THERE is no point denying it. Mitsubishi's announcement that it will stop manufacturing in Australia was a terrible blow to the company's employees, and sad news for South Australia.
But we need to keep things in perspective. Mitsubishi made only 3% of Australia's vehicles. South Australia is expected to produce more cars this year than it did last year as Holden ramps up its Pontiac G8 program at Elizabeth.
Our first priority is to look after the workers, support the community around Tonsley Park and maintain manufacturing capacity in the region.
That's what the $50 million rapid-response package I announced with SA Premier Mike Rann on Tuesday will do. It includes $10 million to retrain displaced workers and help them find new jobs. The other $40 million goes into a new South Australian Innovation and Investment Fund to pay for projects and infrastructure that will boost manufacturing and create jobs, with the emphasis on new industries and technologies.
Our next priority is to secure the future of the Australian car industry.
Some people are against this. They forget that the industry employs about 70,000 people and generates high-value exports, amounting to about $5 billion worth of vehicles and components in 2007 — that's more than we earned from wheat or wool.
The global car industry was worth $3 trillion in 2005. Why wouldn't we want a piece of that?
It's true that we face many challenges. The figures speak for themselves. Sales of Australian-made vehicles fell by 11.5% last month compared with January last year. Holden, Ford and Mitsubishi all went backwards, with only Toyota managing an increase.
The appreciation of the Australian dollar has hit Australia's car makers hard. The depreciation of the Japanese yen has made it a double whammy. These currency movements have effectively made Australian cars dearer and imports cheaper.
The rise of low-cost producers such as China, India and Thailand has intensified competition, reduced margins and forced other producers to economise. At the same time, Australian car makers are barred from many overseas markets.
The local market is fragmented, with dozens of brands competing for a share of 1 million sales annually. We have nearly twice as many brands as the Americans, and they buy 17 times more cars.
Australian car makers, including Mitsubishi, have been criticised for not spotting the trend to smaller vehicles. This ignores the lead times involved in getting new models into production, which can be as long as six, eight or even 10 years. If anyone tells you they knew in 1998 — when four-wheel-drives were the next big thing — that the market would be focusing on fuel-efficiency in 2008, don't believe them.
Car makers worldwide have been caught out by this change in buyer preferences, which KPMG has called a "tectonic shift".
The environment our car makers operate in has changed dramatically over the past 10 years, but government policy in this area has been on autopilot. That's not good enough.
I am about to launch a comprehensive review of the car industry. It will be about much more than tariffs, examining investment attraction, skills, R&D and more.
The review will give us a chance to evaluate how well the Automotive Competitiveness and Investment Scheme is performing and to lay down a new set of principles to make the industry sustainable into the future.
There are already grounds for optimism. Holden has started exporting Commodores to the US, re-badged as the Pontiac G8. It is expecting to ship about 30,000 a year. From 2011, Ford plans to build the Focus in Australia. It is aiming to produce 40,000 a year for domestic and export markets.
The Government's own $500 million Green Car Partnership will begin in 2011. We expect it to generate $2 billion in private investment to design and build fuel-efficient cars in Australia. Car making thrives in high-wage countries and low-wage countries. The emphasis in high-wage countries — Germany is the most obvious example — is on quality and innovation. That's the direction Australia has to take.
The car industry is already one of our greatest innovators, and it has been since the first Holden rolled off the production line in 1948. It can reinvent itself and, with this Government's support, it will.
Senator Kim Carr is the Minister for Innovation, Industry, Science and Research
[First published in The Age Business, p.12; Monday, 11 February 2008]