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Wednesday, 27 May 2009
Page: 4562

Mr BILLSON (6:38 PM) —I listened with interest to the speakers’ contributions to the Car Dealership Financing Guarantee Appropriation Bill 2009 and I recall how well advocates are able to leave out important parts of the story as they extol the virtue of something before this House. This bill amounts to a soccer player or footballer, who has scored an own goal and is facing the relegation of their team, working hard to at least assist someone else in scoring a goal for their team so that they are not relegated. That is what is happening here.

What occurred with the poor overreach by the Rudd government in the way it handled the bank guarantee issue was that it dried up non-primary bank funding sources for so many other areas of enterprise in our economy. One of them was new car dealerships. The Prime Minister did not follow the wise advice and the considered proposals of the opposition for a limited and targeted guarantee and instead guaranteed everything in the hands of our major banks. This meant that anyone else who was in the lending game and trying to attract deposits to support their loan book was left out in the cold. It was the Rudd government’s own goal that put the Australian economy—in this case the new car industry—behind the mark and facing relegation.

The Rudd government subsequently recognised its error in its intervention in the financing markets and tried to at least pass the ball in an assist to the car industry so that the car industry can assist itself to score a goal and avoid relegation and get back into the game. That is what this bill is about. It is an assist after an own goal.

The bill specifically tries to provide a facility for financing motor vehicles on the floor of new car dealer showrooms where they are used to show the range of vehicles that are available, hopefully, to tantalise consumers and enable dealers to get on with selling cars and supporting the car industry and all those involved in servicing and maintaining vehicles and in the retail and wholesale improvement and after-market management of our vehicle fleet.

This bill does that by putting a standing appropriation in place that enables claims to be paid under a deed of guarantee. The deed will see the major banks bring together the finance and then make it available for funding of car dealerships. This deed was executed by the Commonwealth with the banks in December 2008. The execution of the deed occurred some weeks after the 5 December 2008 announcement by the Treasurer that, in order to compensate for the own goal and the very damaging impact of the poor management of the banking guarantee by the Rudd government, this special purpose vehicle funding instrument would be available through Australia’s big four banks to provide liquidity to eligible car dealers who were left without financing because their traditional finance providers had been frozen out of the marketplace. These finance providers were finding it very difficult to attract the funds so that they could offer that financing because they, unlike the big banks, were not included in the bank deposits guarantee that the Rudd government put in place.

So you can see the course of events: an overreach by an inexperienced government—Prime Minister Rudd is not known for his economic literacy and certainly does not seem to have sound and grounded economic principles that he sticks with—to almost a one-upmanship on what the opposition had put forward, and a lack of understanding of how that action would reverberate through the finance sector. And here we are today discussing a remedy to that own goal, which we hope will assist the car industry.

Those actions and the inability of other non-guaranteed deposit takers to then provide finance facilities for activities like the new car industry are the reasons that we are here today. The two main companies, GE Money Motor Solutions—which is a subsidiary of GE Money, which is in turn a division of GE Capital, which is one of the four main businesses of General Electric—and GMAC Australia Ltd, and, more recently, Ford Credit, are feeling the consequences of the Rudd government’s overreach on bank deposits.

The circumstances that arose were very vivid in my electorate. As the member for Moreton and the member for Riverina commented, it certainly reverberated through an important part of our local economy. The selling, reselling, servicing, improvement and after-market enhancement of motor vehicles and vehicle LPG conversions are all very important parts of the local economy and are major employers. When new car dealers could not afford to maintain their floor stock it had profound implications for employment and economic activity in my electorate. Down Wells Road, the Nepean Highway and other areas where there is a congregation of car dealers you saw large areas of pavement with no vehicles on them. To try to get through the storm that had been created by the Rudd government they downsized the amount of floor stock they held.

What that meant was, clearly, the floor stock that was put to the marketplace was not the best they had available, and some of the costs in that floor stock were proving very difficult for businesses to accommodate. What happened prior to the need for this bill was that new car dealers effectively leased display stock off these financing companies and through those leasing payments paid for the availability of those vehicles. When they were purchased, that sale put in train the full payment for that vehicle and so on. Without having that leasing of the floor stock facility available, you could imagine, less stock was on the floor. What that meant, though, was that dealers then scrambled to try and find financing options to maintain their floor stock under quite different terms and conditions.

I mentioned earlier that this announcement was made on 5 December 2008. It is now 27 May 2009. It was characterised as an emergency intervention back in December, and here we are discussing it now. It was characterised as an emergency intervention that had a shelf life of 12 months, and here we are almost half the way through that period debating it in the parliament. It will probably be well over half that emergency period before it actually passes through both houses of this parliament. What has happened in the meantime is that the resourcefulness and the resilience of the car industry and the dealers, in particular, have been tested. I have had dealers explain to me how others have come forward to offer them financing as long as they provided security over personal assets, their firstborn and even family pets—slight exaggeration. The point I am making is that a leasing arrangement for the floor stock has then become a very large financial burden around the necks of individual proprietors as they have sought to show those who have moved into the void after GMAC and GE Money had moved.

As they sought to fill that void, new lenders came in and were asking very viable, long-established, successful and profitable businesses, some of quite significant scale with multiple outlets and servicing activities and integrated motor vehicle enterprises—these were not little shows; these were big shows—to find in some cases seven-digit sums of money themselves to provide as security for the floor stock. These things do not happen overnight. You found proprietors having to reorganise their personal affairs, to take out mortgages or second mortgages on some of their personal assets, including their homes, to look at the way they could bring that kind of capital to the table as security so that they could get financing made all the more difficult and all the more expensive because of the way the Rudd government mishandled the bank guarantee. And they were told to do it quickly. Some that I have spoken to said: ‘Yes, we have discussed it within our group and amongst our principals and our families, and we believe we can do all of that. We can bring together that capital.’ In some cases it was 40 per cent of the value of the floor stock. This was not a small amount of money. They had agreed that they would go down that pathway, so confident were they about the future of their business and the prospects of the new car industry. But that takes time. Anybody who knows anything about the way businesses operate and the interplay between the business assets and the personal assets knows that if you bring personal assets in to secure finance for the business there is a fair amount of work. I suppose that is work generated for the accountancy sector, in getting tax advice and all those things. It does not happen overnight.

So I was getting phone calls about what had been covered in the media. What had been covered in the media was the announcement of this ACSA, this financing vehicle, and how it was going to be their salvation. Even those in the industry did not quite know how they were going to access it. Up until last month nobody had accessed this. Up until last month some people offering finance to dealers that were having trouble coming up with this huge chunk of security had not even registered to participate. So we had the announcement but not the actual machinery. In the meantime, since December 2008 until now—and I would imagine we will see it for some weeks to come—you have seen an almost stealth like rationalisation of the industry where atrophy is being used by some with motives that are unclear to thin out the number of participants in the industry because the finance that was there, that helped them build their businesses and be successful employers, was changed and compromised by the mishandling of the bank guarantee by the Rudd government.

So I am pleased this bill is here. Many of the car dealers in my electorate would not be happy with me if I did not ask the question: where has it been? Those car dealers who have had to substantially rearrange their personal affairs to bring together in some cases seven digits plus of personal assets and wealth to secure a line of credit would wonder, ‘Where has this vehicle been?’ And we should spare a thought for those that in the interim between the big announcement and now are no longer in the business. We had the announcement but where was the machinery? I hope this works and I hope it provides some support for the dealers who have been left out in the cold by a problem not of their making, a poor handling of the bank guarantee by the Rudd government that compromised the funding streams on which they built successful businesses, in some cases for decades. It is a problem not of their making, but they have been left out in the cold. Here we are on a cold night, just about in winter in Canberra, talking about something that has left them very cold for nearly half the year. I hope this gets rolled out and is made available soon. I hope the terms and conditions that accompany accessing this vehicle are not so punishing and so punitive, like the examples that have been brought to my attention where this becomes a policy action in name only and not a policy action that is offering help. I hope it does offer help, because these people in the industry need that help.

We have seen examples of what has been happening in sales trends and the like. That is worrying. I remember in the Howard government years when we had a million vehicles sold in a year. I hear many businesses saying: ‘Please, can we have that again. We will make very good use of those positive times.’ But there is a reduction in activity in the industry and this has just been an own goal made by the Rudd government that has made the situation even more difficult.

But it is not the only challenge. I was meeting with some of the leading people in the LPG conversion industry that operate out of the Dunkley electorate. They are very talented, very forward looking. They were pleased when the budget was announced that despite the lead-up press—where there were strategic leaks about price gouging and profiteering compromising the LPG conversion grant—the grant hung on. The amount diminished but the industry is keen to make the best of the announcement of the Rudd government. It was put to me that there may be options and opportunities to improve the effectiveness of that grant. Perhaps registered converters with access to registration information could validate the eligibility of people seeking conversions and then have the money paid directly, with those seeking the conversions only paying the gap. That might be attractive, particularly for people without the cash flow to pay for the full conversion upfront. They would only need to pay the difference. In some cases in Victoria, where I think more than 40 per cent of the conversions that have been eligible for this grant have taken place, that might open up an enlarged market.

The LP gas industry would benefit from another opportunity that the government has through its own leasing arrangements. I was flabbergasted to learn that people with vehicles contracted through LeasePlan could not get LPG conversions as an after-market improvement. LeasePlan just would not have a bar of it. I found that odd for people who are trying to support the Australian car industry and looking for more environmentally friendly fuel consumption and fuel type. Unless it was done through the original equipment manufacturer, LeasePlan would not support it. That is disappointing and it is an area where government could do something constructive to support the LPG industry.

In the few minutes that are available I want to pay tribute to the Victorian Automobile Chamber of Commerce, the VACC. They do a terrific job and I certainly value their insights, their perseverance and the quality of their contribution to public debate. You can imagine my surprise when I learnt in the second week of May that the Rudd government decision about its skills council was going to leave the automotive industry out on a limb. I was surprised by that. At a time when I thought competency and skills in an increasingly sophisticated sector such as the automotive industry would be very important and when manufacturing so often holds up the automotive industry as an example of world-class, day-in, day-out endeavour and of what Australia and Australian companies can do, they were left out.

Manufacturing Skills Australia, which was going to handle vocational education and training, was not going to include anyone from the Australian automotive industry. They have been soaked up under the broader representation of the Australian Industry Group. I can understand why AiG would think that was a good outcome, and good luck to them. But, as the Executive Director of the VACC, David Purchase, said:

This decision has the appearance of a deal and that someone has been blowing in the Minister’s ear.

He went on to say:

This decision does not have the support of any of the key stakeholders. The car manufacturers, component parts suppliers, the automotive retailers and the union, all believe this decision to be incorrect.

…            …            …

VACC considers training to be of the utmost importance. As the largest automotive apprentice employer in Victoria and as one of the State’s leading skills training facilitators, we feel passionately about skills training.

This decision by Julia Gillard’s office has left the Automotive Industry confused. Why would they consider textiles and chemical manufacturers to be aware of skills training needs in the automotive sector?

How would manufacturers understand the skills required in automotive retailing? There is no point in making cars if you do not have a skilled aftermarket workforce to sell them, service them and repair them.

That is a point that I think many members in this parliament have been making in relation to the debate about the car dealership financing guarantee and the importance of the car industry to local economies.

Mr Purchase went on to say:

Nobody understands the training needs of the Australian automotive industry better than the automotive industry itself and that is why the Government must reverse this decision and leave training in the hands of those who know the Automotive Industry the best.

The Automotive Industry needs the ability to determine its own training arrangements and that has effectively been taken away from us.

All I can say is hear, hear; I agree. This is another opportunity where the government can show that its commitment to the automotive industry goes beyond some of the big public statements, the big media events. Perhaps if the skills council had had a hard hat opportunity that the automotive industry could provide, they might have got a better look in. This decision is a bad decision; it needs to be changed, and I encourage the government to do that.

In closing, I hope the Car Dealership Financing Guarantee begins soon to provide the support it purports to provide. It is great to have this bill before the House on a problem that has been created by the government—an own goal by the government—and that they are now seeking to at least do an assist pass so the automotive industry can help get itself back on track. It was supposed to have had a use-by date of 12 months. We are nearly halfway through that period already and dealers are yet to see a tangible upside from this measure. I hope it gets passed quickly and implemented even more effectively, because the industry needs it. I support the industry in my electorate. I hope they have a prosperous future and that they can get through this difficult period, but they can count on my support, just as the opposition supports this bill.