Abbott Government Warns Money Tight to Save Australian Carmakers

Australia’s new industry minister said the government has limited funds to subsidise the car industry and wants to hold talks with General Motors Co.’s local unit before deciding on future support for the automaker.

“This is a very, very important industry on the brink of closing,” Ian Macfarlane, who was sworn in as a member of Prime Minister Tony Abbott’s Cabinet yesterday, told Australian Broadcasting Corp. radio. “My pockets are a bit empty at the moment, I want to see where all the money has gone first.”

Macfarlane said he plans to visit the South Australian plant of GM’s manufacturing unit, Holden, and hold talks with the state government, company and union officials. His comments came as the Australian Financial Review reported today that GM needs a commitment from Abbott’s government on financial subsidies within two months or may announce it will follow Ford Motor Co. and cease making cars in Australia.

GM, Ford and Toyota Motor Corp. have been hit by a strong Australian dollar that’s made exports uncompetitive and brought in more imports. The currency has risen 6.7 percent against the U.S. dollar this month. Facing a deteriorating budget position, Abbott’s coalition government, which won the Sept. 7 election, plans to cut A$500 million ($475 million) from subsidies to the car industry by 2015.

“We look forward to sitting down with the new federal government and discussing the policy settings to secure the future of manufacturing in this country,” Holden spokesman Sean Poppitt said by telephone today when asked to comment on the AFR report. The company said earlier this month it was waiting on the result of the election before deciding on investments in the country beyond 2016.

Government Subsidies

The previous Labor government had set aside A$5.4 billion for the domestic car industry until 2020 and pledged another A$700 million during the five-week election campaign. Abbott said Aug. 21 his government wouldn’t “run down the road after Holden waving a blank check at them.”

GM said in March 2012 that its Holden unit will continue making cars in Australia until at least 2022 after the government announced a A$275 million assistance package. Costs at Holden are up about 60 percent from 10 years ago, making it one of GM’s most expensive operations, the division’s managing director, Mike Devereux, said in April.

Macfarlane told the ABC today the future of the car industry was the “most important issue in my portfolio” and that he didn’t want the issue to be politicized.

Cars made in Australia slumped to 13 percent of domestic sales in 2012 from 80 percent in 1984, according to data from Ford and the Federal Chamber of Automotive Industries.

Ford announced in May it will close its Australian car lines in 2016 after nine decades.

Before it's here, it's on the Bloomberg Terminal.