Joint Media Conference, Deputy Prime Minister Warren Truss and Minister for Industry Ian Macfarlane
11 December 2013
Subject: GM Holden
WARREN TRUSS: Ladies and gentlemen, it was obviously a great disappointment to receive the call this morning from Mr Devereux, the general manager of Holden in Australia, to be informed that Holden would be ceasing their manufacturing in Australia from late 2017. The car manufacturing industry has been a great Australian industry. Holden has been an Australian icon from as long back as we can remember. Many Australians have happy personal experiences with their Holden and over the years have been loyal and faithful followers of the brand.
But as Mr Devereux has indicated, it's becoming more and more difficult to be a manufacturer in Australia. Our costs are high. They're high by world standards and, of course, accompanied with a high dollar, has made it difficult for Australian manufacturers, including General Motors, to be able to be competitive on an international market. Over the last six years, car manufacture in Australia has declined by a third and we've lost, of course, Ford earlier this year and earlier Mitsubishi.
The fact that the environment in Australia makes it difficult to manufacture vehicles in a competitive global market is, of course, affected also by our high labour costs and high on-costs. Once electricity when was cheap in this country and now it's more expensive. Once it was possible in this country to attract a low cost work force and, of course, that's no longer possible. And all of that creates a very, very difficult environment.
In addition to that, while Australians say they want locally manufactured cars, that they love Holden and Ford and Toyotas, the reality is they don't buy them. We now have over 50 makes sold in Australia. In the US, there's only about 20 and their market is 20 times the size of ours. And so our market is incredibly competitive and that means the volumes of manufacture in this country are small and that adds to the cost.
Now, all of these are reasons why the industry has suffered a decline, but they're not a satisfactory explanation to those workers who now see only a short time left in the job that perhaps some of have been in there for their working life. And I know that today is a particularly difficult day for them and their families. Whilst Holden will still be making cars in Australia for another four years, a lot of workers now know they have to transition to either retirement or some other career.
Now, as a government, we're determined to work with them, the unions, the South Australian and Victorian Governments, to provide whatever opportunities might be available. If retraining is required, we certainly stand ready to do that. We're also working on a plan to transition the economies of South Australia and Victoria, those communities, which are effectively most affected as a result of these closures, to enable them to move hopefully into a new era of manufacturing or new industry, so that new jobs can be created.
Now, of course, this is not the only element of manufacturing that's struggling in Australia at the present time. In my own electorate, we manufacture trains and it's very difficult to be competitive manufacturing trains. We've seen a lot of manufacturers who are associated with the mining sector also moving offshore because the costs of this country have been too high.
Now, that's why we do need to have a competitive economy, why this Government's reform agenda is so important. The carbon tax added about $460 million to the cost of making cars in Australia and that's a cost that should be taken away. It should have been gone by now, but we've been unable to get the passage of the legislation through the parliament.
And, of course, some of the commentary that's being made by the Labor Party today, I think has been, frankly, disgraceful. To suggest that this Government that's been in office for 10 or 12 weeks is somehow responsible for a decision of this magnitude made by a multinational company in the United States is absurd. I would remind you that, again, about a third of the manufacturing industry for vehicles in Australia fell away during their term in office. And then at the end of the term, if that wasn't enough, they came along with a $1.8 billion additional tax through the Fringe Benefits Tax arrangement.
You know, our industry could not afford that imposition and they certainly couldn't afford the extra costs that are associated with the carbon tax. So we need to work constructively together to find solutions. We still have one major manufacturer in this country, a manufacturer with a strong export focus, and Toyota have been more successful because such a large proportion of their product is export.
Now, it's so important that Toyota's given every opportunity to survive these difficult times. The Government's ready to help wherever we can, but ultimately this will be a decision in the hands of the workers over the next few days and the Toyota management.
So it's a significant day for Australia. A company that we've known and loved is no longer going to manufacture here, but there is a future for manufacturing in this country and our Government is determined to do what we can to make manufacturers want to come to Australia and those that we have to grow and expand so that there are opportunities for us to continue to build things for future generations.
Now, I'll ask Ian Macfarlane if he like to make a few comments.
IAN MACFARLANE: Thanks, Warren, and can I just extend on the comments that Warren made in terms of it being a very sad day for the workers, for anyone associated with the car industry, and for me as Industry Minister, I knew when I started this process after I was sworn that there was a risk that Holden wouldn't stay the distance. There had been a number of issues that the company faced in regard to its falling export sales.
We wanted to do everything we could. We explained right at the start it was a process. We wanted a methodical approach to how we position the car industry going forward. We're not looking at a quick fix, we're looking at a long term fix for the car industry. The task for the industry has got measurably more difficult as a result of Holden's decision, but it is not impossible to maintain a component and car industry in Australia.
So my deepest sympathies go out to the workers. I knew when I went through the plant in October that you could tell by the looks in their eyes that there was a level of desperateness. They were looking for a solution. They - the workers there knew they were up against it in terms of Holden maintaining production now. As Warren said, a perfect storm has overtaken them and Holden in terms of their ability to produce cars on a competitive basis in Australia.
The Government's process will now be a dual process. Firstly to ensure that the transition of the economy in South Australia in particular, but also in Victoria to an extent, to a broader base will be supported by the Government and that those workers displaced as a result of this decision will be given support through the various government processes that we've set up and we'll continue to work with GMH as they roll out the wind down in their production.
The second part is obviously to see what needs to be done to maintain the competitiveness of the component industry in particular, but also of Toyota, and we will be continuing with the PC process. They currently are reviewing particularly the auto industry internationally and will hand down an interim report in a week or so's time and then we'll have another report at the end of January and a further report at the end of March.
So we are still - I and the Government still believe the car industry has a future in Australia and we'll be working towards that.
QUESTION: Before the federal election, Holden was quite explicit to both the Coalition and Labor as to what it wanted. It also it wanted an answer by Christmas and it needed an answer by Christmas. You gave them an inquiry instead. Did you call their bluff and lose?
TRUSS: Well, this was no game of poker. We were trying to work to deliver a sustainable motor vehicle manufacturing industry in Australia. When I wrote to Mr Devereux yesterday, the very first sentence was a commitment by this Government to an Australian car manufacturing industry and a recognition of the enormous contribution it's made to our economy and also I listed in that letter the help that we had provided in the past and the fact there was at least a billion dollars still available in the motor vehicle - in the Automotive Transformation Fund which could support the industry.
So that was a clear indication of a willingness to support - of a willingness to play a role, but on the other hand, we did feel that it was important with the speculation that was rife both here and in the United States that maybe a decision had already been made and that this had been withheld from the workers and from the Australian public, that that situation needed to be clarified. That was the purpose of the letter.
QUESTION: Minister Truss, you said the Government's only been in for three months or just over three months, but have you - hasn't your Government taken the $500 million off the table that Holden put out there as necessary for it going forward?
TRUSS: But there was still a billion unused, and so that 500 million was largely irrelevant in the current circumstances. They hadn't used the billion dollars yet. It was uncommitted. So there was significant funding there. Let me also say that we have moved to get rid of the 1.8 billion from the Fringe Benefits Tax, an enormous benefit to the motor vehicle industry, and we're seeking to get rid of $460 million worth of cost associated with the carbon tax. And we've also indicated that we're prepared to work with the industry in a constructive way to make our manufacturing sector right across the nation more profitable and more competitive.
So we - in our short time in office we have been proactive in providing a better environment for the car industry to work in.
QUESTION: Mr Macfarlane, you said in 2012 that governments had to understand that they either continually subsidise the car industry or they had to cut the noose and let them go. Holden was making a decision about a new model that started in 2017 and went out in to the 2020s - 2023 or so. The billion dollars Mr Truss refers scaled right down by the end of the 2020s and it wasn't clear what would be on the table after that. Was - did Holden have an answer from you about whether those subsidies that you acknowledged were necessary would be there for the duration of its investment decision?
MACFARLANE: Firstly let me say that those subsidies were going to continue to 2020 and as part of the process that the Productivity Commission were embarking on we were seeing how those subsidies would be laid out to the car industry. Secondly, at no stage did Holden indicate to me that the timeline that I laid out to them from day one was a timeline they couldn't adhere to now. I'm not privy to the decision making process.
I spoke as the Acting Prime Minister did Mike Devereux today, he advised me that he was told yesterday afternoon by Detroit that a decision had been made to cease production in 2017. That was the first indication I got that a decision had been made and in terms of the time line, as I say, I received no indication that the timeline in relation to the Government's approach through the Productivity Commission and then a considered response to the Productivity Commission would in any way inhibit a positive outcome for Holden.
QUESTION: Minister Macfarlane, do you believe if you had more support in Cabinet - it was briefed yesterday that it was 1:19, you would have won - that you may have been able to save Holden?
MACFARLANE: Well, look, in the end the reality is that Holden's made a decision long before I've had a fair dinkum discussion with anyone in Cabinet. As I say, I was advised yesterday that Holden - GM in Detroit had made a decision but at no stage did it come down to a numbers game within Cabinet. I can assure you that when that time arrives, there will be an open discussion within Cabinet about what we do to support the car industry. Holden made a deliberate decision not to wait for that process.
QUESTION: Mr Truss, you've said earlier on that the Government was looking at how it would support Victoria and Western Australia. I'm just wondering: has Cabinet actually discussed - South Australia, sorry - has Cabinet actually discussed the issue of support for the car industry at any stage, and has it discussed what it might have to do to help these economies in transition, and if not why not?
TRUSS: Well clearly we haven't made plans for something we hoped would never happen. We have had over recent days, some discussion about the likelihood that there would be a need for a program if in fact Holden made the decision that it's announced today. But clearly there - its four years before the company ceases manufacture altogether. I know that there will be a scale-down much earlier than that, and so we will need to have in place arrangements with the relevant state governments, industry sectors and that process is to begin from now so that we are in a position to respond.
QUESTION: Toyota's reaction today has been pretty swift, saying that it has been unprecedented pressure now on the local supply network and our ability to build cars in Australia. With some of this money that was earmarked for Holden, are you open to now giving some of that money to Toyota in the future to ensure they do stay here? And do you admit that there's some within your party that were happy to make the decision they made today?
MACFARLANE: I don't think anyone in the Australian Parliament, let alone within my party, would have been happy to see the decision today. Holden is an icon and it's a vehicle we've all driven. My first car was a Holden and I've had several of them since. In terms of Toyota's comments today, I can understand Toyota being concerned by Holden's announcement today and I understand the pressure that will place particularly on the supply component, supply chain, to ensure that there is a critical mass.
Now what that says to me is we need to redouble our efforts to make sure that the component supply chain in Australia becomes part of a global supply chain. And we can produce components here in Australia, particularly the sophisticated components, that are used all over the world. And Australia for a long, long time, for instance, has led the world in terms of electric power steering. So what we will do, albeit the task may be more difficult, we will continue with the process we began on: a methodical, measured approach to restore the viability of the car industry.
Remember we haven't been in control for six years. We've inherited a position where the previous Government saw the production of Australian-made vehicles drop by 30%, where the number of car manufacturers in Australia fell by 50%, where the number of Australians buying cars - buying Australian made cars - virtually halved. Now that is the climate that we're in. As I said, we always had a fear that because Holden had not embarked on a long-term export strategy and other factors are at play, not the least of which with the parent company which has changed dramatically in the last five years or six years since I was last the minister, would see a negative outcome in regard to Holden.
We are determined to proceed. To see what we can put in place to ensure the viability of the car industry so as I said, we are still confident about the future of the car and component industry. We will still work to see what we need to do to maintain its viability.
QUESTION: Mr Truss, there's been warnings that thousands of jobs will go, component makers will fall over as a result of Holden going. What assurances can you give us that there won't be a recession, particularly in Victoria and South Australia, and potentially nationally as a result of this?
TRUSS: Well I think Ian has got it right. That we have to look at new opportunities now for the parts manufacturers, for those who have been making products for General Motors, to see what opportunities there may be to put some of those products into the global market. Now of course, most of these manufacturers, the major manufacturers, have been exporting componentry over the years.
The free trade agreement with Korea will provide some more opportunities to enter that market with some of our components. And I think there will be niche markets and opportunities for those manufacturers to place their products around the world. As Ian also said, some of this is world-leading technology and cars have increasingly become global including Holdens and Falcons and Toyotas. And so our role in playing in a global automotive industry could still be strong.
QUESTION: Talking about helping two economies transition, structural adjustment, all sorts of things. Is there a risk that this is going to cost you more than it's going to save, to bail out two state economies that you otherwise would have spent on industry assistance? And could I say just separately, on your line about the component industry. The gentleman who's here today from the head of the component parent body, said without a domestic car industry you can't survive just on exports. He said you cut down the trunk and the branches come down with it. Do you think he's wrong?
TRUSS: Well I think it's going to be a challenge, but it's a challenge we want to do what we can to meet. Clearly we want to work with them, and no one can make a promise that every component manufacturer will be able to find a market in another place. But hopefully there will be some that have done well in this area in the past, and others that have the opportunity to do well. And from my perspective, I'd be - in developing a plan for the future, would be wanting to particularly target the opportunities to assist those industries to break into markets in other places.
QUESTION: The announcement on the timing of the Holden decision, were you expecting it before it was announced today? In your answer to [indistinct] it suggested you thought the writing was on the wall and it was going to happen. And second to that, the reports suggest that Holden would have stayed with $150 million dollars a year in commitment from Canberra. Why was that commitment for $150 million a year too much?
MACFARLANE: Can I say two things. Firstly, I did not expect the announcement from Holden and I was shocked. When Mike rang me - Mike and I have a long relationship and I can say fairly frank relationship - and when he rang my personal mobile during another meeting and I took the call, I was floored. In terms of the ask from Holden, there have been a number of asks from Holden that I'm aware of. And remember that I haven't seen all the documentation from the previous Government. The $150 million figure is not correct. Can I just say, that in terms of any ask by any company, it would be reckless by a Government to not have a process where it could assess where the taxpayer's dollar was going to take the auto industry in the next six years or from 2016 forward.
And as I say, both car manufacturers and the component industry agreed to a process where we would have a Productivity Commission report where they would have an opportunity to feed into that report and then the Government would respond to that report and obviously the Government would respond to that report and obviously the Government would take into consideration the PC report. But as was the case last time - and I should add, whether PC did support further support for the car industry - as was the case last time, the Government would then make decisions based around that but not exclusively on that.
So I continued to hope that in terms of the process that we could delay a decision from GM until we made them an offer. But I wasn't prepared to compromise the integrity of the future of the car industry by rushing a decision. Just throwing money at a problem will; never fix it.
QUESTION: Mr Truss, to follow up on that. Wasn't your letter yesterday a clear breach of that process to try to force an early decision by Holden when you'd set up a longer term process?
TRUSS: My letter followed speculation that Holden had already made a decision. Made a decision that they hadn't communicated to their workforce or the Australian people. And that was the reason why the letter was written.
QUESTION: But Mr Truss, Mr MacFarlane's just said he was hoping he could delay Holden's decision until he'd gone through his process. You demanded Holden make a decision straight away.
TRUSS: No, the speculation was they had already made a decision. There were reports in newspapers in the United States and there was feedback around this part of the world that decision had already been made. Yes it would have been our preference to go through the whole process and deal with it in that way. But the speculation around was that the decision had already been made and when Mr Devereux appeared before the Productivity Commission that speculation increased because there was no decisive statement at that stage which seemed to reflect any optimism about Holden staying longer in this country.
QUESTION: But why would it be in Australia's interest to try to force his hand if there was a process going on that was pertinent to his decision?
TRUSS: The issue was not trying to force his hand. It was to indicate, it was to ask him to level with the Australian people if in fact a decision had in practice been made. And if that decision, as had been widely reported, had been made then the Australian people had a right to know.
QUESTION: But he had just spoken to the Productivity Commission hearing for some time. More than an hour. So are you saying that he hadn't levelled with the Australian people?
TRUSS: There was increased concern after the Productivity Commission report that the statements made were anything but conclusive. And that gave rise to a further round of concerns that maybe the speculation; maybe the rumours were actually true.
QUESTION: What happens to the various forms of assistance that are already slated to be given to Holden? Do they get affected by this announcement, and in particular by the scaling down of production?
MACFARLANE: The current plan which I have to remind you, was the plan I laid down in 2003 and commenced in 2005 is still running. And it's a plan of both capped and uncapped components. And some of it is based around the activities of the company. Some of it's based around the R&D effort. That plan will continue and Holden will continue to draw on that plan, as will Ford, who have requested that they remain in that scheme through to their cease of production.
QUESTION: Do you anticipate that you will actually involve less budgetary outlays because they are winding down?
MACFARLANE: Well I'd hope not, I'd hope Holden, who have a particularly good model on the market today, would continue to see supporting sales and that their drawdown of their - well it's not their portion - but their drawdown of the fund would continue at predicted rates.
TRUSS: And if I may return to one of my earlier themes, Australian people can help them make sure they manufacture more vehicles in this country by turning up at the Holden dealers, which are generally Australian-owned and Australian employees, and buying vehicles. Just as Ford can be encouraged to produce more vehicles if people turn up at their dealerships and actually purchase Ford vehicles, and for that matter Toyota as well.
QUESTION: [Inaudible question.]
MACFARLANE: Because Holden didn't bid for the armoured car program.
QUESTION: Just on the component question, you said that you'd look at what you could do to support the components industry, would that include direct subsidies to the sector?
MACFARLANE: Well it already does, and we were already looking at that in terms of where the component industry would fit into any plan going forward. As the acting Prime Minister has said, there is money allocated going forward to 2020. How that money is distributed is part of the auto plan that we're currently working on. Thank you.
Media contact: Mr Macfarlane's office 02 6277 7070