It’s time to ask the tough questions of our car tzars.

Taxpayers are being forced to bankroll an ailing car industry in a “no-questions-asked” situation. We need a thorough, independent review of the industry and its public subsidies; we need full accountability and scrutiny of current operations, and an informed public debate.

Back in February, former Reserve Bank of Australia board member Warwick McKibbin called for an independent expert analysis of the productivity potential of the industry, the impact of the world economy and the future direction of the global car industry. Ford’s decision this week to cut 44o jobs in Victoria makes that call all the more relevant.

Failure to scrutinise the local car industry has allowed Ford to spend $42 million in public money — from the Green Car Innovation Fund — to manufacture a “four-cylinder Ford Falcon” (the EcoBoost engine) that has high greenhouse gas emissions of 201 grams of CO2/km. The NSW government refused to acquire this vehicle because it failed the minimum “green car” pollution standards.

What is the future viability of Ford when it announced its record financial-year loss of $290 million? Holden announced a net profit of $89.7 million for 2011, which matched the amount of government funding.

The local car industry cannot survive without continuing support from government and business buyers, which in 2008 made up over 75% of their domestic sales. However, it was reported recently that only 35% of the federal government’s 14,115-car fleet are Australian made.

The Australian Manufacturing Workers Union is calling for all government cars to be Australian made, but this won’t resolve the issue when state and federal governments only acquire 19% of locally made vehicles.

Unfortunately, Australians are turning their backs on locally made vehicles.

At the beginning of the year, federal government and state governments announced additional funding of $275 million justified as a “co-investment” in the future of GM Holden’s car-making operations, plus $43 million to Ford. (This is additional to the $5.4 billion allocated to the industry from 2008 to 2020). The Prime Minister differentiated this funding as “not a hand-out” but a “co-investment” to keep car manufacturing here while other governments provide co-investment too.

Human Services Minister Kim Carr says Australia does not spend much on supporting the car industry compared to other countries. Carr stated that Australia’s support equated to $17.80 per taxpayer — well below other countries such as Sweden ($122), France ($108), Canada ($100) and the UK ($59). But Carr failed to mention that the support made by these countries was for the technological advancement of low-emission, fuel-efficient vehicles. Not for a car industry that manufactures mostly large, fuel-inefficient vehicles.

Blaming the rising Australian dollar for the decline in the export sales of car sector is, according to the former Reserve Bank of Australia governor Bernie Fraser, a “convenient scapegoat”. Fraser’s comments support the 2010 OECD Economic Survey of Australia that found that subsidies to distressed industries to offset the appreciation of the Australian dollar had no solid empirical evidence to back them up.

Not to mention that the federal government’s policy of supporting the local car industry’s manufacture of large high-polluting vehicles is in conflict with its environmental policy of reducing greenhouse gas emissions.

The government’s carbon tax of $23 per tonne of carbon pollution will only apply to heavy road vehicles from 2014 (passenger vehicles are off the hook). Yet road transport emissions are one of the largest sources of emissions growth in Australia, increasing by 31.6% between 1990 and 2010. Supporting the local car industry will prevent governments from introducing environmental measures to reduce road transport emissions by discouraging the importation and acquisition of high-emitting vehicles, such as SUVs.

Another concern is that Australians love high-emitting SUVs. In April 2012, the FCAI reported that SUVs in all categories continued to dominate the Australian car sales, accounting for 28% of all new car sales, while sales of electric, LPG and hybrid vehicles remain low.

In the EU, the shift to low-emitting, hybrids and electric vehicles is being encouraged by imposing some form of CO2 motor vehicle taxes on purchase price — through registration taxes, or by imposing a bonus-malus system where either a penalty charge is imposed when purchasing a high-emitting vehicle or a bonus is paid when buying a low-emitting vehicle. Such measures are unlikely to be introduced here while the government continues to support the local car industry.

If Australian taxpayers are “co-investors” in the local car industry, then they should feel confident that their funds are being used in the development of vehicles that are meeting global standards and future consumer demand. Such confidence is not forthcoming, with the continued decline in demand for Australian-made vehicles and the vehicles’ poor fuel efficiency.

An independent expert analysis is warranted before further funding is provided.

Peter Fray

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