Taxpayers dig deep to create empty industrial estates
There is a vast expanse of disused and dirty industrial land about 1km from where I grew up which served for years as a gigantic money pit for the Australian taxpayer.
The millions and millions of dollars poured into it ultimately failed to do anything to stem its demise.
Today, the abandoned Mitsubishi site stands as a monument to an industrial policy which tried to forestall the inevitable, creating false hope for workers whose jobs were marginal at best, and enlisting the taxpayers as a reliable cash-cow while failing to put any real pressure on the company chiefs to address the demand problems with the type of cars they were producing.
When Mitsubishi closed its doors in 2009, it did so having received a $35 million offer of assistance from the Howard Government and $50 million from South Australia’s Rann Government. To his credit former Premier Mike Rann immediately wrote to Mitsubishi asking the company to repay the money it had been lent, which was meant to secure the development and production of the mid-sized 380 model. The company had also promised to continue with its local assembly operations until 2010, but fell short by 12 months, with the Australian arm of its business having accumulated losses of some $1.5 billion over the previous decade.
If the Mitsubishi collapse sounded a warning about the wisdom and merit of these taxpayer-funded industry bailouts, the job losses at Ford this month have driven a stake through their heart.
While the impact of globalisation and the sheer impossibility of competing with Third World countries is a huge part of the challenge, there is also a separate but significant issue which goes to the business decisions made by some of the car manufacturers, principally their determination to keep producing cars for which there is no real demand. The fact that so much taxpayers money has been spent defending an industry which sometimes makes stupid decisions now has serious repercussions for every car manufacturer, regardless of whether they are adjusting their practices to suit the market or not.
The once-great Ford Falcon is a case in point. Ford received a direct taxpayer-funded contribution of $42 million from the Federal Government in 2009, specifically for the development of the four-cylinder Falcon. The company received a further $103 million package from the Victorian and Federal Governments and its US parent company in January this year. Of that bailout $34 million was paid by federal taxpayers and $9 million by taxpayers in Victoria.
All this money was meant to secure the local production of the flagship Falcon brand, but just six months later the company announced that it would be axing 440 jobs at its Melbourne and Geelong plants, and reducing the daily production of vehicles from 209 to 148 from November of this year.
Quite simply there is no public demand for the vehicle. As Fairfax’s Joshua Dowling wrote when the job losses were announced this month, Ford and its employees have bought three times’ as many cars as private buyers since the vehicle went on sale three months ago, 159 versus 53. And the Federal Government itself, which has blown $76 million on its production, has bought a grand total of two vehicles.
The uncritical delivery of public money to companies such as Ford has done nothing to stem the flow of jobs or boost sales of the now-dated sedans which Aussies are rejecting for smaller, cheaper vehicles or SUVs. The danger is that companies such as Holden, which have rightly sniffed the wind and changed their business model with the production of models such as the Cruze for which demand is buoyant, will now fall victim to the completely understandable public conviction that all these bailouts have been a massive waste of money.
As far as Ford and Mitsubishi were concerned, the money they received made about as much sense as bailing out the Beta video recorder industry in the late 1980s. It shouldn’t be the job of governments to prop up the production of unpopular products. The increasing number of now-abandoned manufacturing sites around Australia’s industrial suburbs proves that it won’t work in the long run anyway.
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