Holden Calls The Coalition's Bluff


If you’re wondering whether the Abbott government should take the blame for the closure of Holden, ask yourself how Tony Abbott and his senior colleagues would have reacted to the news had it happened while they were in opposition.

It’s obvious: the Coalition would have excoriated Labor for the disappearance of an Australian icon on their watch. They would have rolled out the soundbites about the disastrous impact of the carbon tax and the economic incompetence of the previous government. Economic credibility would not have been allowed to detract from an effective attack.

Given this, it’s no surprise that the government is wearing a fair bit of heat for its handling of the Holden shutdown. Incumbents take the blame for bad things that happen on their watch. After years of blaming everything on the previous government, Abbott and his cabinet can’t be surprised when new developments are blamed on them.

How much of the blame game is justified? Quite a bit, actually. In grim harmony with the rest of its dismal first 100 days in office, the government has comprehensively bungled this latest major challenge.

The Holden story began, let us remember, with leaks from inside the government itself. The leaks were then buttressed by a story in the Wall Street Journal hinting that GM would exit Australian manufacturing.

For some days, there were at least two narratives emerging from the government. Abbott and Treasurer Joe Hockey were reiterating their opposition to further subsidies for car manufacturing. As late as Friday the Prime Minister was sticking to the Coalition’s election promise to cut $500 million from auto subsidies. In Parliament this week, Hockey basically dared Holden to close, calling on GM management in Detroit to “come clean”.

At the same time, Industry Minister Ian Macfarlane was claiming the government was doing what it could to try and save Holden. “Do we support Holden remaining in Australia?” he said in Parliament on Monday. “Absolutely. Are we doing something about it? Absolutely.”

All this was happening, by the way, while the government had set in train a Productivity Commission inquiry on assistance to the car industry, which it was telling everyone would work through the evidence and report in March. It was Macfarlane who set this up. At the time he said he acknowledged that the car industry would exit without ongoing subsidies.

“I want to say to the industry, there will be one shot at this,” he told reporters at Holden’s plant in Elizabeth back in October.

“We are going to lay down a plan and that is going to be it, because they keep coming back. I'm being deadly serious here; the next car plan that I hand down will be my last car plan, and I don't know why they should have to come back again.”

But it never got to that, because the government decided to bully General Motors Holden into making a decision this week, even as Holden’s boss Mike Devereux was appearing before the Productivity Commission for hearings.

As a result, Holden called the Coalition’s bluff. Or maybe it just moved forward an announcement it was always going to make. No matter: the messy nature of the closure seems in part the result of government manipulation driven in large part by budget hawks inside the government that have long opposed industry subsidies of any nature, let alone to well-paid manufacturing jobs in a heavily unionised industry.

But will the closure even save the federal government any money? There will now be a series of “adjustment packages” announced to help smooth the transition for laid off workers.

There will also be a hit to revenues from workers no longer paying tax. Indeed, if the government caves to pressure from South Australia to ramp up naval construction with the building of submarines and air warfare destroyers, the decision could be very expensive indeed.

The cost of building Australian-made submarines in Adelaide has been estimated by one credible report at $36 billion, comfortably dwarfing all future car subsidies put together. And yet, a further move towards the defence industries does appear to be what the government seems to be suggesting as a future adjustment path for South Australia.

All this is speculation, of course. For now, the government’s pressing need is how to get a handle on the Holden firestorm and tamp down on the bad publicity leading into Christmas. Whatever the economic merits of subsidies, Labor is on strong ground when it points to the efforts it devoted to keeping auto manufacturing going in Australia under Kevin Rudd and Julia Gillard. In contrast, the Coalition appears to be internally split on the issue.

The Coalition’s slide in the opinion polls has continued in recent weeks, with Labor now ahead in two-party preferred terms in the latest Newspoll. The Holden decision won’t help: many voters have personal associations with Holden cars and a very real, if somewhat nostalgic, belief in the value of “Australian made”. The Coalition will certainly wear some blame.

Ben Eltham is New Matilda's National Affairs Correspondent.