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Australia's Auto Industry Gets $2.4 Billion Aid Package

Australia's government is to inject an extra A$3.4 billion ($2.3 billion) into the ailing car industry to offset tariff cuts and a global economic slowdown, Prime Minister Kevin Rudd said on Monday.

Toyota Prius
Source: toyota.com
Toyota Prius

Automakers build about 320,000 vehicles in Australia each year and employ about 65,000 people, accounting for around 6 percent of Australian manufacturing, and had asked the center-left government to delay tariff cuts to safeguard jobs.

Only three car makers, local subsidiaries of Ford Motor , Toyota Motor and General Motors , manufacture vehicles in Australia. Mitsubishi Motors this year closed a plant in South Australia.

Rudd said his government would proceed with long-standing plans to halve tariffs on imported cars to 5 percent in 2010 from 10 percent, while offering aid to help the A$7.7 billion industry cope with slowing sales amid global economic gloom.

"Some might say it's not worth trying to have a car industry," Rudd told reporters in Melbourne, where much of Australia's automotive industry is based. "That is not my view, it is not the view of the Australian government."

The announcement coincided with calls in the United States for the Bush administration to offer more help to stalled U.S. automakers amid fears of a global recession.

Republican Florida Senator Mel Martinez at the weekend backed calls for a recently launched $700 billion corporate bailout program to rescue GM, Ford and Chrysler LLC with desperately needed cash.

Rudd said Australia would outlay A$3.4 billion from 2011 to 2020 to transform the industry, including money for a "Green Car" fund to help automotive companies design and sell locally-made environmentally friendly cars.

The fund would see the government match industry investment in green cars on a A$1 to A$3 basis over 10 years from 2009.

Other funds would help consolidation in the auto parts sector and help suppliers boost capability. When tied to previous support, the new package lifted total industry backing from government to A$6.2 billion.

High fuel costs and fears of climate warming have seen Australian motorists embrace smaller, more fuel efficient cars in preference to the large sedans that have traditionally made up the bulk of sales.

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Ford Australia last month announced plans to cut 450 jobs amid financial market jitters as industry figures for October showed overall car sales down 11.4 percent on last year.

Rudd said the auto industry was vital to Australia's manufacturing ability and played a key role in an economy largely dependent on road transport.

But the government had also sought assurance from car makers that new industry investment would follow, despite an economic slowdown expected to trim growth to around 2 percent and drive up unemployment by 1.4 percentage points by June 2010.

"This is a new deal for Australian car makers and a new deal for Australian car buyers. The government is making a significant commitment to this industry and we expect commitment in return," said Industry Minister Kim Carr.