Australian Governmant Throws Struggling Car Dealers A $2 Billion Lifeline

[Sprint XR8]

A $2 billion lifeline for car dealers involving the federal government and the country's major banks will save jobs, the automotive industry says.

Car dealers have encountered huge difficulties raising funds to buy stock for their showrooms as a result of the global financial crisis.

Two major financiers, GE Money Motor Solutions and GMAC, are exiting the Australian car market because of the crisis, placing great pressure on a large number of dealers and the automotive industry more generally, Treasurer Wayne Swan said in announcing the deal on Friday.

He said the financing arrangement with the CEOs of ANZ, Commonwealth Bank of Australia, the National Australia Bank and Westpac on Friday had been designed to support viable businesses.

"It will not seek to provide an artificial lifeline to unviable dealerships," the treasurer said.

"Today's announcement will help ensure the long-term viability of the automotive industry and forms part of the government's commitment to protect jobs in this vital industry and right across the Australian economy."

Industry data released on Thursday showed the dire straits the motor vehicle industry is in.

November sales slumped over 22 per cent when compared to the same month last year, the worst performance in six years.

This was partly due to weak consumer demand, but also because of the strife car dealers faced in financing.

Federal Chamber of Automotive Industries chief executive Andrew McKellar said this action by the government was a decisive response to extraordinary circumstances.

"These are complex issues but the government has acted quickly and effectively in an effort to head of a potential crisis," Mr McKellar said in a statement.

"The bottom line is - this will save jobs in the industry."

But Opposition Leader Malcolm Turnbull said this problem was brought about by the government's poorly thought out unlimited deposit guarantee.

It left finance companies unable to raise new funds as they did not have the benefit of the guarantee.

"Considerable damage has been done to both the finance industry and the car industry by the Rudd government's mismanagement, and much of that damage will be very difficult to remedy," Mr Turnbull said in a statement.

He was also disappointed the government had once again chosen to avoid parliamentary scrutiny by announcing the measure after parliament had risen for the winter recess.

Mr Swan said the government, assisted by Future Fund chairman David Murray, had been working closely with the car industry, car dealer financiers and the four banks in recent weeks.

A special purpose vehicle (SPV) has been established to provide liquidity to car dealer financiers through the securitisation of eligible loans. The SPV will be implemented by January 1, 2009.

The government will support the SPV by providing a guarantee for a minor proportion of the securities issued, while Credit Suisse is providing technical support.

The SPV will be available to both new vehicle and mixed vehicle dealerships that trade cars, trucks, motorbikes, boats, caravans and other commercial vehicles as long as they are currently financed by GE Money or GMAC.

http://news.ninemsn.com.au/article.aspx?id=682751

[4Vman]

Pre xmas handouts, first home owner grants, tax cuts, bailouts.. id love to know where all this extra money is going to come from.. oh wait, tax payers.
Brace yourselves, there's no such thing as a "free lunch".....

[Professor Farnsworth]

let's not create another political argument here.

[Hunter]

Should have let them die on the vine like the dead wood that they are... there's too many dealerships in Australia, the levels of new car sales here aren't sustainable given the size of our population.

[vztrt]

This money is going to the banks to cover them is a dealership goes under. So the money has to be paid back to the bank and is not a free gift like the car manufactures recieved.

[4Vman]

Its an interesting conundrum.... spend a bit of money to bail them out to save allot more in welfare etc.. or let natural forces take their toll as a form of "market cleansing"...

[snappy]

Originally Posted by Hunter

Should have let them die on the vine like the dead wood that they are... there's too many dealerships in Australia, the levels of new car sales here aren't sustainable given the size of our population.

People need the jobs . We need more industry not less

[Smoke Pursuit]

Oh great, my business suffers, can i ring the government crying poor and get a free handout? doubtful..

Im quiet over these big organisations crying poor, if you can make your business viable then tough cookies, fall over and walk away...

[uranium_death]

Throwing money into a hole.

The changing climate of Australian motoring means that there has to be casualties.
It is hard, yes, but it happens all the time to others with little or no sympathy from anybody, other than close friends and families of those retrenched.

[dom_105]

Originally Posted by Hunter

Should have let them die on the vine like the dead wood that they are... there's too many dealerships in Australia, the levels of new car sales here aren't sustainable given the size of our population.

Bingo.

[mongoloid]

good for them

[robjh80]

The govt is only "delaying the inevitable" and wasting more tax payers money in the process.

Regardless of how long they prop up the car industry for, .... it will eventually fail.

The only difference here is the govt gets to waste $2 Billion buying time for an already ailing industry when the worst is yet to come.

This at the same time as the auto companies announce "price increases" of all things on their cars! ..... what a joke!

[balthazarr]

Why is it that big business gets bailouts, while small business slowly (actually not that slowly) withers and dies? Big business should have the resources to ride out the tough times... not so small business.

I thought most people are employed by small business, so if the premise behind the bailouts is to preserve jobs... where's the money for the little guys?

[Bill M]

If you read it again you can see "unviable businesses" will not receive support. If the automotive industry falls over as some you suggest it is not just jobs in that sector that will go, there are many "high tech" companies that also use component suppliers for intricate assemblies that end up in exports not to mention the knowledge base that supports such ventures. But that is taking the broader view which is not so common here is it? :rolleyes:

[balthazarr]

Originally Posted by Bill M

If you read it again you can see "unviable businesses" will not receive support. If the automotive industry falls over as some you suggest it is not just jobs in that sector that will go, there are many "high tech" companies that also use component suppliers for intricate assemblies that end up in exports not to mention the knowledge base that supports such ventures. But that is taking the broader view which is not so common here is it? :rolleyes:

I get the justifications for the bailout... and the wider ramifications outside the auto industry... my point was, there are plenty of small businesses that, while 'viable', are struggling - where is their bailout?

What does 'viable' even mean - if the business is 'viable', then why does it need any form of bailout?

[Bill M]

Balthazar, I agree with you 100 % on assistance to small business, I may be employed by a large company but I spent the best part of 30 years in small business with staff numbers under 10. My statement is to those who think Australia can let manufacturing here wither away and die. Well I guess we can have jobs unloading containers from China, provided we remain on "friendly" terms with them of course.

[colossus]

What a joke - I can understand car manufacturers getting a hand out but car dealers! pfft. They are greedy, constantly use dirty tricks to con people out of their money ect. - can't believe tax payers have to put up with this.

Maybe if they cleaned up their acts, stopped training salesmen to be slimey, pushy dirtbags, then people may want to go to dealerships and give them business. What an absolute rort.

[Daymoe]

Should just let all the dealers die off, especially Ford, maybe that would teach them for their shitty servicing and "customer service". Should be able to buy cars online straight from the factory and cut out the middle man (dealer) without having to deal with the car salesmen and aftersales rip-off chick.

[Ghiadude]

The way i under stand it its a fund that the dealers CAN BORROW FROM so that they can buy floor stock. Dealers cant just borrow money from a bank at the moment the companies (GMAC) are pulling out of australia. THIS IS NOT A BAIL OUT its simply a bending of the rules so that they can stay in business

[sly_ba]

I can think of a few dealerships I would like to see closed *cough* Westpoint Ford *cough*

I am with 4Vman and Hunter on this one in terms of "market cleansing" etc... Let the dead wood die off *cough* Westpoint Ford *cough*

[robjh80]

Originally Posted by tx3dude

The way i under stand it its a fund that the dealers CAN BORROW FROM so that they can buy floor stock. Dealers cant just borrow money from a bank at the moment the companies (GMAC) are pulling out of australia. THIS IS NOT A BAIL OUT its simply a bending of the rules so that they can stay in business

Yes, "in theory" this is correct .... a fund they can "borrow" from

But what happens when the dealership falls over regardless of the "fund", ie: (Taxpayers Money), and can't/won't be paying the money back?

This is exactly why the Banks won't "fund" these dealerships, a lot of them are simply "bad risks" .... yet again it's the Taxpayer that will end up wearing the brunt of this ludicrous Govt Policy when it all goes sour.

[ebxr8240]

One issue there is NO finance Co. For buyers to get car loans from..
Like GE ... The dealers have to come up with some other means..
Poor Bustards !!!

[LTDterri]

I dont get it. Why give dealerships money? Are they not like every other small to medium business in Australia. Times are tough we all know that but bailing out car dealers is not the answer how about helping Australian Manufactures struggling to get their goods into the market