their lives in tedious, sometimes dangerous traffic — as the Australia Institute's 2005 paper "Off to Work" detailed. Cars pollute the atmosphere, they kill and maim their drivers and occupants, and they're helping to make us fat. The failures of our freeway-building transport planners have turned our suburbs into what epidemiologist Sarah Hinde calls "a cultural economy of car reliance."
While we're having this debate, we might also consider the merits of funnelling billions of dollars to multinational corporations, even if Kim Carr insists that more than 200 Australian component manufacturers will also benefit.
As the Government's own innovation report, released earlier this year, points out, there are better ways to stimulate innovation than handouts to big manufacturers. Tipping $500 million a year into the Australian Research Council would go a long way towards achieving Terry Cutler's recommendation of doubling Australia's public research spending in 10 years. Instead, it's all going to be spent on a failing industry.
Let's hope consumers really want to buy those hybrid Commodores and Camrys.
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Australia in my view really doesnt have any car industry left anyhow. I think most cars are imported into Australia now days anyhow. Australian tax payers should not be propping up these failed car makers and helping them out. Cars are after all a small part of Australias climate change problem.
Australian politicians need to get real and start really spending some big dollars on public transport otherwise Australia will be classed as a backwater compared to the rest of the world -if it isnt already seen that way?
Rudd needs to get real and start talking to the Greens on some of these issues.
Ben, IMHO it’s a case of the Labor Party getting back to its roots. Whereby the working class gets to root the wretched providers of capital. It would seem to be abundantly clear (after all it is an industry of the 19th and 20th century, as out of date as child labour and gasometres) the auto-industry has developed the staggers. Look what’s happening in America.
The auto-industry is a haven for employing the unemployable- I understand the necessity to provide jobs for people who leave school at the age of fourteen and can barely read the sports pages. What I fail to understand is that the taxpayer has to fund these drones, AND to support an ailing industry, by funding a company like Toyota who have more money than the combined debt of OZ then be slugged in triplicate, to pay money all over again for an idea such as the ‘Green Car’ which, will be out of date before the first models come off the assembly-line. I would love to hear the screeches of outrage if Chemists were to try on this little stunt. Ditto any group which employs trained people.
Given the extent of the credit crisis and the massive leverages involved with the banks’ exposure to our own Australian mortgages industry, I would personally like to see them try to bail even the Fish and Chip shop industry out, much less the auto manufucturing industry.
Now, an attempt to make like China and spend some money on infrastructure or on import substitutiing industrialisation, perhaps through the process of technology transfers, might be a better bet than attempting to prop up a bad business at a time when we rank amongst the most indebted nations in the world with one of the worst capital accounts and lowest production growth per capita.
Characterizing Ford and Holden operations as part of a failed industry is harsh .
Let’s try a more reasoned approach :
Over the last 20 years Ford and Holden (F & H) have lifted their game to the point of producing a world class niche model , the large family sedan . These cars cater to the preferences of Oz motorist for big cars & big powerful engines.
The economic benefits of local development and production are obvious.
These preferences are slowly changing.
The difficulty has always been in the economics of doing this in a small insignificant country.
F & H’s parent companies have had no interest in intergrating these products into their overall plan. Only in recent years has Holden found a few small niche markets they have been allowed to export to . Their persistence and the respect engendered by the quality of the engineering they do on a shoe string budget has kept the industry alive.
Throwing money at the industry will be ineffective because it is head office who has no interest in our local industry, when an export quota of 5,000 Falcon and 5,000 Commodores into other markets would make all the difference, so much for free trade agreements.
Venise, Rude and arrogant comments about working class people are completely out of order. Have you consider all the world class engineers and design staff Ford & Holden employ , more your class of people ?
This is the importance of the industry the diversity of employment it offers , and the ability to export design and engineering services to their parent companies.
Hi Jonah, thanks for those comments. But your comments about the difficulty of success for car manufacturers in a small country like Australia is a symptom of the problem. While manufacturing is an important part of our economy, it’s also one of the most trade exposed. I’d much prefer this government money spent to lure some of those talented engineers and designers to other industries, like renewable energy, which makes products the world desperately needs, rather than try and prop up the domestic car industry, which makes products the world already has far too many of.
Ben,
From what I read about the announcements on this funding, I thought the idea was to get a start on making forms of transport likely to be more energy-efficient, or even able to take advantange of renewable energy.
There really isn’t much point in developing renewable energy if you’re not going to use it, is there ? Or if you are going to sit back and watch the continuing use of products that burn non-renewables at a greater rate?