Identifier
Created
Classification
Origin
08CANBERRA1316
2008-12-23 23:50:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
Cable title:  

GOA SUPPORTS NEW GM/HOLDEN SMALL CAR

Tags:  EIND ECON AS 
pdf how-to read a cable
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DE RUEHBY #1316/01 3582350
ZNR UUUUU ZZH
P 232350Z DEC 08
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC PRIORITY 0742
INFO RUEHDN/AMCONSUL SYDNEY 4081
RUEHBN/AMCONSUL MELBOURNE 5873
RUEHPT/AMCONSUL PERTH 4140
RUEHWL/AMEMBASSY WELLINGTON 5577
RUEHKO/AMEMBASSY TOKYO 3348
RUEHGP/AMEMBASSY SINGAPORE 1636
UNCLAS SECTION 01 OF 02 CANBERRA 001316 

SENSITIVE
SIPDIS

STATE FOR EEB, EAP/ANP

TAGS: EIND ECON AS
SUBJECT: GOA SUPPORTS NEW GM/HOLDEN SMALL CAR

REF:

UNCLAS SECTION 01 OF 02 CANBERRA 001316

SENSITIVE
SIPDIS

STATE FOR EEB, EAP/ANP

TAGS: EIND ECON AS
SUBJECT: GOA SUPPORTS NEW GM/HOLDEN SMALL CAR

REF:


1. (SBU) SUMMARY: On 22 December, Prime Minister Rudd announced an
agreement with GM Holden and the South Australian Government to
support production of a new, fuel-efficient, low-emission small car
in Australia. The agreement provides A$179 million (US$122 million)
over 3-4 years to Holden under a co-investment agreement that must
be matched by the company. All three local car manufacturers will be
making 4-cylinder cars by 2011. Ford will build the Focus from 2011,
while Toyota is already building the Camry. The GOA's aim is to
build the capacity of the local car industry, as well as to lower
vehicle emissions - using a flexible approach to industry policy.
END SUMMARY.

INDUSTRY POLICY RATIONALE FOR THE CAR INDUSTRY


2. (U) The Rudd Government is determined to retain and expand the
local car industry to help stimulate economic activity in the midst
of the global crisis. Prime Minister Kevin Rudd and Industry
Minister Kim Carr declared on December 22 that the new small car
will "redefine" Holden (General Motors' Australian subsidiary) and,
by adding capacity to production of the large Holden Commodore model
"will reinforce the long-term sustainability of manufacturing". In a
press conference, Rudd affirmed he believed "passionately" in the
future of the Australian automotive industry and noted that the
intent "is to provide more fuel efficient vehicles and therefore
provide a sustainable basis for the continuation of the industry
into Australia's long-term future as well". Similarly, Industry
Minister Carr stated that "We're in the business of ensuring that we
remain one of the 15 countries in the world that can make a car from
beginning - that is, from conception through to the showroom floor".
In November, PM Rudd rejected the opposition Coalition's advice that
the GOA should wait for President-elect Obama's package for US
carmakers and instead outlined the A$6.2 billion car plan.

DETAILS OF THE HOLDEN SMALL CAR PLAN


3. (U) Under the co-investment agreement, the GOA will contribute
A$149 million over three years starting in 2009-10 to this project
and the South Australia (SA) government will put in A$30 million
over four years to support the small car project. The
front-wheel-drive, four-cylinder car will be manufactured starting
in the third quarter of 2010 at GM Holden's Elizabeth plant in
Adelaide, SA. Design and engineering work will be done at Port

Melbourne in Victoria. The car is part of the global Delta small car
platform and will include both petrol and diesel variants. It will
support up to 600 jobs at Holden and up to 600 more jobs in the
automotive supply chain. Previously, Industry Minister Carr argued
that the A$6.2 billion plan for the car industry would generate A$3
billion of private investment for every A$1 of public funding,
although the Opposition questioned the capacity of the US-owned car
companies to invest in Australia. The current package appears to
endorse a 1:1 ratio of government to industry support for the Holden
small car - possibly in recognition of the difficulties faces by GM
in the United States.

THE GREEN CAR POLICY AND FUEL EFFICIENCY


4. (U) The support package for the Holden small car is the first
green car grant under the Green Car Innovation Fund. It must be
matched by Holden, although its investment will be provided 'on
staged levels over the 3 years' rather than upfront. The Rudd
government has also announced that it will provide A$35 million to
Qgovernment has also announced that it will provide A$35 million to
support the production of a Camry hybrid in Melbourne. The Holden
small car will be based on a low-displacement, forced-induction
petrol engine, for better fuel efficiency. The car reportedly is 20%
more fuel efficient and produces 20% less in carbon emissions than
current larger vehicles. Carr claimed that families travelling
20,000 km a year would save A$500 a year in fuel costs and produce
around 1.7 tonnes less in carbon emissions. Critics of the plan have
pointed out that other cars on the road get between 35 and 45 miles
per gallon, but the new Holden car will only get 27 miles per
gallon. Industry Minister Carr suggested that government assistance
for the small car is meant to support the introduction by Holden of
hybrid engines and alternative fuel systems, including LPG and E85
(ethanol-blended fuel) and CNG (compressed natural gas). However,
Holden has so far committed only to producing petrol and
diesel-injected versions of the new vehicle. If market conditions
improve, Holden may consider other technologies to reduce
emissions.



5. (SBU) COMMENT: The Rudd government's package to support local
manufacture of Holden's four-cylinder car appears to be a generous
and flexible interpretation of the guidelines of the recent A$6.2

CANBERRA 00001316 002 OF 002


billion (US$4.2 b) car plan. Firstly, the ratio of government to
industry contribution under the co-investment agreement has eased
from 3:1 to 1:1. Secondly, Holden's contribution is not being paid
upfront, but over a period of four years. Thirdly, the green car
fund has been tapped for grants to Holden, but the proposed model is
less fuel-efficient than a range of existing models - despite the
GOA's initial intention to sustain new technologies towards the
reduction of carbon emissions. The modified automotive strategy
likely reflects Carr's conviction that "urgent" action is necessary
to revitalize and reinvest the local car industry in Australia. The
GOA is now talking with Toyota about the sustainability of local
manufacture at its Altona plant. It is likely that (given the A$179
million grant to Holden's small car) increased assistance will be
approved for Toyota's Hybrid Camry project, which had already been
guaranteed A$35 million by the Rudd government. END COMMENT.

MCCALLUM