Old Holdens never die in Canberra

The federal government is today expected to announce a $200 to $250 million 'co-investment' in GM Holden to keep its Australian design and manufacturing capabilities alive for at least another decade.

As it does so, government media units will be spinning faster than a HSV's back wheels in a parking lot – at stake is the notion among voters that this is less a public investment and more extortion money demanded by an unsustainable industry.

The deal, which is expected to include a good chunk of money from the South Australian government – and hell, even some from Detroit – will be a stay of execution for Holden's 2500 Adelaide workers, as well as for workers in its Melbourne engine plant and the myriad small businesses that depend on both operations.

It follows the wonderful 'co-investment' opportunity offered to Australian taxpayers by Ford in January. Brokered by then manufacturing minister Kim Carr, the $103 million deal to keep Ford's Broadmeadows operation alive cost the public purse around $54 million ($34 million from Canberra and around $20 million from Victoria's Baillieu government).

Asking taxpayers to fund more than 50 per cent of the co-investment prompts a lot of voters to wonder what we get out of it. There are 'returns', but they need to be explained carefully by a government not known for its communication skills.

For starters, Australia will retain (for the time being) something like 14 per cent of GM's global workforce – something unemployed US autoworkers might find perplexing given the way the Australian dollar has ravaged exports across most of our manufacturing sectors.

Further, as I wrote in January (Abbott must dodge an auto explosion, January 17) there are two short- to medium-term benefits:

Firstly, closing Holden's plant would shift very substantial costs to state and federal governments in terms of social services – the idea that the family men and women working in Elisabeth in Adelaide's north will just shrug their shoulders at redundancy notices, and board planes to work in the resource states (where jobs are plentiful) is a wild fantasy. The bill for the retraining and interim social support for such a large number of workers would likely be larger than the public 'co-investment' about to be announced.

Secondly, the major block to our competitiveness in auto manufacturing – the high dollar – may be removed sooner than anyone thought back in January. New signs of weakness in demand for our resource commodities (The sum of all China fears, March 21), plus the prospect of prices being weakened on the supply side, mean a slow return to competitiveness in this sector may be about to commence. If that does prove to be the case, an injection of public funds to keep Holden investing in its Australian plant looks wise.

As with the Ford decision in January, the Holden plan will be supported, at least privately, by many members of the Coalition. Last time it was Barnaby Joyce and Ian MacFarlane who spoke in favour of extended support for the auto industry, though it may be only Bulldozer Joyce who pushes on with that line this time around – Joe Hockey's "line in the sand" comments in January make it difficult for the more sober-minded Coalition MPs to speak up on this issue.

In short, this is an imminently 'spinnable' policy for the federal and South Australian governments.

The major philosophical objection to auto subsidies comes from the resources sector, which wonders why it's being taxed so highly – given that it produces the things our overseas markets want the most – to fund industries producing things we're having trouble selling.

As Keith De Lacy, former chairman of Macarthur Coal, put it on ABC radio on Monday, this kind of thinking stems from "big city economists who really just don't understand that you've got to have a productive sector... someone producing that first wealth then you don't have all those service industries, you don't have a public service, you don't have academia, you don't have retail".

And you don't have state-backed auto manufacturing.

These kinds of arguments will fly back and forth across the houses of parliament in the weeks ahead, and more privately across the Coalition's joint-party room as it works out how to counter the Gillard government's auto subsidy plans.

But the deal will be done. The jobs saved. The spin pumped out in all directions. And then there'll be an election to see if the people backing the deal (you and I, dear reader) approve.

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