Mar 23, 2012

Holden does it again: how the subsidy king fills its coffers

You’ve got hand it to General Motors, the makers of Holden. Its success in garnering taxpayer dollars is breathtaking, writes Kath Walters, editor of LeadingCompany.

You’ve got hand it to General Motors, the makers of Holden. Its success in garnering taxpayer dollars is breathtaking. Its latest score announced yesterday -- $275 million from the Australian, Victorian and South Australian governments -- will keep the company’s Adelaide assembly plant going for the next decade.
Australian car makers are experts at getting subsidies and grants from governments. And so they should be. Increasingly, company boards are insisting that their executives dip their snouts in the public trough if they are entitled to do so, says Adrian Spencer, the chief executive of GrantReady, a consulting company that helps companies find and apply for government grants. "There are 650 grant programs," Spencer says. "Boards are seeing it as a governance issue because government grants are just another income stream. They are asking management to map out funding options available to them." To keep the board happy, and help yourself to government funds:
  1. Align yourself with government policies and objectives. The government is trying to achieve certain goals. In Holden’s case, it prevents job losses, and creates smart jobs, using the government’s largesse. "If you and your company can assist governments to achieve their goals, and demonstrate a strong need for funds, the case for funding is strong," Spencer says.
  2. Governments fund projects -- not companies. Don’t ask for money for the day-to-day; ask for money to do a project that will help your business.
  3. Create jobs. A big employer has a stronger case, however all companies that argue they are creating employment have a strong case. Explain what your taxpayer-funded project will deliver to the community and the economy.
  4. In arguing the value of the project, look at the financial "eco-system" around your business. "We had a client that commissioned a research organisation to measure the benefits from their $200,000 grant; it tipped $5 million back into the local economy," Spencer says.
  5. Report back to the government on the benefits of funding. Too many companies take the money and provide only the statutory reports required. What a waste! Demonstrating great results to the government funder creates a relationship. More money next time.
  6. Make sure your industry body is lobbying hard in at every level of government on your behalf. Ring up the chief executive if they are not.
  7. Target the right money. With 650 programs at local, state and national level, there is an art to choosing the right one, and applying for the wrong one is a waste of money and effort. "It’s a matter of thinking quite specifically about what you are looking for," Spencer says.
  8. Don’t expect the government to hand out money outside its programs. In Holden’s case, the federal government's contribution of $215 million comes from the $5.4 billion New Car Plan for a Greener Future. "Organisations often think they can rock up to government and ask for a discretionary grant. That is very rare. They process takes a lot of time, and most companies will be disappointed. Go through the grant system," Spencer says.
  9. Back your own great ideas. Like any good investor, the government wants companies that it supports to share the pain of possible failure. Holden has promised to invest more than $1 billion into car making in Australia and to make two "next-generation" vehicles.
  10. Put your company in a global context. Car makers are very good at explaining what other countries will pay to win their business. Be ready to go if the government doesn’t care (Holden is). After all, for some sectors and companies, other countries offer better deals.
  11. Be humble. Spencer says companies sometimes feel they "deserve" government money. Put aside feelings of entitlement and be grateful for anything from taxpayer coffers. It might provide just the competitive edge your company needs.
*This article was first published on LeadingCompany

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10 thoughts on “Holden does it again: how the subsidy king fills its coffers

  1. Suzanne Blake

    How are Hawke / Keatings funds to prop up Kodak going?

    Oops they went Chapter 11 a few months ago

  2. Jimmy

    Yeah SB – industry subsisides are only paid by Labor govt’s!! Clown!

  3. Suzanne Blake

    @ Jimmy

    who are the clowns?

    Lindsay Tanner slams politics of spending

    FORMER Labor finance minister Lindsay Tanner has attacked politicians, including his own former Labor colleagues, arguing that they are ignoring the national interest and handing out infrastructure funding “irrespective of merit” for political and not economic gain.

  4. Jimmy

    SB – You just proved my point, Tanner attacked politicians including his former colleagues AND previous Liberal govts and the Abbott opposition, that iss to say all policiticians are guilty not just Labor.

    An example would be Abbott’s direct action policy which is universally condemned as the most expensive & inefficient way to address climate change but he sse’s it as politically beneficial.

  5. Meski

    Point 2 – so the taxpayer owns the project. Will the government be getting a dividend on it then.

    2a, don’t be silly, its for the benefit of GMH.

  6. botswana bob

    Seems like executives of big corporations are often on about middle class welfare. Presumably this is because they don’t want to share the government honey pot with anyone else? Oh yes, where were all those econocrats who are always lecturing about how awful government handouts are? Sorry… its not a handout its a “co-investment.”

  7. Stevo the Working Twistie

    12. Be John Howard’s brother.

  8. Wallace Scott


    Depends on which brother. I’m pretty sure his brother Mark Howard (I think that’s his name) is a Marxist.

  9. Wallace Scott

    Co-investment sounds good. I’m surprise no Tea Partier have come on to attack the government for being communist nationalising industry yet.

    Holden exports sales did suffer last year due to the high dollar and they have to trim down staff. I’ve just read on the ABC, former RBA board member Solomon Lew launch a massive attack on the current RBA for being out of touch and should cut 75 basis points immediately while BIS Shrapnel chief economist Frank Gelber has warned that the lack of investment non-mining sectors of the economy could affect Australia’s long-term growth prospects and there was not enough investment in other sectors of the economy to stimulate growth.

  10. Arty

    Kath, how does the inflows and outflows total in a deal like this?

    Do you calculate the number of jobs lost if Government does nothing, and then extrapolate the cost to government of all that dole outflow; then add the cost of the lost income tax that those employees would have paid; and compare the result with $275mil?

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