THE DISTILLERY: Jac's tear-jerker

Former Ford Motors boss Jacques Nasser is probably the leading Australian automotive figure. As a staunch advocate for industry subsidies, if he says the industry is headed towards an inevitable decline, people pay attention. This morning two big hitting commentators offer up a big dose of dread to back up Nasser’s words.

Also in Friday’s shooter from The Distillery, Woolworths’s latest sales numbers take a back seat to two other battlefields with Wesfarmers that commentators are interested in.

But first, the case against ongoing automotive industry subsidies is well worn, as evidence by The Australian’s John Durie this morning.

“The facts speak for themselves when you consider 370,393 vehicles were made in Australia in 1984 when the famed Button car plan was introduced, but this fell to 329,726 in 2000 and to just 190,000 on the latest numbers. Employment has fallen with it, even though taxpayers provide the industry with net annual subsidies of $1.6 billion a year. Nasser said the demise was sad and, when asked whether it really mattered if the industry disappeared, he replied: "I only get sad about things that matter."

The Australian Financial Review’s Matthew Stevens notes Nasser’s comments that the industry has not done a good enough job selling itself as something worth government funding. That responsibility rests with the big carmakers and them alone.

“Nasser concluded his reflections with the observation that Australians don’t seem as emotionally attached to their car industry as the folk of other countries in which he has lived and worked. To a considerable degree, this takes us to the core of Nasser’s deeper frustration about the relentless demise of Australian car manufacturing. Sure it matters how much the taxpayer spends on supporting an industry that has long been a cornerstone of its industrial estate. But this is an issue deserving of a broader and more informed cost-benefit analysis.”

The question The Distillery would like asked is whether the big carmakers actually want to be in Australia. Sure, they’ll take our money to make the current layout profitable and when that play ends, they’ll pack up shop and go to lower cost markets in Asia.

Elsewhere, the buzz around Woolworths is growing with the latest sales figures pointing to a closing of the gap of its growth rates with those of rival Wesfarmers. For more on this, read Business Spectator’s Stephen Bartholomeusz or The Australian’s  John Durie.

But Fairfax’s Elizabeth Knight reports that the war the big retailers are fighting out through lower end department stores is every bit as exciting as the supermarket battle.

“When questioned by analysts as to what Woolworths is going to do about these lacklustre sales, the answer was simple – we are trying. But to date it is not experiencing much success. Wesfarmers – the conglomerate that owns Coles, Target, Kmart, Bunnings – is in no position to criticise. Its discount department store strategy has resulted in a performance which has had mixed success. Earlier this week Wesfarmers ordered a changing of the guard and installed a new chief executive at its problem child, Target.”

Meanwhile, The Australian Financial Review’s Chanticleer columnist Tony Boyd is taken by the battle between the two big retailers in the sharemarket.

“That battle is throwing up some mind-boggling numbers which have been drawn from the latest mid-cycle equity strategy review published by Macquarie Securities strategist Tanya Branwhite. Investors have afforded a premium rating to Wesfarmers’ shares despite the fact that Macquarie’s strategy team’s modelling suggests an expected negative total shareholder return of 7.6 per cent over each of the coming few years. This return is arrived at by factoring into this valuation model Wesfarmers’ long-term price-earnings ratio relative to the market and ‘mid-cycle’ earnings forecasts…The same model says Woolworths has an expected total shareholder return of 10.3 per cent annualised. Branwhite is as intrigued as Chanticleer about the valuation multiple that is being placed on Wesfarmers.”

In other big company news, The Australian’s Matt Chambers reports that the signals from Western Australian Premier Colin Barnett point to a more muted reaction to Woodside Petroleum’s anticipated announcement that a floating LNG plant is more likely for its Browse Basin project compared to when he was in campaign mode.

The Australian Financial Review’s Jamie Freed writes that Rio Tinto’s asset sale program is starting to look like a bit of a fire sale from certain angles. The most important issue for Rio is that the iron ore prices don’t come off the boil too hard and too early. If it does, the miner will look like a forced seller, explains Freed.

In market news, Fairfax’s Malcolm Maiden reports on the arguments for and against a gold price correction.

The Australian’s economics correspondent Adam Creighton hurls praise on the late Baroness Margaret Thatcher for her command of economics, adding that she had a greater understanding of it “than most of the practitioners of the dismal science today”.

Also in economics, The Australian’s Judith Sloan explains why business readers should pay attention to the headline-killing trend labour force figures rather than the headline number because it’s a far more reliable indicator.

And finally, The Australian Financial Review’s James Eyers has a big crack at Goldman Sachs for allowing Lloyd Blankfein to continue serving as both chief executive and chairman, along with Australia’s James Gorman at Morgan Stanley and Jamie Dimon at JP Morgan.

He’s right, the practice stinks.