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Wednesday, 27 May 2009
Page: 4556


Mrs HULL (6:10 PM) —I rise to set the scene on the Car Dealership Financing Guarantee Appropriation Bill 2009. On the surface it seems to be something that is going to provide significant support and is going to get a lot of our dealerships out of trouble. Sadly, the case in rural and regional Australia is that this is not happening. I will set the scene with my email to the Department of the Treasury on 20 March wherein I say:

We have a crisis in car dealer finance for many dealers covering around 80-90 dealers in NSW as determined by the NSW MTA. It appears that there is no finance for these dealers as a result of GM removing their finance. The dealers have been working with MTA to try to get other finance options through St George and Esanda, however the dealers have now been told by Esanda that the applications that have been put to the finance companies particularly from marginal rural and regional dealers as a result of the ongoing drought, have not been approved because the Special Purpose Fund appears not to be operating. The real crisis I have is one dealer at the moment in one of my communities who has been in a family business for 100 years and who has been dramatically affected by the drought period so much so that he has qualified under the drought program. He is at this moment in Sydney trying to get some help but to no avail. He cannot sell cars because the banks are not wanting to fund the sales or the floor plan, that means that the 10 full time jobs will go as early as the end of this month. He has been battling with this since GM removed finance.

I go on to say:

I have spoken this morning with an officer in your office and explained the urgency of this issue. I would so appreciate some assistance in someone ringing the dealer to guide him through the options that he may not know about as per my discussion with the officer in your office.

Sadly, most of the finance companies seemed to be saying to the dealers across my electorate that the special purpose fund, about which we are speaking this evening, was certainly not operational. It was not about what you knew or how you presented yourself as to whether or not you would be able to get access to this fund. It was almost about who you knew.

Let me remind the House that the bill was:

… limited to guaranteeing securities that the OzCar Trust facility issues which are risk rated below ‘AAA’ by Standard & Poors.

It appropriates funds 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.

The Bill provides an appropriation for the purpose of paying any claims pursuant to the Deed of Guarantee.

The appropriation is not subject to a specific monetary limit.

The overall contingent liability for the Australian Government is estimated to be around $550 million comprising around 45 percent of the remaining GE and GMAC loan books and 85 per cent of the Ford Credit loan book.

Under the Dealer Eligibility Criteria the SPV will only be able to advance funds if it is satisfied that the dealership is not subject to any insolvency event.

So that was the bill as we saw it last year.

Then came the email that I sent off to Treasury, saying: ‘I have a crisis. I’ve been told that this fund is available. I have information from the government that says this special purpose fund is operational. Yet the people that I represent are being told by the finance companies: “Sorry about that. We are not getting any money out of that fund; it is not operational.”

Can I explain to the House the current financial situation of regional towns, particularly in the electorate of Riverina. Apart from the city of Wagga Wagga, the economies of all towns and villages in my electorate of Riverina are underpinned by agriculture or value-added industry resulting and arising from agriculture. Agriculture has an overriding hand in the make-up of all of my regional communities. Many facets of these towns are either indirectly affected by, or can be solely attributed to, the state of our local agriculture and climatic conditions—currently, drought. Some of these facets are, for example, the sociodemographics, consumer confidence and population changes. For the past seven years—continuing to this very day—when we have had floods and heavy rains in most areas across Australia, the electorate of Riverina has received no reprieve from the drought. It is still the most amazingly drought-stricken area that one could see. Just this weekend, when I was out in my electorate, I was confronted by a dust storm that was almost interminable, maybe 200 feet high, rolling across every town and community. That is the kind of environment that we are experiencing at the moment.

A downturn in the economy is nothing new for many of the towns and villages in my electorate. The continuing drought had already shaken our consumer confidence well before the financial crisis hit. As I said, my electorate experienced seven years of ongoing drought before this global financial crisis. They were hurting big time. The employers in all of the towns across my electorate are brave and absolutely stoic people and have continued to employ their employees regardless. It is the employers’ homes that are mortgaged. It is the employers that go home late at night and cannot sleep because all of their material possessions are on the line. And they still guarantee the employment of people in their local communities.

We already had this major drought problem when the luxury vehicle tax was introduced by this government. That was supposed to pin down and target those great big rich people in the community with luxury cars. It actually also targeted those car dealers who required four-wheel drives, which came in under luxury car tax, to make a living. Rather than those exclusive dealers that you see on many of the roads in Sydney, who provide Porsches, Mercs and a million other luxury cars, it was the dealers in rural and regional Australia, particularly in my electorate of Riverina, that were hit hard by that luxury car tax and by having the price of their vehicles rise as well. Those very dealers underpin employment in most of the towns across my electorate, providing a large amount of employment. So the car dealers had gone through seven difficult years of drought, then they were hit by the luxury car tax, and then along came the economic crisis. They are in enormously difficult circumstances. We thought we had a crisis before—we haven’t seen anything yet.

The impact on our economy and our regional businesses, primarily these car dealerships, was absolutely extraordinary. They were being kicked when they were already down. In one of the towns in my electorate, a locally owned car dealership actually qualified under the drought program for drought support assistance. This shows the impact that the drought was already having on our local car dealerships, without even factoring in the global financial crisis.

The withdrawal of finance by GE Money Motor Solutions and GMAC was, in simple terms, the last straw for many of those dealerships in my electorate. The coalition, and particularly I, were very disappointed in the government’s inability to address the serious problems that the car industry was, and still is, experiencing. We have this bill, but, seriously, it is not working for many of the people who desperately require assistance. It has already been exacerbated by the now infamous unlimited bank guarantee.

Prior to the government’s announcement in December, the coalition had called on the government to provide urgent support to car dealerships right around the country. I was one of the people calling for assistance, not for the big manufacturing industries out there with multitudes of employees under the one roof but for the multiple employers right across Australia that desperately required that assistance and support. I was very happy to see this particular program put in place because I believed it was the answer we required. But, as I have mentioned, it did not come to fruition.

I have maintained the links with my communities and I understand what is happening on the ground. The message coming from car dealerships is, simply, ‘Help!’ There is a strong cry for help, at this very moment, on this very day. Today my office has spoken with an owner-operator of a car dealership in my electorate. That owner-operator has explained his circumstances to us. From 2004-05 to 2009 their sales have dropped by 60 per cent. They had 19 staff members in 2004; they have eight currently. They believe this is a consequence of the drought and, in their opinion, it is significantly associated with and underpinned by the financial crisis. His business has no debt—it owns the building, it owns all of the cars and it has substantial savings, so it is not at risk of going bankrupt. Since GMAC withdrew, this businessman has not been able to get anyone to take his business on. Esanda, St George and Capital Finance have all rejected his claim. Capital Finance said that he did not meet the criteria and that his business could not give them enough retail paper. The reason was that his business was too far out, too small—they were not interested. He could only supply them with half a million dollars in contracts per year. They wanted half a million dollars per month, in our drought stricken region. Esanda and St George gave similar rejections. This person has been financing the sales himself. He believes the SPV does not work.

I make this appeal to the government because I think the intentions of the government may have been very honourable. I think the intentions of the government were very good. There is a lot of material that precedes the Car Dealership Financing Guarantee Appropriation Bill 2009. There are a lot of explanatory notes and deeds of guarantees. There are quite a lot of hurdles and challenges that have to be met—major dramas that have to be overcome. The legal and contractual arrangements that underpin this bill are very technical. The government does not pay out any money; it just gives guarantee support of moneys to be paid out. I am wondering just how much of the available funds is actually being accessed. It would be great to know just how much of those available funds is going out to those dealers who are in crisis.

Seriously, they want us to write half a million dollars of contracts per month in rural communities! This particular business underpins probably one of the largest employers in the community. Generally, how these guys work is that a dealer with a dealership in a given community goes out and takes a dealership in another community and provides employment in other local communities, where it is very difficult to get employment.

I remember my conversations and the absolute crisis calls that I spoke about in the beginning of my speech. When I banged that email out to Treasury I was saying: there is a crisis here. I had another guy on the phone from the streets in Sydney, desperately trying to save the employment of 10 staff members in a business that has been in the family for 100 years. He was not a Johnny-come-lately fly-by-nighter, not a person who does not understand business structure or the way in which business works—this family had been in business for 100 years. The business was an institution and was employing 10 people in full-time jobs at the time. This was the other man I was referring to in this community, with his dealership, back in March when I sent this emergency email. I think it has to be recognised that there has been some slowness, some reticence, some lack of interest in ensuring that those people in rural and regional Australia are entitled to get some support as well. Those people in drought affected communities are entitled to maybe have just a little bit of leniency on these criteria.

As I have explained, the person that we spoke to today is not going bankrupt—he owns his building, he owns his stock and he has eight staff members still employed out of the 19 that he did have employed. But he is too small. I would urge that the government consider and understand this issue and move to address it, because it is simply unjust, unfair and quite discriminatory. I am sure that there was not an understanding of these types of issues when this scheme was first put together. It would be great if the Prime Minister and the Treasurer could see their way clear to change some of these criteria to give those people a break, those people who are still employing people, who still have their houses mortgaged in most cases and who are doing it tough but are still committed to jobs. I understood that that was what we were all about in responding to this financial crisis: retaining jobs, jobs, jobs. These people are retaining jobs, jobs, jobs; but they are retaining them without the assistance of this program.