Green plan won't help spluttering car makers

News that exports of Holden utes to America have been cancelled is the latest nail in the coffin of the Australian automotive industry.

It is an industry in terminal decline, and it's time the Rudd Government admitted it.

Yet in 2008 prime Minister Kevin Rudd and his Industry Minister, Kim Carr, did the opposite and expanded automotive industry assistance to $6.2 billion.

With 64,000 workers employed in the industry, the package is equivalent to nearly $100,000 per worker.

And that's on top of tariff protection.

But neither subsidies nor tariffs are helping to create a long-term, viable industry.

Tariffs and subsidies make industries unresponsive to consumer demand.

And being unresponsive has caused the problem that now plagues the industry.

The Australian automotive industry has traditionally produced large passenger vehicles.

But Australians clearly don't want them.

Last year just 171,432 of the 1,012,432 cars sold were made locally -- less than 20 per cent.

Tougher economic times have seen overall sales drop 3.6 per cent on 2007.

But sales of locally made cars dived by 14.5 per cent.

Meanwhile, demand for small and medium cars, primarily made by importers, account for more than 50 per cent of the market.

At least 60 per cent of locally made cars are sold through fleet to corporates.  With company belt-tightening, the pressure to turn over their fleets may wane.

There have been some markets that demand Australia's large cars, notably the Middle East.

Cars being exported to the Middle East are being subsidised by our taxpayers' dollars.

But we aren't getting subsidised oil in return.

The Rudd Government may argue that it's reforming the sector by continuing to phase out tariffs.

But with every drop in tariffs, it is simply increasing equivalent subsidies.

The only difference is, the cost is being spread to every taxpayer, instead of just to consumers of new cars.

The Government is also using its $1.3 billion green-car fund to achieve its industry and climate-change objectives by encouraging research and development of lower-emissions vehicles.

If the objective of the fund is to get consumers to buy lower-emitting cars, subsidising research and development isn't the best way to go about it.

Estimates show that State and Federal Government taxes and tariffs add $7000 to the cost of a Toyota Prius.

Removing these taxes and tariffs would be the best way to increase sales.

And Australia is highly unlikely to become a green car innovator.

At best, Australia will contribute to the development of their next range of vehicles.

And any short-term benefit will be small.

During a global economic downturn, the first concern of consumers is not to buy expensive "green" cars.

It's to buy cheaper ones.

According to the Australian Bureau of Statistics, more than a million new cars are bought annually.

Yet only 5000 Priuses are estimated to be sold this year.  Consumers are still voting with their hip pockets, not their green thumbs.

The Rudd Government may argue their plan is working.

Days before Christmas, Holden announced that it was to develop its new four-wheel-drive model out of Adelaide and will deliver 1200 jobs.

But so long as these 1200 jobs are built on the false foundations of government subsidies, no worker can have faith in the sustainability of their job.

Successive governments have conned automotive industry workers into thinking their jobs are viable.

They never have been, and it is the Government's job to clean up this mess.

To be fair to workers, the Rudd Government should use its industry assistance to retrain workers and find them alternative employment.

Government spending on infrastructure projects provides a potential pathway.

The geographic concentration of the industry in Geelong and Altona will mean any collapse will be devastating.

Retraining will lessen the impact on these individuals and communities.

More importantly, young workers need to be stopped from entering a dead-end industry.

But the Government won't, because the affected communities correlate strongly with marginal seats.

And the cost of inaction will be borne by consumers with higher car prices, and workers with an uncertain future.

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