Nick Xenophon (SA, Independent) Share this | Hansard source

I, and also on behalf of Senator Madigan, move:

That the Senate notes the importance of an Automotive Transformation Scheme to Australia’s economic prosperity and development.

This is a very important issue and, in the next few minutes, I propose to outline the importance of the Automotive Transformation Scheme and the need for it to be modified in a way that reflects the changing circumstances of our automotive sector and the critical importance of Australia's economy. At stake there are up to 200,000 jobs—not just the direct jobs, not just the 33,000 in the automotive components sector and the 12,000-plus jobs in the manufacture of motor vehicles but all the other associated jobs, the tier 2 and 3 of the automotive component sector, and also the multiplier effect of that on our economy, particularly in Victoria and South Australia, and throughout the rest of the nation.

The Automotive Transformation Scheme or ATS has been a mainstay of Australia's industry policy for at least two decades. Since the car makers made their announcements in 2013 and early 2014 that they would cease car making from the end of 2017, Australia has been on notice. How would Australia deal with the loss of an industry that employed directly over 40,000 people and was also responsible for the indirect employment of about 150,000 more? A massive piece of that answer has to be the ATS.

Originally worth $3.4 billion when launched in 2011—and the Howard government had another scheme in place when they were in government that had a similar function—the Howard government understood the importance of jobs in this sector and did all they could to maintain employment in the sector.

This scheme was always intended for the auto manufacturing sector and, when the car makers made their decision to cease car making, the ATS was the obvious policy lever to turn to. But what have we seen? The government first tried to capitalise on the announcements by the car makers by trying to cut $1 billion from the ATS at the 2014 budget. This was a foolish, economically destructive decision that would cut ATS funding immediately to the auto components makers, raising the risk of an early exit by the car makers and then the destruction of that supply chain in the auto sector. In your home state of Victoria, Mr Deputy President Marshall, there are so many jobs—well over 100,000 jobs—that are dependent on that sector.

But that was blocked in the Senate, and the government saw that its plan would lead to the early closure of car making—and the government still has not acted appropriately in my view. So the ATS remains as it was when the government came to office. It is locked up with restrictive rules that mean it cannot be accessed by auto components makers to diversify their business and secure a future beyond car making once Ford, Holden and Toyota leave this country.

It is estimated that between $700 million and $800 million will be left in the ATS unspent when car making ends in 2017. It is incredibly cynical to say, 'We've reversed a decision on cutting back on expenditure on this fund but, if you don't change the rules, the money won't be spent.' And the rules need to be changed, because we need to take into account the impending circumstances of the loss of original motor vehicle producers in this country.

The government intends recovering these funds as a savings to its budget, but this position is short-sighted and counterproductive and it will lead to a much worse jobs crisis than necessary The ATS is governed by its own act, which currently sits with a Senate committee that will soon report on options for the future. I look forward to joining with my crossbench colleagues and the opposition to look at sensible amendments to change the ATS so that it can save as many jobs as possible in the auto components sector and all the jobs that rely on having a viable auto components sector. The hour is late but we all have a duty to make the best of the situation for the good of the many tens of thousands of Australians who rely on the auto sector for their future.

How did we get here and where should we go? The ATS took the place of the previous auto sector policy, set up under the Howard government, called the Automotive Competitiveness and Investment Scheme, the ACIS. John Howard recognised the importance of car making to the Australian economy in that it provided high-quality, high-paying jobs to upwards of 40,000 Australians directly and created many more times that number of jobs in the wider economy. As experts in manufacturing, such as Professor Goran Roos, have pointed out, a local automotive manufacturing sector also created a critical mass of engineering, research, design and manufacturing know-how that raised standards across the economy, not just in the automotive sector. In fact, I have been told that in the mining sector a number of innovations in terms of productivity improvements have come about as a direct result of improvements in the auto sector. Innovation in the auto sector drove improvements in other sectors of the economy, including the mining sector.

Every industry in Australia, from banking to agriculture to education, requires sound government policy. Manufacturing is no different and successive governments have invested in the sector due to the massive payback it provides to the economy and the country as a whole. The ATS Act was passed in 2009, it took effect on 1 January 2011 and it was to run for 10 years, ending on 31 December 2020. It was worth $3.4 billion and it was split between the main car makers—Ford, Toyota and Holden—as well as the hundreds of car components makers that supported Australia's car makers. The ATS Act was tightly drafted in order to make sure it could not be rorted—and that is fair enough. Recipients had to be bona fide manufacturers of new cars or the components that went into them. Only firms that generated more than $500,000 in revenue a year from parts for Australian-built cars or firms that had 50 per cent of their output go towards car making were eligible. Services such as research and development were also included, so long as they were directed at Australian car making.

The ATS became a crucial policy lever that underwrote innovation and investment in the sector as well as long-term security for the hundreds of firms that contributed to car making. That was all as intended. What happened in September 2013 with the election of a new government was that, for some reason, sound automotive manufacturing policy was metaphorically tossed from the window of a moving car. The new government was aware of what car makers required in terms of auto-making policy and in terms of certainty for investment decisions. They could have read it on the front page of The Australian Financial Review in June 2013. Matt Hobbs, GMH director of government affairs, was quoted following talks between Australian car makers and the then-Labor government. He admitted that trading conditions had worsened since the GFC in 2009 but that further assistance could be delivered in a number of ways. He said, 'There are many ways to skin the policy cat. Money could be one of them.' What was clear then, and what was made clear to the new government later in the year, was GMH's desire to remain in Australia, to continue investing in its operations and to continue making cars here. Ford had already announced that it would cease car making in 2016 and, with the Prime Minister away on an overseas trip, some statements were made in the parliament on 10 December.

On 9 December, Mike Devereux, along with Matt Hobbs from General Motors Holden, gave evidence before the Productivity Commission. Essentially they said, 'We want to stay in Australia. Obviously there has to be a package of measures because there has been an element of government investment and involvement in the sector.' The signals were all strong that they would stay. Then, inexplicably, on Tuesday, 10 December, the Treasurer stood up in the chamber and approached the dispatch box. He said this:

So I would say to the Leader of the Opposition: put Australia first, put the workers first and join with the Acting Prime Minister and the government in calling on Holden to come clean with the Australian people about their intentions here. We want them to be honest about it—we want them to be fair dinkum—because, if I was running a business and I was committed to that business in Australia, I would not be saying that I have not made any decision about Australia. Either you are here or you are not.

It was a bit like that Clash song, Should I Stay or Should I Go. Basically I think he was telling them to go. I do not think it is any coincidence that, within 24 hours, a decision had been made out of GM's headquarters in Detroit to say, 'We're not going to stay here anymore.'

On any objective analysis—and I do not want to be party political about this—I think that what the Treasurer said and what the Acting Prime Minister said in the parliament on 10 December was provocative and rude. It was basically waving a red flag at Holden. It was telling them, 'We don't care if you stay here or not.' We know that these multinationals, as big and ugly as they can be, work on a consensus as to whether they are wanted in a country or not. And what the Treasurer said that day was, in my view, reckless and irresponsible. It was goading by the Treasurer. There was a swift and devastating reply. General Motors announced that it would cease car making in Australia by the end of 2017 and Toyota soon followed, because it was just untenable to have only one car maker in terms of the supply chain. The supply chain would collapse with only on car maker, and Toyota had to go as well.

In 2014 the Treasurer failed to point out a radical move against the auto sector: that the ATS would be abolished and $1 billion recovered by Treasury. I met at length with representatives of the Federation of Automotive Products Manufacturers and the Federal Chamber of Automotive Industries on budget night. It required some work, but it was clear from the budget papers that the government was going to capitalise on the closure of car making to recover approximately $900 million from the ATS. This was well in excess of what it promised at the election and it was decided in secret with no announcement. The government was blocked in the Senate by crossbench colleagues including Senator Madigan—who has been an absolute champion for the manufacturing industry not only in his home state of Victoria but nationally—Ricky Muir, Jacqui Lambie and, of course, the Australian Greens, who shared those concerns. Of course, this would not have happened without the opposition being very clear that their policy on the ATS was something that ought to be maintained, and I agree.

In March this year, the government, I think, quite cynically attempted to claim it had backflipped on the ATS and that it would continue to fund the sector. In reality, the government was simply withdrawing its ATS abolition bill and leaving the ATS in place, along with its narrow regulations that mean funds only go to firms if they make new Australian cars or the parts that go into them. At least it gave some comfort to GMH, Ford and Toyota that their suppliers were not going to get pushed out of business due to the closure of the ATS before 2017. So the ATS Act sits with a Senate committee, and we are looking at that in terms of alternatives.

The government is stubbornly refusing to use it to transition the hundreds of firms that are facing closure at the end of 2017. We will see a tsunami of job losses in this country, particularly in Victoria and South Australia. The consequences will be devastating. The only way to stem those job losses is to rejig the ATS. It has to be reformed so that there can be funding for all these companies with all these workers that have potentially billions of dollars worth of plant and equipment, so it can be used in a very useful way in terms of manufacturing in the global auto supply chain or to do other things, such as at Precision Components in Adelaide, which is headed by Darrin Spinks, who is doing a great. They are making heliostats for the renewable energy industry.

The government says the growth fund for transitioning the industry, at $155 million in total, including $101 million from the Commonwealth, will fix it. It will not. With the closure of car making by the end of 2017, the jobs emergency that will be created will deliver devastating economic and social consequences, at least in Victoria and South Australia. The car components sector, represented by FAPM, employ more than30,000 skilled workers. Where will they go? Many of these businesses, from 20 or 30 employees up to 600, 700 or 800 employees, are in real strife.

The Bracks review of the car-making sector in 2008 estimated the jobs multiplier for each job in auto at approximately 6.2, suggesting the total number of jobs at risk at over 200,000 nationally, just with the components sector. An expert report by Professor John Spoehr of Adelaide University last year estimated the possible overall jobs impact of between 150,000 and 200,000 jobs nationally. The car-making sector has been a part of the Australian economy since the early 1900s. Just how far its tentacles of employment and enterprise reach only time will tell. Greg Combet, the former minister, has estimated that three-quarters of the components sector is likely to close its doors when the last Australian car comes off the line in 2017. I think that is an accurate figure from what other experts have said.

A car industry representative this week informed me that New South Wales, not well known for being a car-making hub, has several thousand jobs at stake. These will be jobs in the so-called tier 2, tier 3 and tier 4 suppliers—firms that make a widget that goes onto another widget that goes onto another part that goes into an Australian car. So every state of Australia faces job losses. That is why the ATS is so important. It is not just the existing component firms that will benefit. Innovative firms serving the automotive aftermarket can make a huge difference—and I believe Senator Muir will address that matter later today. They can soak up some of the skilled labour that will be out of work.

In Adelaide, a small innovative company called Supashock, run by Oscar Fiorinotto, has taken the V8-racing scene by storm this year with its patented smart shock absorbers. These are computer generated. Acting Deputy President Bernardi, as a South Australian, you should check out these shock absorbers. They are world beating. Fiorinotto is one of those supersmart, quiet achievers who tinkered in his shed for years and developed a world-beating invention. He wants to expand. He supplies an F1 racing team. The Ford racing team attributed their success in a recent article in The Daily Telegraph to the Supashock shock absorbers. They can be used in the mining industry for heavy earth-moving equipment to reduce the risk of back injuries because of their computerised shock-absorbing capacity. The four-week drive market is huge in that they can give a very smooth ride on the roughest terrain.

Just last night on Adelaide's Today Tonight on the Seven network his firm was showcased. Because he does not supply a car manufacturer, his company remains locked out of the ATS. That is why I wrote to the industry minister, the Hon. Ian Macfarlane, to say, 'Reconsider changing the rules because there are so many jobs at stake here.' Mr Fiorinotto says that they could easily go up a hundred workers in a matter of months. He has employed some supersmart engineers and designers in his business. They are jobs that could exist in South Australia. My fear is that Supashock will get an offer from the Chinese or the Germans that is too good to refuse and in years to come we will see a Supashock plant, possibly, in Germany with many hundreds of employees who could have employed right here in Australia.

Many submissions have been received by the Senate Economics References Committee into the future of the automotive industry. I want to endorse several recommendations from FAPM, who have been a very diligent and energetic representative of the auto components companies. What they are saying makes sense in economic terms; it makes sense for this sector. The key change to the ATS has to be an expansion of the eligibility rules to include engineering services provided by Australian firms to overseas customers. Australia has a huge store of know-how and expertise in auto making and this can be marketed to the world's car makers.

ATS rules need to be tweaked to allow firms to start moving in that direction. In addition, the Automotive Diversification Program, which is currently part of the growth fund, is into its third round of grants and is totally oversubscribed. This is a clear sign that the sector is crying out for transition assistance right now. The government has to massively increase the funding of the ADP—currently capped at $20 million or, better still, move it over to the ATS and use the $700 million unspent funds there to expand the reach of the ADP.

Finally, it is clear that whatever the parliament decides to do with the ATS there will be large numbers of auto-manufacturing workers out of a job between now and the end of 2017. That is why FAPM's recommendations need to be considered in terms of R&D activity being funded, broadening the definition of automotive services to include the aftermarket sector and customising processes. There also needs to be a tooling investment allowance as a key part of the diversification plan to allow for an ease of movement between ATS registration categories as transition with the industry unfolds.

Studies conducted in the wake of the closure of Mitsubishi in 2007 showed that a large proportion of these workers who lost their jobs at Mitsubishi—ageing men with limited experience—would not find work again. The ATS must be reformed to fund retraining programs and even a dedicated program to guide those who are unlikely to find new jobs into work at existing large employers, for example, in hardware retail chains.

There must be an approach here that understands the crisis that we are facing. We are facing a jobs emergency in South Australia. There will be one in Victoria as well unless we use the money that is already in the kitty—the $700 million to $800 million that will be unspent because cynically the government will not broaden out the funding requirements for the ATS. Because the auto sector is changing we need to change the funding requirements for the Automotive Transformation Scheme to allow for the Supashocks of this world and to allow for all these innovative companies that have great potential to grow jobs very quickly to absorb some of those massive job losses we are expecting in South Australia, Victoria, New South Wales and other parts of the country. I cannot overstate how important it is that we act on this as a matter of urgency. I urge the federal government to reconsider their position, otherwise there will be literally tens of thousands of jobs lost in the southern states of Australia in the next two to three years. That is something that would be not only very bad for our economy but also a national tragedy.