By Paul Hemsley and Julian Bajkowski

Local governments have come under direct pressure from Prime Minister Julia Gillard to use ratepayer’s money to buy Australian vehicles for their fleets to help keep the domestic car manufacturing alive – despite billions of dollars in government subsidies failing to keep factories at Ford and Mitsubishi operating.

Ms Gillard on Sunday night used her opening speech to the Australian Council of Local Governments Awards dinner to implore councils to keep buying locally made cars.

“It’s a simple request but an important one,” Ms Gillard said.

“With so many Australian jobs relying on manufacturing and with car making at manufacturing’s heart, I’ve come tonight to ask you to support your fellow Australians by buying local when you renew your vehicle fleets.

“Help a mate with a job; that’s all I ask and I’m sure it’s something you can do.”

The Prime Minister’s patriotic call on councils follows Minister for Industry and Innovation Greg Combet sharp criticism of state and local governments for not buying enough Australian made cars, saying that councils have been buying as much 70 per cent of their fleet in foreign made cars.

But the call to drive home grown cars will be an increasingly difficult one for many councils to heed given that many local governments have put in place extensive fleet management procurement guidelines that focus on safety, fitness-for-purpose and value for money to get the most mileage for ratepayers dollars.

A key issue is that many councils simply no longer see value in buying larger and more expensive Australian cars that often realise a lower price when they are disposed of as assets, an issue that has only been exacerbated by Ford’s forthcoming closure.

While many local governments and their fleet managers are keeping an understandably low profile on the issue, the political rhetoric over the future of the domestic automotive industry has gone into overdrive.

South Australia’s Labor state government has reaffirmed its support for the struggling local car manufacturing sector but warned that that a federal government led by Tony Abbott will spell doom for the future of the Australian car industry because of cuts to funding to existing Automotive Transformation Scheme.

Much of South Australia’s auto industry relies on federal subsidies to the ailing car manufacturing sector most prominently represented by Holden and its SA factory in Elizabeth.

The state’s Minister for Manufacturing, Tom Kenyon, has said that the Elizabeth plant is at risk of “destruction” if the Coalition wins the federal election on 14th September, 2013.

Mr Kenyon’s warning of a doomsday scenario for the Australian car manufacturing sector was preceded by statements from federal Shadow Minister for Innovation, Industry and Science, Sophie Mirabella, who said that the Coalition has had a clear and consistent policy about supporting a viable automotive sector in Australia for the long term since February 2011.

Ms Mirabella’s argument is that a Coalition government would reduce the Automotive Transformation Scheme from $1.5 billion to $1 billion, which would mean the funding of $1 billion would remain in the scheme to 2015 and another $1 billion in the scheme from the start of 2016.

But South Australia’s Shadow Minister for Manufacturing, Martin Hamilton-Smith, has backed Ms Mirabella’s stand saying that with Ford backing out of the Australian car manufacturing sector, there will be less demand on the federal scheme, hence the $500 million reduction.

However Mr Kenyon said that a federal Coalition government under Tony Abbott would “destroy the industry” by cutting assistance and placing at risk the jobs of tens of thousands of car workers and suppliers nationwide, including 16,000 positions in South Australia.

Mr Kenyon said if Holden’s Elizabeth plant is closed due to Coalition policy, South Australia’s Gross Regional Product could fall by around 1.1 per cent within two years and would remain below pre-closure forecasts for at least 15 years.

Although Mr Kenyon called on state Opposition Leader Steven Marshall to “stand up” to his federal colleagues and “fight for the future” of the Australian car industry, Mr Hamilton-Smith shot back by saying that Labor is “playing politics” with Holden rather than getting the right result for the company.

“They should be concentrating their effort on having the Gillard government and the Victorian government sign up to the $275 million support package for Holden which the state Liberals have fully supported instead of trying to get involved in the federal election campaign by wrongly characterising the Coalition as not supporting Holden,” Mr Hamilton-Smith said.

Mr Hamilton-Smith told Government News that Ms Mirabella and the Coalition stated that they will reduce the fund from $1.5 billion to $1 billion, “but they haven’t said they will not support Holden”.

He refuted the state government’s talk of “destruction” by emphasising his own party’s support for Holden and the Automotive Transformation Scheme.

“We’re standing right alongside Holden and we will be supporting Holden and the co-investment package that’s being sought firmly and resolutely and our message to the federal government is they need to do likewise,” Mr Hamilton-Smith said.

The continuing decline of the Australian car manufacturing industry has been an ongoing headache for the federal, South Australian and Victorian governments as they all try to mitigate the economic fallout from job losses at Ford and Holden while helping dependent workers and local businesses through a difficult transition as best they can.

But it has been the role of hefty federal and state subsidies that have come into sharp focus, particularly whether they are effective in stopping car companies from moving manufacturing overseas.

Almost as soon as job losses of 1,200 workers at Ford prompted the Victorian government and the federal government to commit almost $40 million to support unemployed workers, the South Australian government was stung by Holden’s defiant announcement that it would reduce its workforce by cutting 400 of its workers down to 1,750 and as well as further reducing the number of cars made daily.

South Australian Premier Jay Weatherill said at the time of Holden’s announcement in April 2013 that it was in breach of one of the conditions in an agreement between the company and the state government to ensure minimum employment levels and minimum production levels until at least 2022.

The agreement first announced in March 2012 included subsidies to the company totalling $275 million, which comprised of $215 million from the federal government, $50 million from the SA government and $10 million from the Victorian government that would be paid in instalments until 2018.

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