Automotive industry assistance

[BroadyFord]

Given that we're about to endure another federal election, I thought it might be worthy to discuss the implications for the automotive industry, especially under a new government led by Tony Abbott. I'd just like to point out that I'm not being partisan in terms of political parties - all I'm trying to do is state the facts as they are.

Car industry funding as it stands:

Presently, there is around $5.4 billion available to car-makers up until around 2020 to facilitate plant upgrades and other investment necessary to ensure the viability of the industry going forward. This funding, known as the Automotive Transformation Scheme (ATS), has been accessed by all three manufacturers for future vehicles and products. The Gillard Government has committed to retain the current funding package in its entirety until 2020, when it's hoped the industry is able to become self-reliant.

The Coalition, however, has said it will cut $500 million from the ATS between now and 2015 (leaving $1 billion available to manufacturers until 2015). Additionally, the Coalition has (as yet) not committed to any further funding beyond 2015. It's important to note however that they also haven't committed to axing funding after 2015 either.

Implications:

Given that both Toyota and Holden have made investment decisions that should see production through to 2020, it's important to analyse this scenario from Ford's perspective. Having examined this scenario in my mind, the bottom line is: I'm worried.

As most people here know, Ford is due to end production of the current Falcon in 2016, leaving question marks about what will be produced at Broadmeadows beyond that time frame. Uncertainty about the Coalition's policy combined with the general feeling of uncertainty that elections bring for business leads me to believe that Ford will hold off making any decision until after September. One can assume that Ford have indeed not yet made any decision given that the plan to locally produce the Ranger was recently scrapped and the company is now back to square one.

To this end, a decision after September would leave a three year gap between an announcement and production (if any). In my opinion, this is the absolute minimum lead-time that would be required for any new vehicle and in a normal world, Ford would be in discussions with the government right now about securing new investment. However as the government has confirmed Ford have not approached them to discuss funding, coupled with the likelihood of a new government which, as yet, has no policy beyond 2015, it's very hard to see how Ford would be able to make a decision on a Falcon replacement and secure funding by the end of the year. Indeed, like most businesses, I wouldn't be surprised if Ford have put any investment (or shut down) decisions on hiatus until after the election due to all the uncertainty.

What are your thoughts?