Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Wednesday, 27 May 2009
Page: 4546


Mr PEARCE (5:19 PM) —The Car Dealership Financing Guarantee Appropriation Bill 2009 provides for a standing appropriation to enable claims to be paid under the deed of guarantee in respect of the Australian government guarantee to support interim funding to car dealerships, executed on behalf of the Commonwealth on 23 December 2008. On 5 December 2008, the Treasurer announced the establishment of a special purpose vehicle, an SPV, with the support of Australian banks, to provide liquidity to eligible car dealers who were left without financing as a result of the departure of two large automotive finance leasing companies from the Australian market following the onset of the global financial crisis. The two companies are GE Money Motor Solutions, a subsidiary of GE Money, a division of GE Capital, one of four main businesses of General Electric; and GMAC Australia LLC, GMAC’s automotive and motorcycle finance business in Australia. GMAC is the automotive finance business of General Motors Corporation.

It is estimated that one-quarter of new car dealerships obtained wholesale floor plan finance though GE Money Motor Solutions and GMAC Australia LLC. The SPV, otherwise known as ‘OzCar’, was established as a trust on 2 January this year. Under the agreements negotiated with the Commonwealth Bank of Australia, the ANZ Bank, the National Australia Bank and Westpac, the four major banks will provide liquidity to OzCar through the purchase of AAA rated OzCar securities. Most of these securities will require a Commonwealth guarantee so that they qualify as AAA in order for the four major banks to purchase the securities. Having raised funds through the sale of securities to the banks, OzCar will make available funding for 12 months to eligible car dealerships requiring finance.

In his second reading speech for the bill, the Assistant Treasurer told the House that most of the former GE and GMAC dealerships had managed to secure alternative financing, primarily through the remaining lenders. As a result of the orderly wind-down of GE and GMAC loan books and alternative sources of finance, the initial estimate of $2 billion to finance future loans was reduced to $850 million. The Assistant Treasurer stated that the final figure will be much less and the appropriation to support the Commonwealth guarantee will apply to around $550 million of the securities issued by the OzCar SPV.

Let me go to the issue of new vehicle sales. New vehicle sales figures for April 2009, released on 5 May by the Federal Chamber of Automotive Industries, show that just under 64,000 passenger motor vehicles, SUVs and commercial vehicles were sold in April 2009, a fall of some 24 per cent compared with the same month in 2008. In the year to date, a total of just under 277,000 new vehicles have been sold, which is a fall of just over 20 per cent compared with the same period last year, suggesting annual sales for 2009 of 840,000, compared with over 1,012,000 sales in 2008. The fall in new car sales reflects the broader slowdown in the Australian economy and globally, with the four local motor vehicle manufacturers reducing production in response to falling demand. Production levels are the lowest since the 2001 downturn and have led to temporary stand-downs and a four-day week for automotive component manufacturers.

According to the explanatory memorandum to the bill, the overall contingent liability for the Commonwealth is around $550 million, comprising 45 per cent of the remaining GE Money and GMAC loan books and 85 per cent of the Ford Credit loan book. To limit the risk to taxpayers’ funds, the SPV will only be available to advance funds if it is satisfied that the dealership is not subject to any insolvency event. In the event that the deed of guarantee is called upon, any payment made under it will reduce the underlying cash balance. The explanatory memorandum states:

The extent of the impact on the underlying cash balance will depend on borrowers’ default and borrowers’ ability to meet any SPV’s claims. Under the Series Notice, the Trustee indemnifies the Commonwealth (out of the assets of the Trust) against any amounts paid or required to be paid by the Commonwealth under the Guarantee.

No securities have yet been issued under the OzCar SPV. However, as the guarantee covers most of the Ford car dealerships and as new loans are taken out in the new financial year, the SPV will underpin the next 12 months of trading by dealerships. With this assistance from the government, new car sales are forecast to recover, as we hope. The coalition supports this bill.